What is a Cryptocurrency Wallet?
A Cryptocurrency wallet is a highly secured digital which is used to receive, send, and store private keys that claim ownership of public keys associated with a certain amount of Cryptocurrency like Bitcoin. The wallet also acts as a personal ledger of all transactions carried out through it. There are many types of Cryptocurrency wallets available on the market today. Popular cryptocurrencies like Bitcoin and Ethereum offer officially endorsed secure wallets. Universal wallets and offline wallets for long storage are also available options but one can never be wary enough of malware disguised as wallet software.
How secure are Cryptocurrency wallets?
All Cryptocurrency wallets are designed to be secure but the security levels of Cryptocurrency wallets differ from wallet to wallet. It is advisable to not store more currency than you require at a time in a frequently used wallet. Not sharing your private keys and passwords and using Google authenticator and multi-signature transactions also add to the security of your wallet. It is wise to have an encrypted hard copy backup of your wallet and private keys to ensure that you do not lose them. Losing private keys means losing the cryptocurrency associated with it and there is no way of retrieving lost private keys unless you have a backup.
Are Cryptocurrency wallets anonymous?
Cryptocurrencies are pseudonymous. Users are identified with their public keys which do not require them to reveal any personal information. The open source and public nature of Blockchain ledgers allow little to no scope of tracking the identity of a user. These features make cryptocurrency wallets anonymous to a large extent.
What are the types of Cryptocurrency Wallets?
Based on the medium on which the wallet is stored and its offline or online availability, the different types of Cryptocurrency wallets available are Online, hardware, desktop, mobile, and paper. Some wallets, like the Bitcoin wallet, offer multiple methods of access such as desktop and mobile.
Here is an overview of different types of cryptocurrency wallets:
Online Wallets: Also known as ‘hot wallets’, online wallets are web-based wallets that host data on a real or virtual server. Some hybrid online wallets allow encryption of private data before forwarding to the online server.
Offline/Hardware Wallets: Hardware wallets include USB devices or specific hardware created to securely hold cryptocurrency. The wallets can go online for data and transactions but are taken offline for transportation or security.
Desktop Wallet: This is the most common type of wallet available and connects directly to the coin holder.
Mobile Wallet: These types of wallets are run and can be accessed from a smartphone.
Paper Wallet: Paper wallets completely avoid digital interaction by printing out the QR codes for private and public keys. These types of wallets are considered highly secure although they limit fluidity.
Desired Traits in Cryptocurrency Wallets
Not all cryptocurrency wallets are made the same way. Some offer more security while others offer unparalleled convenience. Here are some traits to look out for, before choosing your wallet.
- Cost – Some wallets are available for free. It is important to consider all factors with such wallets.
- Security – The security record of the company and its products may help you analyze the security of specific cryptocurrency wallets.
- Mobility – The ease of storage, accessibility and the risk of losing your keys must be considered.
- Convenience – The transaction time, the range of supported altcoins and the UI can be analyzed to filter out a wallet that offers convenience.
Whatever be the type of wallet, it pays to follow security practices like not sharing your private keys and keeping a backup of your keys. Cryptocurrency wallets are safe and secure storage and exchange platforms for altcoins if utilized properly. You can also build your own cryptocurrency wallets with custom integrations, keeping in mind the above-mentioned factors.