What is a Crypto wallet and How Crypto Wallets Work
New York City: Cryptocurrencies are a hot topic these days. You might have heard about them, but you don’t know where to start. Don’t worry! We’re here to help. In this article, we will discuss what is cryptocurrency wallet, how it works and the different types of wallets available for storing cryptocurrencies.
What is a Crypto wallet?
A crypto wallet is a software program that stores private and public keys and interacts with various blockchain to enable users to send and receive digital currency. The most popular crypto wallets are: Jaxx, Exodus, MyEtherWallet, Coinomi, BitPay and Ledger Nano S.
Crypto wallets allow you to send your cryptocurrency using their private key (a secret code) so that no one else can access it except the owner. They also provide you with additional security measures such as two-factor authentication (2FA) or mnemonic phrase generation where each user has their own unique password for protecting their funds from hackers or thieves who might try stealing them from your device via brute force attacks on weak passwords when trying 2FA codes sent through SMS messages which often result in unsuccessful logins due to incorrect passcodes being entered incorrectly into mobile phones’ keyboards by hackers who want access
How do Crypto wallets work?
Crypto wallets allow you to store, send and receive cryptocurrencies. They are the most popular way to buy or sell cryptocurrency online.
Cryptocurrency wallets store your public and private keys. Your private key is used to access your funds while the public key is needed to send funds to other people through an exchange or wallet service provider (WSP). The WSP can then convert this digital currency into fiat currency at its own discretion, which means that it would not necessarily be exchanged for USD/EUR etc., but rather another currency of their choice depending on their business model.
Types of Cryptocurrency wallets
There are several types of cryptocurrency wallets. The main types include:
- Cold wallets, which are offline and can be accessed only by carrying the physical device with you. These type of private keys cannot be compromised in any way because they are stored on your hardware device and not accessible online. This is the safest way to store your funds for long periods of time, but it does require you to carry around a physical device that has been tampered with or stolen from you (though this is rare).
- Hot wallets, which are similar to cold wallets except they’re connected to an internet connection so they can be used online as well as offline – however, this comes at the risk of being hacked if someone gains access into them via malicious software such as malware or viruses. You should always use two-factor authentication whenever possible when using hot wallets; otherwise there’s no telling what might happen once hackers manage get past their defenses!
Cold Cryptocurrency wallets (offline)
Cold wallets are those that don’t have internet access, and can be stored on a USB drive or an offline computer. These types of wallets are ideal for storing large amounts of cryptocurrency because they’re not connected to the internet. They’re also easy to create and use because you don’t need any previous knowledge about cryptocurrencies or how they work before getting started.
Cold cryptocurrency wallets can be used for long-term storage purposes as well as short term storage needs such as buying your first crypto asset
Hot Cryptocurrency wallets (online)
You can use a wallet to store your cryptocurrency. Wallets are a type of software that allows you to send and receive payments from other users, as well as make transactions with other services. (You can also think of it as an exchange for holding your coins.)
Online wallets are the most convenient type of wallet, but they’re also the least secure. This is because online wallets are vulnerable to hacking and viruses, which can steal all or part of the funds stored in them – even if you never used any personal information like usernames or passwords!
Some types of online crypto wallets are:
- Hot Wallet (or Cold Storage) – When you have large amounts on hand, cold storage is recommended because it’s safer than keeping them in hot storage (which we’ll talk more about later). Hot Wallets allow immediate access but don’t offer long-term security against theft or loss due to hacks/virus attacks etc., so this type needs extra precautions taken when choosing one over another without knowing which ones would suit your needs best beforehand.”
Hardware Cryptocurrency wallets
Hardware cryptocurrency wallets are physical devices that store your private keys in a secure way. These wallets are more secure than software wallets, because they don’t have access to the internet or any other network. They’re also more difficult to use: you’ll need to open them up and plug them into your computer, which means you can’t take them with you when traveling or even just out on a walk.
Hardware cryptocurrency wallets are often used as cold storage (i.e., storing crypto offline) because they’re so hard for hackers to get into—but there’s no guarantee that this will always be true! It all depends on how secure the platform is designed; some hardware wallets aren’t as safe as others.
Software Cryptocurrency wallets
Software cryptocurrency wallets are installed on your device. They’re generally easier to use than web-based wallets and they tend to be more secure, but they also require more storage space.
Software cryptocurrency wallets are the most common type of wallet because they allow you to store your cryptocurrency offline, which increases its security by making it less susceptible to hacking attempts. The downside? You have to install an app onto your phone or tablet before you can use it as a wallet (and this may take some time), so software isn’t ideal if you want instant access from anywhere in the world at any time in case something happens with your phone or laptop that prevents them from connecting properly with one another (or worse: crashes).
Desktop Cryptocurrency wallets
Desktop cryptocurrency wallets are software programs that you download and install on your computer. Desktop wallets are considered hot wallets because they’re connected to the internet, which makes them vulnerable to hackers. They’re also great for storing large amounts of cryptocurrency because they don’t need an online connection to work properly, but this comes with some downsides:
- If your desktop wallet gets hacked or stolen, then all of the money in there will be gone forever.
- Hardware wallets like Trezor or Ledger Nano S store private keys offline and require more space than most other types of wallets (especially if you have lots of crypto).
Mobile Cryptocurrency wallets
Mobile cryptocurrency wallets are a convenient way to store your cryptocurrency. They’re easy to use, but you have to be careful not to lose your phone.
Mobile wallets are the best option for people who want the ability to spend their coins on the go. If you’re using a desktop or laptop computer, it might be easier for you to transfer funds from an exchange into another wallet than from one mobile device into another (i.e., if both devices were connected at once).
Web-based Cryptocurrency wallets
A web-based cryptocurrency wallet is accessed through a web browser. Web-based wallets are easy to use and convenient for beginners, but they’re also vulnerable to hacks. As such, you shouldn’t keep all of your coins in one place or rely on any single service for your online storage needs.
Web wallets are free and make it possible for anyone with Internet access to store cryptocurrencies like Bitcoin and Ethereum safely at home or wherever else they may be needed (i.e., in case of emergencies). These types of wallets tend not only offer convenience but also security features such as 2FA authentication codes so that only authorized people can access them without having any problems along the way
Choosing the best wallet for your needs largely depends on the type of coins you plan to store and whether you need to access your coins on the go.
Cold wallets are more secure, but online wallets are more convenient. Cold storage refers to keeping your cryptocurrency offline in a device (such as a USB drive), whereas online storage refers to storing it in an online wallet like Coinbase or MyEtherWallet. The latter option provides access through web browsers and mobile apps, but there’s no way for cold wallets—the most secure type of cryptocurrency storage—to be accessed by anyone without help from its owner.