“Wallets” (cryptocurrency wallets) play an important role in the development of technology. We cannot forget that Bitcoin and other cryptocurrency systems operate completely decentralized. And this is precisely the importance of “wallets” because they provide absolute control to the user who acquires them. ” Wallets” (cryptocurrency wallets) allow you to check your balance, work with cryptocurrencies or view transactions performed. The security of “wallets”, unlike banks, is that they allow the user to sign transactions with full control over their private keys.
In this sense, “wallets” will continue to evolve in this technological era. Although they are compared to regular wallets, the difference is in their storage, as they store keys instead of money. Virtual currencies are often used in society today, and this mechanism is necessary to take full advantage of the benefits offered by crypto-assets . For this reason, when it comes to cryptocurrency , the choice of how to store it is crucial. Consequently, it is necessary to choose safe and reliable “wallets” (cryptocurrency wallets).
What is a cryptocurrency wallet?
” Wallet” (cryptocurrency wallet), like the usual wallet that you probably carry in your pocket or bag, is mainly used to store virtual currencies. However, unlike its traditional counterpart, it also allows you to make transactions, that is, send and receive funds . In practice, a cryptocurrency wallet is a file that contains private keys and addresses for making transactions. Keys are unique strings of characters (passwords) used to confirm transactions.
Addresses are strings of 25 to 34 digits or characters that identify a user in a particular network (such as the Bitcoin network). They serve the same function as bank account numbers: you provide them so that someone can send you funds. The difference is that you can use a different one for each transaction. You can store your virtual funds in different ways, depending on the type of “wallet” (cryptocurrency wallet ), which can be through your computer or cell phone.
How do cryptocurrency wallets work?
There is no doubt that the wallet (cryptocurrency wallets) provides security to users through blockchain encryption methods. “Wallets” are highly advanced in terms of technology because they use cryptographic security mechanisms to sign, access and encrypt transactions, blocks and their chains. This allows the wallet to move value between users without the involvement of third parties in the process. In other words, it decentralizes management and offers its participants a ledger that remains secure and reliable over time.
However, “wallets” consist of a public key, which is used to obtain the cryptocurrency. This key consists of an address of numbers and letters. As its name implies, it is public, so it can be shared with other users. Similarly, the private key, which consists of a series of cryptographically generated numbers, is extremely important. Which allows to confirm exit and fundraising operations solely by the owner . As a result, in a “wallet” both keys are linked, since the public one is always generated from the private one.
Are wallets (cryptocurrency wallets) really safe?
One of the most important aspects and goals of a “wallet” is its security. Since they are digital files, no two addresses are the same. This gives the user confidence that another user cannot interfere with their funds and vice versa. Another point in favor of the security of “wallets” (cryptocurrency wallets) is that addresses consist of combined numbers and letters, which does not reveal the user’s identity.
However, just as there are countless aspects of a “wallet” (cryptocurrency wallet) for security, one must consider that there are many types of wallets available. This variety of digital wallets means that some are not as secure as others, and each has its own risks. Therefore, security measures must be taken to protect cryptocurrencies. For example, a desktop or mobile wallet will be vulnerable if it is not regularly backed up.
Wallets are important tools for storing, accessing, sending and receiving cryptocurrency. They are used to store private and public keys required for all types of transactions. There are different types of wallets with varying degrees of security for different user needs.
- A wallet is a physical medium, device, program or service used by cryptocurrency holders to store (multiple) public and/or private keys.
- Wallets are used to track ownership as well as to receive and spend cryptocurrency.
- The cryptocurrency itself is not “hosted” inside the wallet, the wallet interacts with the blockchain.
- Software wallet (desktop/mobile/online)
A software wallet offers you greater ease of use and greater security when storing your credit on your computer desktop or mobile device. You have immediate access to your cryptocurrencies and full control over your private keys. This solution creates a single wallet file that stores your private keys. For added security, this file is also encrypted, which means you can use a user passphrase to access it.
