When people first started trading bitcoin, they had no idea that the potential of the first cryptocurrency was so high.
Back then, the advantages and disadvantages of bitcoin were still blurred since no one really knew what it was at the time. Now, people are starting to become more aware of the good that it can bring. People (especially those that live in countries that have struggling economies) are trading them more now than ever. If you’re new to the crypto world, you might be asking: “where do they keep all the coins?” The answer? Wallets. No, not the traditional wallets that you can hide in your back pocket, digital wallets that store not only bitcoin, but some can even hold other cryptocurrencies.
Cryptocurrency wallets are an incredible thing. It allows the underbanked to have an online financial passport. Meaning, having a digital wallet opens up a global opportunity to buy and sell across the globe. Cryptocurrency wallets are kind of like internet bank accounts, provided that you fund them but that isn’t a problem since nowadays, it’s extremely easy to buy bitcoin and other cryptocurrencies. This is because this new era of bitcoin has birthed hundreds of new payment methods. If you’re still a little new to the bitcoin industry, allow me to explain what wallets are, the different kinds of cryptocurrency wallets, and how each kind of wallet has a different purpose.
Different Kinds of Cryptocurrency Wallets
So what is a cryptocurrency wallet? Aside from it being an online financial passport, it’s a software program that stores public and private keys. These keys allow you and other people access the wallet. Cryptocurrency wallets also enable users to send receive digital currency and monitor their balance. If you’re looking to hold some bitcoin or any other cryptocurrency, you can’t do that without a wallet.
There are many different kinds of wallets out there and that can confuse/intimidate a lot of newbies. Each wallet serves a specific purpose and we’ll be going through some of the more popular choices:
These wallets are hardware devices built specifically for handling private keys and public addresses. It’s a flash drive-like device with an OLED screen and side buttons to navigate through the interface of the wallet. It also comes with native desktop apps for different cryptocurrencies.
It’s usually a battery-less device which you can connect to a PC or mobile device via USB port. Hardware wallets are probably the most secure wallets out there but it’ll set you back $70-$150. It’s a bit pricey but you can’t put a price on the security of your funds. If you’re holding a lot of cryptocurrencies or you’re holding a significant amount of money, this wallet is probably the best option for you.
These wallets are a bit more technical and it requires a high level of caution from the user. In a typical paper wallet, your private keys and public addresses are printed on a piece of paper. From there, you can start transferring your money into it. When you generate a paper wallet, 2 QR codes are created: (1) a public code for the public key to receiving crypto and (2) a private code for the private key to spending crypto.
You also cannot spend a fractional amount from paper wallets. You’ll have to swipe the entire amount into a digital wallet using its private keys. After you’ve transferred all the contents, the wallet can no longer be used.
Paper wallets are easily the 2nd most secure way to store your cryptocurrencies.
These are software packs that contain desktop wallets available for Mac, Windows, and Linux. Since your desktop or laptops are often connected to the internet, be sure to install an antivirus or anti-malware software. Set up a strong firewall as well.
These are hot wallets that are always connected to the internet. They can be accessed via different internet browsers. Private keys are held online, so they’re prone to DDOS (distributed denial-of-service) attacks.
It is recommended that you use “non-hosted wallets” so that you are more in control of your funds. Web wallets are only good if you’re just starting out and haven’t put a lot of money into your account. Most bitcoin exchanges will give you a free wallet upon signing up so that you can begin your crypto journey at once. It’s best to use these wallets if you’re testing the waters when it comes to cryptocurrency trading.
These are probably the most used wallets right now on the market. This is because it’s so easy to use and you can access your wallet wherever as long as you have your phone. Consider these factors before choosing a mobile wallet to use:
- Private keys – It’s important that you have control over your own private keys.
- Ease of use – Choose a wallet with an elegant UI so you won’t get confused.
- Development community – Make sure that the development community is active.
- Backup and security – Choose a mobile wallet that has back-up and restoration features.
- Compatibility – Make sure that it’s compatible with different operating systems.
Keep Your Funds Safe
If you’ve already gotten into cryptocurrency trading, you should already know by now that keeping your funds safe should be at the top of your priorities. Obviously, you wouldn’t want your investments to go to waste.
Bitcoin itself cannot be hacked but wallets and exchanges are not immune. This is why it’s important to get a proper wallet for your trading needs. Be sure to do as much research as you can before getting into cryptocurrency trading. Dip your feet in the water before diving right in. I wish you nothing but the best on your trading adventure! Welcome to the club!
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