The cryptocurrency market innovates how we make payments and receive money, but some concepts are relatively new and create confusion among newcomers. One of the topics which need some clarification is represented by cryptocurrency wallets and today we’ll dig into the subject in order to explain what is their purpose, what types of wallets we can use, and what are some of the most popular wallets in each category.
What is a cryptocurrency wallet?
A cryptocurrency wallet is a place for storage, where users can keep private and public keys in order to interact with various blockchains to make transactions (send or receive digital tokens). Unlike the wallet you have in your pocket, a cryptocurrency wallet does not have any coins in it. All the digital money is stored on a blockchain and the cryptocurrency wallet only gives you access to a block on the network where your coins are stored.
Since there are two main types of cryptocurrency wallets (physical and e-wallets) each one with a few subdivisions, let’s explore a little deeper this zone, so you will be able to have a broader picture on the topic.
Physical wallets
As the name suggests, physical wallets represent devices or physical objects that are used to store public and private keys. We can divide them into two different smaller categories: hardware and paper wallets.
Hardware wallets store a user’s private keys on a hardware device like a USB. Most of them are compatible with several web interface and have support for different cryptocurrencies. Using a hardware wallet is relatively simple; users just plug their device to an internet-enabled PC, laptop, tablet, or even phone (with an adaptor), enter a pin code, and then make transactions. The main advantage of hardware wallets is increased security since the private keys are stored offline, safe from hacking attacks or other malware.
The second type of physical wallet is represented by paper wallets. A much cheaper alternative to hardware wallets, they also provide a very high level of security. Instead of a physical device, in this case the user carries a physical printout of public and private keys in the form of QR codes and the actual series of letters and numbers that form them. Paper wallets are ideal for people who do not carry high amounts of cryptocurrencies but would still like to have strong security without paying for a more expensive hardware wallet.
E-wallets
Software wallets or e-wallets different from the above-mentioned category since the public and private keys are stored online, on a server, and users get access to their tokens via software that’s compatible with desktop or mobile devices.
Desktop wallets represent pieces of software downloaded and installed on a PC or laptop. In this case, they are only accessible from a single computer, but still, security vulnerabilities enter the equation. You may have to face a partial or complete loss of funds if your computer gets hacked and a virus manages to collect your authentication data.
Online wallets, on the other hand, are running on the cloud and can be accessed from any device, since your private and public keys, as well as your login data, are not stored on your device. With convenience as their main advantages, online wallets are controlled by a third-party and thus they are vulnerable to hacking and theft operations.
Mobile wallets represent the third type of e-wallets and are basically an app that you install on your phone. People are using them since it is much easier to transfer cryptocurrencies when and make payments. In addition, users can add multiple layers of authentication like fingerprint, which increases the level of security.
The most popular wallets
Before you start to use the best Bitcoin exchange, you should know a few of the names that provide the best cryptocurrency wallets. When it comes to hardware wallets, Ledger and Trezor are two of the most popular names in the industry. On top of them, we could mention Digital Bitbox, CoolWallet, and ChooseCase. The best Bitcoin paper wallets are provided by paperwallet.com, bitcoin.com, and walletgenerator.net.
Moving ahead to desktop wallets, some of the most popular names in this field are Electrum, Exodus, Jaxx, and Guarda. As a brief note, you should be aware that some of them are charging fees, so make sure to choose the most optimal solution.
When it comes to online wallets, Coinbase continues to dominate, although you must be aware that it does not have support for all cryptocurrencies. Other names that should be mentioned here are blockchain.info, BitGo, Jaxx, and Bither.
Lastly, the providers of mobile wallets that should be considered are Coinbase, Coinomi, Mycelium, Jaxx, and Cryptopay. It will be up to you to study each offer and figure out which one is suitable for what you want to do.