What is a crypto wallet? Definition and example

An example of a crypto wallet

An application that serves as your cryptocurrency wallet is called a crypto wallet. A crypto wallet works similarly to a regular day-to-day life wallet and is used to store rewards and changes for transactions.

Instead of holding on to your physical assets, it keeps track of the passkeys you use to sign for your digital currencies and provides the interface that lets you access your money.

In addition to offering a user-friendly interface for managing cryptocurrency balances, cryptocurrency wallets hold users’ public and private keys. Additionally, they enable blockchain-based bitcoin transfers.

blockchain-based bitcoin transfers via crypto wallet

Users can even carry out specific operations with their cryptocurrency assets with some wallets, such as purchasing and selling or connecting with decentralized applications.

It’s critical to keep in mind that cryptocurrency transactions do not entail “sending” crypto tokens from your mobile device to another person’s mobile device.

When you make a transaction with your tokens, these tokens need a ‘private key’ to update the current transactions in a block. When multiple exchanges happen, these blocks make a chain, and a long history of balanced forms is reflected in the addresses of the respective parties.

Types of the crypto wallets:

There are three broad classifications of crypto wallets depending on where you are willing to store cryptocurrencies.

#1 Software wallet

An example of a software wallet

For PCs and mobile devices, software wallets are available. These software wallets, like regular wallets, will have access to your cryptocurrencies, balance, and transactions. You can download them on your PC or laptop and make carefree transactions.

 If you’re using a software wallet created by a cryptocurrency exchange, it can also have exchange integration.

Several crypto wallets provide quick physical store transactions using NFC (near-field communication) technology or QR code scans. iOS and Android smartphones frequently support mobile wallets.

You can use wallets like TrezorElectrum, or Mycelium. Hot wallets are often those that run on software.

#2 Paper wallet 

An example of a crypto paper wallet with a QR code

In the past, those who used cryptocurrencies made paper wallets by scribbling or writing their keys on paper. Afterward, the keys and QR codes were added so mobile wallets could scan them.

However, because paper wallets are so easily lost or damaged, many bitcoin users no longer use them.

However, paper wallets are hard to maintain and are only advisable if proper private key safety is carried out. To make sure you don’t lose anyone, you can keep it in a safety lock where no one other than you can access it.

#3 Hardware wallet

The ledger Nano S is an example of a hardware wallet
The Ledger Nano S is an example of a hardware wallet

Due to their ability to store and remove private keys from a device, hardware wallets are the most widely used type of wallet. Modern hardware wallets contain various capabilities and look like USB drives.

You can use your computer or another device to transact cryptocurrency while the hardware wallet is plugged in.

The majority of them can automatically sign bitcoin transactions without requesting that you enter the key, preventing hackers from being able to record your screen or track your keystrokes.

Some examples of Hardware wallets are SafePal S1Ledger Nano SD’CENT Biometric Wallet, etc.

Conclusion

The hardware wallet is the safest crypto wallet among the three discussed above. However, we want to share a quick tip – Never purchase a hardware wallet from third-party stores like Amazon or eBay.

Anyone can access the private key easily by removing the seal. Thus, your coins won’t be safe any longer. Buying them from the original dealers’ website is the best solution to avoid fraud as the dealer’s shipping procedure is secured and authorized.

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