While talking about the risks of crypto you may have heard the experts recommending storing your assets in crypto wallets.
What exactly is a crypto wallet? Have you heard of it? Is it like a wallet in which you can store crypto? It seems like you do have a lot of questions. Guess what, we have the answer to all these questions. So, find out your answers from below:
What Is A Crypto Wallet?
A crypto wallet is a separate wallet that only you can access. Using this wallet you can store your crypto.
You can store your private keys and send and receive digital money using crypto wallets. Also, you can spend digital money with this wallet.
You can use the crypto wallet to engage in all kinds of interactions with the blockchain network. We already mentioned that crypto wallets can be used to store crypto.
However, it is not in the literal sense that the currency is stored inside the crypto wallet. Rather, the wallet acts as a medium that you can use to store the currency by enabling interactions.
It acts as a tool with which you can enable Blockchain interactions. There are different kinds of crypto wallets.
How Does A Crypto Wallet Work?
You can use crypto wallets easily. Many of the major crypto wallets have mobile apps so that you can simply use them.
The first thing that you need to understand is that cryptocurrencies are bits of data that are stored in a database.
Hence, they can not be ‘stored’ in the literal sense. When you use a crypto wallet, it holds the private key to your cryptocurrency. When you store it on the platform of the crypto exchange itself, it is less safe.
But when you store it in a wallet, it can only be accessed using a private key. You will need to verify the transactions using the wallet address and this is done using a private key which comes in sets of codes.
Crypto Wallets and Private Keys
You use your private key to access your crypto wallet. That means anyone who has your private key can access your crypto wallet and move your funds.
Therefore, you should not share your crypto keys with anyone. It should be strictly confidential and should not be shared with family or friends.
Different Types Of Crypto Wallets
Here we introduce you to the different types of crypto wallets out there. They are software wallets, hardware wallets, paper wallets, and more.
However, the crypto wallets are basically categorized into two. They are either Hot wallets or Cold wallets.
The software wallets and others are the subcategories of hot and cold wallets. Let us start by looking at what hot wallets and cold wallets are.
Hot wallets are a kind of crypto wallets that can be connected to the internet. They can also be connected to a device. At the same time, cold wallets are quite the opposite.
They can not be connected to either the internet or a device. It has no connection at all. Crypto wallets are classified based on these, whether they can be connected.
Hardware Wallets
Hardware wallets do have a lot of fans. These are wallets in which you can store your private key and you can also remove them from your device.
Think of a USB drive in which you can store data but it needs to be connected to a device to get that data. Hardware wallets are like that.
However, hardware wallets are more than this and they have several features attached to them
Software Wallets
You can install software wallets into your mobile phone, laptop, or desktop and then use them. You can take control of your hard-earned crypto, check your balance, move funds, and make transactions using the crypto. Some of the software wallets may also provide you with exchange integration.
Paper Wallets
Paper wallets are the wallets on which you write your crypto keys and store them. This type of wallet was mainly used in earlier days.
After writing the key in the paper or a similar medium, you can store it in a safe place
The Bottom Line
We hope you were able to know about the crypto wallet, its working, and the different kinds of crypto wallets out there.
Also, in this article, we tried to break down some common misconceptions about crypto wallets, that they are used to ‘store’ cryptocurrency.
