Crypto Education

Deciphering the Concept of a Cryptocurrency Wallet

bitcoin binary 120x80Are you enthusiastic about cryptocurrency investments? If yes, then you need to be well-versed with the essential concepts of cryptocurrency. One important term that you come across, when investing in cryptocurrency is cryptocurrency wallet.

The concept of a digital currency wallet

A digital currency wallet can be termed as a software program that is used to store the public and the private keys. The wallet interacts with the different blockchains also so that the users can receive and send the cryptocurrency. The wallet also monitors the balance of the users.


Different Types of cryptocurrency wallets

There are different types of digital currency wallets that you can choose.There are different types of digital currency wallets that you can choose.

Online: The online wallets can easily run on the cloud and you can access them from anywhere.Though the online wallets sound like a more convenient option but there is one important issue that you cannot ignore. These wallets store the private keys of the user online. The troubling aspect is that the private keys are controlled by a third party in this situation. This is why these keys are vulnerable and can be stolen.

Hardware: You can find hardware wallets as well. They differ from the software wallets because they store the private key of the user on a hardware device. For example, the private key can be stored on a USB. The benefit of the Hardware wallets is that they are compatible with most of the web interfaces. Making a transaction with a hardware wallet is quite easy. All you need to do is plug-in your device to your computer that is connected to the internet. Once you are connected to the internet you will have to enter your pin, send your digital currency and confirm. With the help of hardware wallets you can easily keep your digital currency offline.

Desktop: Well, if you want to go for a desktop cryptocurrency wallet, then the benefit of this practice is that they can easily be downloaded on your computer. These wallets do offer a high-level of security but there is one major risk as well. You can lose all your funds if by chance a virus affects your computer or your PC gets hacked.

Mobile: Some people prefer to opt for the mobile wallets also. These wallets can run on your mobile phone. The mobile wallets can be termed as simpler option in comparison to the desktop wallets. However, one thing that you need to remember is that the mobile wallets are quite small and they have a limited amount of space.

Paper: If you are into digital currency investments, then you must be familiar with the concept of Paper wallets also. This wallet can be termed as a piece of software that can generate your key pair. These keys can be printed later on. If you want to transfer your digital currency to a paper wallet, then you have to transfer the cryptocurrency from your software wallet to the public address that is mentioned on your paper wallet.


How the digital currency wallet works?

Well, most people have a misconception about cryptocurrency wallets. They believe that the wallets are used for storing the digital currency but it is not the case for sure. What you need to remember is that the cryptocurrency does not get stored in physical form anywhere. Only the transaction records exist on the blockchain. When an individual decides to send you digital currency, then they are signing off the coin ownership to the receiver’s wallet address. If you want to make use of those coins, then in that case your private key must match the specific public address to which the currency is assigned. When the private and the public keys match, then in this situation your balance will increase and the balance of the sender will decrease.

Now, an important question that may come across your mind is that are the cryptocurrency wallets secure. What you need to keep in mind is that the security level of the wallet depends upon the type of wallet that you decide to choose. Ideally, you should adopt some preventive measures to make your wallet more secure. If you want to make use of an online wallet, then the best approach will be to only keep currency that you require for everyday use in it. You should also keep your software updated so that all the recent security enhancements are available. You should also make sure that you add extra security layers to your wallet. For example, you can have complex passwords. It will also be a good idea if your wallet has a two-factor authentication. 

You can also go for a wallet that requires the multi-sig transactions. This type of wallet requires the permission of another user for a transaction to be made so you can try it out as well.

Risk Warning: Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Especially trading leveraged products such as Forex and CFDs carry a high degree of risk to your capital and can result in the loss of your entire capital. Only invest with money you can afford to lose.