What is a Cryptocurrency wallet?
A cryptocurrency wallet Is a software
program that helps you to store, send, and receive cryptocurrencies. It is made
up of a private key and a public key. The private key and public key
are mathematically related but cannot be made from one another, meaning that
you cannot obtain the private key from the public key. Although the public key
is shared but doesn’t mean that by knowing the public key you can discover the
private key and manipulate it, this is impossible.
Different terms of crypto wallet
i. Hot wallet: This is a wallet that is connected to the internet
ii. Cold wallet: This is a wallet that is not connected to the internet
iii. Wallet addresses: These are used to send and receive
cryptocurrencies from one account to another. They have the same functionality
as bank account numbers used to hold traditional money, the only difference is
that wallet addresses are made up of digital signatures which gives them strong
security to move digital cash online without the involvement of a middleman or
central authority. Wallet addresses are of two types, which are public key and
private key.
iv. Public key: This is an address that is shared with the public or anyone who wants to send cryptocurrency to your account.
v. Private key: This is an address that identifies a wallet
uniquely. This is not seen or shared with anyone except the owner of the
wallet. It should be kept in a secure place that cannot be stolen by hackers or
attacked by malicious software because once gets lost, you cannot access gain
the wallet.
Different types of cryptocurrency wallet
1. Online wallets:
These are wallets that can be accessed through the internet.
Examples of online cryptocurrency wallets are:
- Coinbase Wallet: Coinbase offers
an online wallet service that allows users to securely store, send, and
receive various cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and
more. It also provides additional features like decentralized application
(DApp) browsing and access to decentralized finance (DeFi) protocols.
- Blockchain.com: Blockchain provides an online
wallet that supports Bitcoin, Ethereum, Bitcoin Cash, and Stellar Lumens.
It offers features such as two-factor authentication (2FA), multi-signature
security, and the ability to buy and sell cryptocurrencies directly from
the wallet interface.
- Binance Wallet: Binance, one of the largest
cryptocurrency exchanges, also offers an online wallet service. It
supports a wide range of cryptocurrencies and provides features like
staking, savings, and integration with the Binance exchange for seamless
trading.
- Electrum: Electrum is a popular open-source
Bitcoin wallet that is available online as well as for desktop and mobile
platforms. It is known for its lightweight design, fast synchronization
with the Bitcoin network, and support for features like multi-signature
wallets and hardware wallet integration.
- MetaMask: MetaMask is a browser extension wallet
that supports Ethereum and Ethereum-based tokens. It allows users to
interact with decentralized applications (DApps) directly from their web
browser and provides features like decentralized identity management and
integration with hardware wallets.
- Trust Wallet: Trust Wallet is a mobile-based
wallet that supports a wide range of cryptocurrencies and tokens. It
offers features like staking, exchange integration, and support for
decentralized finance (DeFi) protocols.
- MyEtherWallet: MyEtherWallet is an online wallet
specifically designed for Ethereum and Ethereum-based tokens. It allows
users to create and manage Ethereum wallets securely and provides features
like integration with hardware wallets, token swapping, and decentralized
finance (DeFi) access.
Advantages of online wallets
i. Ability to manage multiple cryptocurrencies
ii. They are more suitable for active trading, as can be
accessed at any time as long as connected to the internet.
iii. Help to conduct transactions at high speed.
iv. Allow crypto members to send and receive cryptocurrencies
daily
Disadvantages
i. They are more vulnerable to attacks.
ii. Risk of being attacked by viruses or malicious software
2. Mobile wallets
These are software application wallets built to simplify the
process of payment online using mobile phones. They can be downloaded on the
Apple Store or Google Play Store.
Examples of cryptocurrency mobile wallets are:
- Coinbase Wallet: Coinbase is a
well-known cryptocurrency exchange platform that also offers a mobile
wallet. It supports a wide range of cryptocurrencies and provides features
like secure storage, easy sending and receiving of digital assets, and
integration with decentralized applications (DApps).
- Trust Wallet: Trust Wallet is a decentralized mobile
wallet that supports a vast array of cryptocurrencies and tokens. It's
known for its user-friendly interface and its integration with
decentralized exchanges (DEXs) for trading cryptocurrencies directly from
the wallet.
- MetaMask: Originally a browser extension for
accessing Ethereum-based DApps, MetaMask has expanded to offer a mobile
app. It allows users to manage their Ethereum and Ethereum-based tokens,
interact with DApps, and securely store private keys.
- Atomic Wallet: Atomic Wallet is a multi-currency
wallet that supports over 500 cryptocurrencies. It provides users with
features like built-in exchange services, staking for certain
cryptocurrencies, and cross-platform support (available for both mobile
and desktop).
- Exodus Wallet: Exodus is a multi-currency wallet known
for its intuitive design and support for a wide range of cryptocurrencies.
It offers features like built-in exchange services, portfolio tracking,
and support for hardware wallet integration.
