For anyone trading or investing in cryptocurrencies, digital wallets are a very important thing. However, it’s crucial to know about the different types of crypto wallets before you can choose the right one for your particular purpose.
A crypto wallet is a type of digital wallet that is primarily used for storing cryptocurrencies. The wallet must be connected and able to interact with a blockchain network so that cryptocurrencies can be easily moved from one wallet to another over the network.
All crypto wallets can be broadly divided into three categories: software wallets, hardware wallets, and paper wallets. As you can probably imagine, software wallets are based on the internet and, therefore, are more convenient and accessible. Hardware wallets are physical wallets that are more secure against internet-based attacks like hacking.
Before we talk about the different types of cryptocurrency wallets, let’s briefly discuss how crypto wallets work.
So, crypto wallets are basically used to store cryptocurrencies, or the information required to transfer cryptocurrencies. Since cryptocurrencies are virtual currencies, they do not need to be actually stored. However, the information associated with these digital currencies, such as the amount, wallet address, security keys, etc., is quite important and must therefore be stored in a secured place, which brings the need for crypto wallets. These digital wallets also act as an interface to communicate with a blockchain when one needs to send or receive cryptocurrencies via the blockchain network.
So, basically, crypto wallets, irrespective of their types, are used to store various important information about cryptocurrencies, including the wallet keys.
Types of Crypto Wallets
Crypto Wallets can be of the following types:
- Hot wallet
a. Software wallet
- Cold wallet
a. Hardware wallet
b. Paper wallet
A hot wallet is any wallet that is connected to the internet and can be accessed/used online. All exchange-based crypto wallets are hot wallets.
A cold wallet is not connected to the internet and can not be accessed online. It uses a physical method like paper or hardware to store the wallet information. Cold wallets are comparatively more secure, as they cannot be accessed or “hacked” online.
1. Software crypto wallet
Software-based crypto wallets use a kind of software application to perform various things and offer services like in-wallet swap, crypto transfer, send/receive payments, deposit, and withdrawals. They generally need to be connected to the internet before a transaction can be performed using a software wallet.
Software wallets can be further categorized as web wallets, desktop wallets, and mobile wallets.
As the name suggests, web wallets can be accessed and used via a browser. Mobile wallets can only be used on a supported mobile device, generally via a dedicated app. Desktop wallet software needs to be installed on a supported computer before using it.
2. Hardware crypto wallet
This is a type of physical (cold) wallet that generally involves the use of a physical electronic device such as a USB drive or flash drive, where the cryptocurrency information, address, and keys are securely stored such that they cannot be accessed online. However, hardware wallets are less convenient to use, as they are difficult to access.
3. Paper wallet
A paper wallet is the simplest type of crypto wallet. It involves the use of paper, on which the wallet information, address, and keys are physically printed out, generally in the form of encrypted QR codes that can be scanned whenever a crypto transaction needs to be performed.
For Libra Coin holders, there is a dedicated and highly secure crypto wallet account assigned to every user. Also, we store a major part of our coins in a physical, hardware wallet so as to safeguard them against internet-based attacks and malware. Your Libra Coin is completely secure and trustworthy. Find out more at https://libraecosystem.com/