When you start investing in cryptocurrency, you need to have a wallet. The latter is used to store assets, as well as to sell them. There are several types today. But what are the options and what are the advantages of this type of portfolio? All the answers in the rest of this.
The cryptocurrency wallet, presentation
The cryptocurrency wallet is a material or intangible medium, that allows you to store, receive, or send assets of this type. They are directly linked to the blockchain, digital currencies not being considered physical currencies. On the other hand, you should know that a cryptocurrency has a device that does not allow it to communicate with others. For example, Bitcoins cannot be transferred to an Ethereum wallet and vice versa. It is therefore necessary to create a crypto wallet for each virtual currency. Concretely, this is how a cryptocurrency wallet works. It consists :
- A public key. It could be compared to the bank identity statement. This key consists of a series of numbers and letters and corresponds to the wallet address on the blockchain.
- With a private key. It is considered a password and allows access to funds stored in the blockchain. It must never be communicated.
It is by combining these two keys that a digital signature is created and allows you to consult your balance and carry out transactions.
The main types of wallet
Today, there are several types of cryptocurrency wallets. Among the main ones, we find the mobile wallet. It takes the form of a mobile application to download via a smartphone. This is the simplest wallet to use, mainly because it contains fewer features than other crypto wallets. Usable to carry out transactions, it also offers the possibility of scanning other wallet addresses using a QR Code. The disadvantage of the mobile wallet is that it remains subject to hacks. Another option is the desktop wallet. This is software to install on a computer. Intermediate between the online and offline wallet, its level of security against viruses and other forms of cyberattacks is relatively high. In the event of a failure, it is possible to use a recovery code, which will have been transmitted during the installation of the software. However, it requires having a firewall and an effective antivirus.
Cold Hardware Wallets
Cold hardware wallets are the most common. They are characterized by their high level of security. They use keys generated via a source not connected to the blockchain. Therefore, they are also not connected to the Internet. This is why they are called cold bags. These crypto wallets can therefore play the role of a savings bank account. While they are not prone to hacks, there is still a risk of losing the assets. It is therefore recommended to make several backups and keep your cold hardware portfolio in a secure location.
What advantages
The advantages of the cold crypto wallet are numerous. First, data is stored on a device that is disconnected from the network. An important point, in addition to the fact that these wallets are small and therefore easy to carry discreetly. This solution will also allow you to store a large amount of data, through various agents. And in the event of loss, it remains possible to recover the funds, via a sequence generated especially for this purpose and known as a seed. Although it is particularly popular, the cold wallet remains relatively expensive. It will therefore not necessarily be the most suitable for investors new to cryptocurrency.
Hot Cryptocurrency Wallets
Hot wallets differ from cold ones in that they have a particular property. They are permanently connected to the network and therefore to the blockchain. While this is a positive, it is also a disadvantage. Indeed, this highlights greater vulnerability to potential attacks, the objective of which remains to deprive the investor of their cryptocurrencies. It is, therefore, better to ensure that your source code is of good quality, but also that your computer is equipped with antivirus. This way, you will be less afraid of malware and possible cyberattacks.
What advantages
This type of wallet has various advantages. Being mobile, they offer the opportunity to carry out rapid transactions. Furthermore, many of them are open source. In other words, this gives you the possibility of checking the security level of your crypto wallet. You should know that making a code public allows you to continue improving a portfolio. On the other hand, hot models support various alternative cryptocurrencies, which cold hardware wallets cannot do. Finally, the last advantage, and probably the main one, is that they are mostly free. These crypto wallets are therefore aimed at the greatest number of people, novices, or experts in the field of cryptocurrencies.