- Blockchain.com Wallet: Blockchain.com
offers a mobile wallet for Bitcoin, Bitcoin Cash, Ethereum, and Stellar.
It provides users with full control over their private keys, multi-device
synchronization, and the ability to buy and sell cryptocurrencies directly
from the wallet.
- MyEtherWallet: MyEtherWallet
is a popular Ethereum wallet that provides users with a mobile app for
managing their Ethereum and ERC-20 tokens. It emphasizes security and
allows users to interact with decentralized applications directly from the
wallet.
Advantages
i. Are safer than online wallets
ii. They are better for use in the long run or on the go
iii. They offer many additional features such as QR code
scanning
Disadvantages
i. Not suitable for storing large amounts of
cryptocurrencies
3. Desktop wallets.
These are cryptocurrency software applications installed on your
computer. They are considered safer than mobile and online wallets, but only if
the computer isn’t connected to the internet. If the computer isn’t connected
to the internet, then the desktop wallet becomes a cold wallet. The risk of a
cold wallet becoming damaged or attacked by viruses or malicious software is
low compared to a computer connected to the internet.
Examples of desktop cryptocurrency wallets are:
- Exodus: Exodus is a multi-cryptocurrency wallet
that supports a wide range of cryptocurrencies. It has a user-friendly
interface and provides features like a built-in exchange, portfolio tracking,
and more.
- Electrum: Electrum is one of the oldest and
most widely used Bitcoin wallets. It's known for its speed and simplicity.
It's a lightweight wallet that doesn't require downloading the entire
blockchain.
- Atomic Wallet: Atomic Wallet is a decentralized
multi-cryptocurrency wallet with a built-in atomic swap exchange. It
supports over 300 cryptocurrencies and provides features like staking,
built-in exchange, and more.
- Coinomi: Coinomi is a multi-cryptocurrency
wallet known for its robust security features and support for a wide range
of cryptocurrencies. It offers features like built-in exchange, support
for multiple languages, and more.
- Jaxx Liberty: Jaxx Liberty is a multi-platform
cryptocurrency wallet that supports a variety of cryptocurrencies. It has
a user-friendly interface and provides features like portfolio tracking,
built-in exchange, and more.
- Trust Wallet: Originally designed as a
mobile wallet, Trust Wallet also offers a desktop version. It supports a
wide range of cryptocurrencies and provides features like staking, DApp
browser, and more.
- Guarda Wallet: Guarda Wallet is a multi-cryptocurrency
wallet available on various platforms, including desktops. It supports a
wide range of cryptocurrencies and provides features like built-in
exchange, staking, and more.
Advantage
i. The keys are stored offline on the computer hard drive
and not on the third-party server
Disadvantages
i. Become riskier if get connected to the internet
ii. Has a high risk of losing cryptos if your computer dies
and you can’t back up your wallet.
4. Hardware wallets.
Cryptocurrency hardware wallets are physical
devices that securely store the private keys necessary to access and manage
your cryptocurrency holdings. They are considered one of the safest ways to
store cryptocurrencies because they keep your private keys offline, away from
potential online threats like hackers and malware. They are called cold
wallets because aren’t connected to the internet. They are very secure wallets
and are good for storing large amounts of cryptocurrencies.
- Ledger Nano S: The Ledger Nano S is one of the most well-known
hardware wallets in the market. It supports a wide range of
cryptocurrencies and offers a secure element chip to protect your private
keys. The device is compact and features a small screen for easy
navigation.
- Trezor Model T: Trezor is another
reputable brand in the hardware wallet industry. The Trezor Model T is
their flagship product, featuring a touchscreen interface and passphrase
encryption for enhanced security. It supports over 1000 cryptocurrencies
and has an intuitive user interface.
- KeepKey: KeepKey is a hardware wallet
acquired by the cryptocurrency exchange ShapeShift in 2017. It has a sleek
design and a large screen for easy verification of transactions. KeepKey
supports a variety of cryptocurrencies and integrates with the ShapeShift
platform for seamless trading.
- BitBox02:Developed by Shift Crypto, the
BitBox02 is a compact and secure hardware wallet with a minimalistic
design. It features a microSD card slot for encrypted backups and a secure
chip for key storage. The BitBox02 supports multiple cryptocurrencies and
provides strong security features.
- Ellipal Titan: The Ellipal Titan is a
cold wallet designed for maximum security. It features air-gapped
technology, meaning it operates offline entirely. The device has a large
touchscreen for easy navigation and supports many cryptocurrencies. It
also integrates with the Ellipal mobile app for convenient management.
Advantages of hardware wallets
i. It is one of the safest cryptocurrency wallet
ii. They are very secure
iii. They are used to store large amounts of
cryptocurrencies for a long time
Dis advantages
i. They are very expensive
ii. They are not user-friendly
5. Paper wallets.
These are super cold wallets. Private keys and public keys are
printed first before use. You can send or receive your digital cash by entering
your private keys or by scanning the QR code on the paper wallet
- Bitcoin Paper Wallet:
Bitcoin Paper Wallet is a popular option for generating a paper wallet for
storing Bitcoin securely offline.
