What is Cryptocurrency Wallet?
Wallets are just like your Account number, but the difference is that it lets you store the cryptocurrency. It can support single or multiple cryptocurrencies.
Why Do We Need A Wallet?
- It allows the instant transaction, which saves the time
- Record the history of the transaction
- Solve the problem of maintaining various blockchain accounts and balances.
- It can be single signed or multiple signed wallets.
How To Create a Wallet
- We can create our own wallet by signing up in mobile apps, or web apps, for desktop wallets you need to install the application for it.
- Once you sign up in mobile apps or web apps you are provided with the public key and private key. The public key is your wallet address and the private key will indicate that you are the owner of this account.
- The seed phrase is provided for backup in case you lost the wallet address, so keep the seed the phrase secret.
- Remember you can create as many wallets as you can, but your account will only be visible in the network when you will perform any transaction.
Types of Wallet
In this section, we will be discussing the types of wallets on the basis of their functionality. These are:
1. Hot wallet: These wallets are connected to the internet which made them more accessible to the user. They are easier to set up but they are more prone to hackers and technical vulnerabilities. Examples: Coinbase, Metamask
2. Cold wallet: These wallets are not connected to the internet, they are more secure than hot wallets. Examples: Trezor, Ledger Nano
3. Software wallet: It can be a web wallet, desktop wallet, or mobile wallet.
- Web wallets: Web wallets are hot wallets that are always connected to the internet and can be accessed through different browsers such as Google Chrome, Firefox, and Internet Explorer. Example: Metamask, MyEtherWallet
- Desktop Wallet: Desktop wallets are installable software packs that are available for most of the desktop operating systems such as Mac, Windows, Linux.
Examples– Electrum, Exodus
- Mobile wallet: Mobile wallets are the fourth most secure way to store your cryptocurrencies because they are always connected to the internet (hot wallets) and can be flawed by its development community itself.it is available on both IOS and Android.
Examples– Coinbase, Coinomi
4. Hardware wallet: These wallets are physical, electronic devices that use a random number generator to generate public keys. The keys are stored in the device itself which is not connected to the internet. Hardware devices built specifically for handling private keys and public addresses. Examples– Ledger Nano S, Keepkey
5. Physical/Paper wallet: It is a piece of paper in which address and private keys are physically printed. Needless to say, as it keeps your private keys offline, it is another secure way of storing your cryptos but not all cryptocurrencies offer paper wallets. Examples- Ethereum paper wallet
Advantages of Cryptocurrency Wallet
- Decentralized: It means there is no central authority to control the network.
- Transparency: Since every transaction is stored on the blockchain, in case of any discrepancy we can check the record.
- International use: You can do Inter-Country transactions very easily because there are no banks involved between this.
- Low operation cost: When you transfer money from one bank account to another, they charge a considerable amount of money to complete the transaction. If you transfer cryptocurrency, it will charge very little amount.
- Instant transfer: Cryptocurrency is transferred instantly which makes the transaction fast and saves time, irrespective of the geographical location of the sender and receiver.
Disadvantages of Cryptocurrency Wallet
- Universal Acceptance: Cryptocurrency is not accepted worldwide, in some countries, it’s not legal tender.
- Price fluctuation: The price of cryptocurrency fluctuates very much, as you can see the price of bitcoin on March, 20 was $6483.74 and on May, 20 it was $9, 437.05.
- Keeping the seed phrase secret: If you don’t keep phrase secure, the security of your account can be compromised
- Reversing the payment: If you mistakenly pay someone by using cryptocurrency, then there is no way to get a refund of the amount paid. All you can do is to ask the person for a refund and if your request is turned down, then just forget about the money.