You can choose between two types of software wallets: either get a separate one for each cryptocurrency you own, or use software wallets that can store multiple cryptocurrencies.
- + Easy to set up and use
- + good security
- + You control your private keys
- – Can be hacked if you lose your computer or mobile device
- – Your credit is “hot” when your computer or mobile device is connected to the internet
- – Public Wi-Fi is not secure to access your credit
Hardware wallets combine user convenience with a high level of security. It’s probably the best way for most users to store cryptocurrency . Your private keys are stored on a cryptographically secure hardware device. Because the keys are stored directly on the device and cannot be read in plain text, it is virtually impossible for attackers to obtain them, even if the computer is infected with a virus.
To ensure that your hardware wallets have not been compromised before you purchase them, never buy used hardware wallets and always purchase from manufacturers . directly from trusted
- + Easy to use
- + Very high security
- + Device can be safely stored
- + Ideal solutions for recovering funds in case of lost or damaged hardware
- – It costs money
- – Used hardware wallets may contain malware
- – May seem inconvenient to use
- – Device may be lost or stolen, in which case there is no way to recover credit
The concept behind this solution is very simple. There are websites that allow you to generate a public address and its corresponding private key in minutes.
You can easily create a paper wallet in minutes. Open-source services are available online, but they create keys locally on your computer, which means they are not sent over the Internet.
- + Very high level of security (depends on how the paper wallet is created)
- + Cheap, convenient and fast
- – If a private key paper wallet is lost or stolen, you can’t get it back
- – It can be compromised from the very beginning, if there is malware on your computer.
Hot Wallet (Bolsa/Broker)
The easiest and simplest option is to store your cryptocurrencies on the platform or exchange through which you bought them.
Bitpanda stores user credits in the most secure way in offline wallets using advanced technology. In addition, accounts can be secured with two-step verification. Users can see their devices and active sessions and can log in and out of active sessions with another device. In addition, Bitpanda also provides SSL encryption and DDOS protection. As a rule of thumb, we recommend keeping only a small amount of your credit in your bag and keeping most of your credit in your cold storage wallet.
- + Easiest way to get started.
- + No need to transfer assets if you want to sell them
- + Fast and profitable
- + High security standards at trusted sites like bitpanda.com
- – Not all exchanges offer the security of a modern wallet like Bitpanda.
- – Wallet due to its characteristics is a weak point in the chain
- – Convenience can make users relax and cause them to neglect storage security.
- – You don’t have immediate access to your credit
The difference between public and private keys:
As we mentioned earlier, the operation of a cryptocurrency wallet is controlled by two types of keys, which we’ll explain below using the example of a regular bank account:
- Public key: This key would be the “account number.” It is unique and known as the wallet address. It consists of a combination of upper and lower case letters along with a series of numbers. As the name implies, this key can be public.
- Private key. Going back to the analogy of a regular bank account, a private key is a password. In a cryptocurrency wallet, it acts as a verification code for any procedure in the blockchain and, therefore, must be intended for private and confidential use.
Although there are different types of wallets, which we will see later, they are all compatible with blockchain technology and allow for decentralized use for any type of transaction.
Cold Wallet and Hot Wallet
There are two categories that span the types of cryptocurrency wallets on the market. They are known as hot wallet and cold wallet . It is important to analyze which type of wallet is right for us before choosing according to our needs.
Hot wallets are those that are online ( software ) and can be accessed when you have access to the internet from any browser or app. They are useful if you make frequent transactions , but while online, the storage of private keys is in the hands of third parties. This does not mean that it is insecure, you can set up additional levels of security to help increase user confidence.
The main difference between hot wallets is that this type of wallet stores digital currencies offline (hardware) , so it requires some physical support, be it a computer, USB or QR code, to access them. This provides more security for users as it avoids the risk of hacking . The best known cold wallets are Ledger and Trezor.
Although the form of storage is different, both types function as a storage space for public and private keys.