Beginner’s Guide to choosing the right cryptocurrency wallet
Cryptocurrencies are virtual assets meaning they do not exist in the real sense. However, coin holders can store and use their reserves using cryptocurrency wallets.
A cryptocurrency wallet refers to a software program that securely holds public and private keys that allow digital currency owners to view their balances, send, and receive coins on a blockchain. Users can view the wallet as their local bank that stores their funds and access them when needed.
Therefore, if you are interested in digital coins for trading purposes or hold some coins, you need a good cryptocurrency wallet. Most coins have their native wallet, but third-party wallets are also in multitude.
Here’s a quick guide to choosing the right wallet before you acquire your first coin.
Understand Cryptocurrency Wallets
By understanding cryptocurrency wallets, we mean what they are and how they function. The definition alone may not give you complete insight, so it’s important to know more about the software programs and the keys. Private keys refer to strings of letters and numbers generated randomly.
Each wallet has its unique private keys, and wallet owners are tasked with maintaining their keys securely. The keys allow you to approve transactions such as sending coins from your wallet to peers. Private keys are typically passcodes meant for the wallet owner to allow you to access the wallet and authorize a transaction.
Without them, it’s impossible to transact, so losing your keys means losing your coins. Public keys are designed for other people to see. In most cases, you will find them referred to as the wallet address and what other people use to send coins to your wallet.
It can be considered a local bank account number, which you can share with anyone planning to channel fiat currency into your account.
Know the Different Types of Cryptocurrency Wallets
Different wallet technologies are broadly classified into hot and cold wallets.
You can choose any wallet type for your coins, but you should make a few essential considerations. The wallets differ in aspects such as security, cost, accessibility, user-friendliness, and convenience.
Hot wallets are the best in terms of accessibility, convenience, and cost but have a downside when it comes to security. They are software wallets that require an internet connection to use. For that reason, they are usually exposed to the risk of hacking, which makes them relatively unsafe.
Hot wallets include desktop wallets, online wallets, and mobile wallets. Users of desktop wallets can download and use them from desktop or personal computers.
Online wallets exist on the cloud and can be accessed anywhere provided you have a device and internet connection. Mobile wallets are similar to desktop wallets, but they run on mobile devices.
Cold wallets may not be the best in terms of convenience, accessibility, and cost. However, they provide unmatched security to your coins as there are no hacking risks, a feature that makes them a bit costly. They are hardware wallets stored offline, making them difficult to access, but the best when planning to hold coins as a long term investment.
The safety of the wallets depends on how securely the owners store their keys. The common cold wallets you will find include USB wallets and paper wallets.
Paper wallets are those that allow users to print and store their keys on paper. Users will need to transfer the keys to a software wallet when they want to do a transaction. For USB device wallets, owners need to connect them to computers, although they are usually protected and will still work even with malware-infected computers.
Choose a Wallet According to Your Needs
People enter the cryptocurrency industry for different reasons. Some are serious investors interested in trading, others want to use digital coins as their currency of choice in their daily lives, and others want to get a glimpse of the industry.
In any case, you should choose a wallet that provides the best of what you value. Individuals who want to use digital coins in their daily operations are best suited for hot wallets. They may not be the most secure but will provide the convenience needed for frequent transactions.
However, if the transactions are of high value, a cold wallet would be a better option for safety. Investors planning to hold coins for long can go for hardware wallets, especially if they hold large amounts of funds.
Otherwise, web wallets can also cater to their needs effectively. People who want a glimpse of the industry will probably hold small funds in the wallets, so hot wallets can be a good option. However, other factors may also come into play, such as access to an internet connection and mobile devices, thereby forcing them to use hardware wallets.
The kind of crypto wallet you choose is a critical determinant of your encounter with cryptocurrencies. The technology behind digital coins has a reputation for confidentiality and security, but that does not imply that cryptocurrency users do not have the responsibility of safeguarding their assets.
If you are eager to own and use your first cryptocurrency, you should understand first the different types of wallets and how they operate. From there, you can choose your preferred wallet type based on your requirements. Don’t forget to check out our top crypto wallets page!