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Cryptocurrency Wallets and Their Types

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Snapshot

  • Crypto Currency Wallets
  • Types of Cryptocurrency Wallets

Cryptocurrency Wallets

Cryptocurrency wallets can be defined as a medium of storage for the cryptocurrency assets. If you want to own a cryptocurrency you need to have a cryptocurrency wallet. A cryptocurrency wallet can be created for any cryptocurrency and requires a public key and private key combination to have access to, to send cryptocurrency and to even receive cryptocurrency. The public key is the address of the wallet similar to the email address and the private key is the password for the wallet as is the password for an email address. There are a number of types of crypto wallets and are worthy of discussion.

Types of Cryptocurrency Wallets

Hardware Wallets

Hardware wallets are the wallets that are built upon the hardware devices such as USB drives. The USB drive is plugged into a system and the wallet can be connected to the blockchain. The Hardware wallets are also known as ‘cold wallets’ as they cannot be accessed through the internet until plugged in and are considered to be more secure than the software wallets. Hardware wallets come with a price of around $100.

Software Wallets

Software wallets are the computer software programs that are connected to the internet. Due to their connectivity to the internet they are known as ‘hot wallets’. They are more prone to internet based attacks when compared to the Cold wallets. Software wallets are free to use and are of following types:

  • Mobile Wallets: They are mobile wallet applications that run on smartphones. They are highly convenient to use even on the go. 
  • Desktop Wallets: They are the software applications installed on a desktop computer. This type of wallets lets the user store their keys on their computer and allows for better management of the crypto assets.
  • Web Wallets: These wallets are stored on the web along with the private keys and the transactional information. Though most convenient they are the most insecure.

Paper Wallets

The public and private key or the QR code of a wallet written or printed on a piece of paper is known as a paper wallet and was used in the initial days of crypto. Though it is considered as the safest means for storing one’s crypto from the cyber attack perspective but can be risky if the paper is torn or burnt or misplaced.

Custodial Wallets

The Custodial wallets are the wallets whose keys are controlled by a third party provider for securing the crypto assets on the behalf of the user. This makes them risky and the asset’s security is in the hands of the third party. The wallets on the crypto exchanges fall under this category.

Non-Custodial Wallets

The non-custodial wallets are the wallets whose keys are in control of the owner of the wallet and these are termed to be more secure when compared to the custodial wallets.

Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investment.

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