What You Need To Know About Cryptocurrency Wallets

Whether you’re just trying to get a feel for the world of cryptocurrency, or are a seasoned vet, a cryptocurrency wallet is a must-have for keeping your money safe. When you hear the word ‘wallet’ your mind likely goes immediately to the physical wallets people carry cash in.

Cryptocurrency wallets aren’t like traditional wallets and instead operate more similarly to a bank account. While it’s not necessary to have a wallet for your cryptocurrency, it’s highly recommended by crypto enthusiasts, especially for beginners who don’t know the ins and outs of the market yet.

What Is A Crypto Wallet?

Crypto wallets, though, don’t actually store your money and are instead just the software programs that store your public and private keys for you. Essentially, they behave similarly to a bank account, providing you with a layer of security around your money, and also giving you the tools you need to access your money.

Investors who don’t go through the step of picking a crypto wallet leave themselves more susceptible to hacking and could result in huge losses of their money being stolen or simply not going through. In these cases, those without a secure wallet will find themselves out of luck.

Using the wallet is simple, and requires only two things: A public key, and a private key. The public key is similar to a bank account number and serves as a wallet address so people know where to access the money you’re trying to send or trade.

The private key is more akin to a bank pin number and is something only you have access to. The private key is what actually opens up access to the account, so it’s important to never share it with anyone else.

What Types Of Crypto Wallets Are There?

Cryptocurrency wallets come in two main types: Hardware, or cold storage, and software, or hot wallets.

Hardware Wallets

Hardware wallets, also called cold storage, hold your keys offline in a device that oftentimes looks like a USB stick. Because they’re stored offline, many crypto enthusiasts think they’re the best kind of wallet to get, as they’re more difficult to hack. Difficult doesn’t mean impossible, though, and even hardware wallets come with their own risks.

The most obvious downside to hardware wallets is obviously the fact that they’re stored on a physical item that can be misplaced or lost. If you permanently lose your hardware wallet device, you’ve also permanently lost access to your keys, which can be financially detrimental.

Software Wallets

Software wallets are also referred to as hot wallets, and instead of relying on storage of keys offline, they store your public and private key online. Software wallets are generally connected to a cryptocurrency exchange with user-friendly designs to help appeal to the mainstream explosion of cryptocurrency.

Software wallets can be accessed through cryptocurrency exchanges, smartphone apps, or software programs downloaded to desktops. While plenty of software wallets are relatively safe, they are much more prone to hacking than their hardware counterparts, and care should be taken when deciding which one to use.

Do You Need To Have A Wallet?

Technically, having a wallet isn’t necessary for buying or trading cryptocurrency, but it is strongly recommended. Cryptocurrency is already incredibly unpredictable and volatile as it is, so adding another layer of security is always a good idea. Hackers looking to steal your money consequence free are always on the hunt for easily hackable crypto, and not getting a wallet to protect your money could cause you to lose your entire investment.

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Author - Staff Writer

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