Like protecting your debit/credit card and cash, it is essential to understand how to store and protect your cryptocurrencies. When digital purchases currency from a crypto exchange or trading platform, investors sometimes store crypto coins with the platform itself, which is wrong. Some platforms provide buyers the options to provide ownership of coins and keys to the platform, but crypto wallets are designed to store cryptocurrencies. Therefore, every buyer must move their coins off from exchange to a digital wallet, either an offline storage wallet or an online wallet. For more information you can visit here.
You need to know numerous things about digital or cryptocurrency wallets that we will discuss in this article.
What is a Digital or Cryptocurrency Wallet?
Like regular wallets are designed to store traditional currencies, a digital wallet is designed to store digital currencies. All you need to make a bitcoin or other crypto transaction; you need only two things that include a bitcoin wallet address and private key. A bitcoin wallet address is also known as a public key, which is more like an email address or bank account number. One user can share a bitcoin wallet address with other users to receive money. A wallet address is viewable, and anyone can view your wallet address.
But if we talk about private keys, the password or PIN of your bank account must never be shared with even close ones. As bitcoin is a purely digital currency, these digital currencies aren’t technically stored in a digital wallet. The only thing stored in a wallet is the information necessary to send and receive that provides you ownership of your wallet. Using public and private keys, any user can send and receive digital currencies.
Another unique thing about digital wallets is that they are available in numerous options that serve different features and purposes.
Types of Digital Wallets
Different types of storage wallets offer different features. Users can choose a crypto storage wallet according to their needs and preferences. Offline cold storage wallets are secure wallets that aren’t internet-connected, and most crypto investors choose to secure their coins in offline wallets for the long term. But traders who trade cryptocurrencies or users who actively transact crypto coins daily choose hot wallets that are internet-connected. Let’s learn about some different types of wallets that fall under offline and online wallets.
Hardware wallets are also referred to as cold storage wallets that store the keys or wallets offline, which means that these wallets aren’t connected to the internet. This wallet is mainly in the form of a USB drive that can get connected to your desktop or mobile device. Paper wallets also fall under the category of cold storage wallets, in which users can print their private keys on a piece of paper and store them at any safe place.
Crypto users found cold storage wallets as the best way to protect crypto coin investments. Because these are offline wallets, it gets difficult for a hacker to hack any information or get access to private keys. But still, there are risks associated with cold storage wallets, and it is better to best security measures into practice.
Software wallets are also referred to as hot storage wallets. These are wallets connected to the internet and provide great convenience to users as these can be accessed anytime and from any device. There are multiple types of software wallets like mobile wallets, desktop wallets, and web wallets. But keeping funds in these hot wallets is risky as hackers are always keeping their eyes on wallets that aren’t secured and easy to hack.
Is it mandatory to have a digital wallet?
Technically, bitcoins and other crypto coins cannot be stored in any wallets as these are virtual coins. These wallets only store important information about public and private keys. Crypto experts recommend crypto users never invest their money in wallets offered by exchanges. There is no other way to store cryptocurrencies other than digital wallets. You must learn about the working of digital wallets and use the right security measures to protect your coins.