- WalletGenerator.net:
This platform supports generating paper wallets for various
cryptocurrencies including Bitcoin, Ethereum, Litecoin, and others.
- BitAddress.org: BitAddress.org is
another well-known platform for generating Bitcoin paper wallets. It
provides a simple interface for generating and printing paper wallets
securely.
- MyEtherWallet: While primarily known
for Ethereum wallets, MyEtherWallet also supports the generation of paper
wallets for Ethereum and Ethereum-based tokens.
- LiteAddress.org:
Similar to BitAddress.org, LiteAddress.org allows you to generate paper
wallets specifically for Litecoin. It provides a straightforward interface
for generating and printing Litecoin paper wallets:
Advantages of paper wallets
i. They are not stored on the computer, mobile phones, or
any third-party server.
ii. They are more secure than any other wallets.
Disadvantages
i. Not user-friendly
ii. Difficult to use for daily transactions than any other
wallet
iii. Can be damaged by fire
How to choose a crypto wallet?
1. Based on security:
Choosing a secure crypto wallet is good for the safety of your
cryptocurrencies. For example, hardware wallets are very secure compared to
other crypto wallet. I recommend you consider buying a hardware wallet if you
have a large number of cryptocurrencies that you don’t invest daily or don’t
use for shopping instead you hold them for a long time. When looking for the
most secure wallet, check the authentication used by the wallet, and find out
what online reviews are saying about the wallet. This will help you to know if
the wallet is secure or not.
Sites that provide reviews about crypto wallets
iii. Coincentral.com
2. Based on crypto ownership:
Some wallets do not hold more than one cryptocurrency because
they have been built for only one cryptocurrency. For example, mycelium, electrum, and Bitcoin core wallets are built to hold
Bitcoin only and not any other cryptocurrencies. If you have more than
cryptocurrencies to store, look for multicurrency wallets that can carry many
cryptocurrencies without any problem. Examples of multicurrency wallets
are Exodus which is a desktop wallet, and Coinnomi.
3. Based on transaction fees:
Consider this factor if you’re an active trader or you want to
spend everyday cryptocurrencies for buying goods and services online and for
exchange on different platforms. You should make sure you pay less in
transaction fees and earn more.
4. Based on anonymity:
This is the ability to hide your personal information from being
tracked or seen by the public or external entities. Anonymous wallets help to
separate your personal information from your funds, in which no one can figure
out which person carries this amount of funds or has conducted this type of
transaction. Whether to choose an anonymous wallet or not, depends on your
goal. If your goal is to make your transactions secret, then an anonymous
wallet is your choice. But keep in mind that anonymity affects your transaction
fees and the price of the wallet. Examples of anonymous wallets are:
How to keep your wallet secure?
i. Back up your wallet:
This helps to recover your wallet in case any failure or damage
to your computer happens. All backup data should be kept in a safe and secure
place apart from the original wallet. Backup should be done regularly to ensure
that all recent crypto addresses are included in your original wallet.
ii. Update your software regularly.
This helps to ensure all new security features
are available to the software. By updating the software, you minimize the risk
of being vulnerable to attacks, because when a company discovers
vulnerabilities in its software, it starts fixing them and coming up with a new
version that has no loopholes for attackers to penetrate as previously, that’s
why updating software to the new version is very important, not only for mobile
or desktop crypto wallets but all software of the other businesses should be
updated regularly.
iii. Use two-factor authentication(2FA):
Use two-factor authentication like the Google
Authenticator app, mobile phone number, and email addresses. You should check if
the wallet provides this type of security feature to use.
iv. Use a strong password.
A strong password has a mixture of characters,
small letters, capital letters, and numbers, and must be at least 16 characters
long. Strong passwords are difficult for hackers to crack. Avoid using known
words as passwords. Don’t use small letters only or capital letters or numbers
only as your password because hackers use dictionaries with millions of words
to brute force and discover the password, that’s why it is recommended to use a
very strong password which is hard to discover.
v. Encrypt your wallet:
If this feature is available in your wallet,
you should consider using it as another layer of security for your wallet.
Encryption prevents anyone from accessing your wallet except you.
vi. Have multiple wallets:
This helps to take advantage of services from
different wallets. For example, you can have a hardware wallet for storing
large amounts of cryptos. Online wallet for active trading and desktop and
mobile wallets as well.
vii. Use antivirus on your computer and
smartphone, and should be updated regularly. You can use strong passwords and
encrypt your wallets very well, but this method cannot prevent you from
keyloggers’ software. This software records everything you type on the keyboard
and sends data to the remote servers of the hackers. Using antivirus helps to
block this malicious software and discover all current running viruses on the
device.
NB: Security is a very important issue in an online
environment, so make sure you keep it as the first priority to take into
consideration.
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