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How to choose a cryptocurrency wallet

July 22, 2020

If you are starting your journey in the world of cryptocurrencies, think about acquiring a special wallet for digital currency. A cryptocurrency wallet is a special software program that creates access to all your cryptocurrencies with storing, managing, sending and receiving them. 

Please, do not confuse the cryptocurrency wallet with a pocket wallet. Moreover, digital wallets do not have a physical body. They are just records of transactions on blockchain that you can later use for various operations. Think of it as online banking with a unique digital key. 

What is a digital key? 

To make your transactions and wallet secure you have private and public keys. A public key usually means your wallet address. A private key is usually your PIN-code and digital signature to gain access to all your funds through a wallet.

Make sure that your private key is protected so that no one could open your wallet with it and withdraw your money. You see, losing or forgetting your key is equal to losing your money with no chance of gaining them back. Thus, be very careful. 

What are hot and cold wallets? 

In the field of cryptocurrencies there are two types of wallets: 

  • Hot wallets are types of wallets that exist only online. Usually, they are more fast, user-friendly, flexible but still insecure.  If you have your connection to the Internet, you will get your access to assets. However, the poorer services your provider offers the more you are opened for thefts. 
  • Cold wallets are wallets that exist on physical devices with a high level of protection from thefts and strong security. Due to their offline nature, cold wallets are quite secure from all hackers and can keep your sustainable holdings. 

What are the main types of digital wallets? 

Crypto wallet
Crypto wallet

Nowadays, there are five main types of cryptocurrency wallets. Each of them has its pros and cons, various levels of security and multiple software programs to offer extra features. Among these types are: 

Mobile wallet

These wallets are installed with an application on your mobile device. Nowadays, it is one of the most popular wallets because it provides mobility and all the same functions that desktop version has with additional bonuses like QR code scanner. 

Pros:  This wallet is practical in use and can be used in various retail stores to purchase or send your coins. Plus, with on the go feature, these wallets are faster and well-knit. 

Cons: Taking into consideration their size and internet connection of smartphones, mobile wallets have only default functionality. Moreover, such types of wallets are more prone to viruses, thefts or cyber-attacks thanks to their weak security. Also, your phone could be stolen and, as a result, you will lose your money from the wallet. 

Desktop wallet

Such a wallet is a software program that you can install on your PC or laptop. It works for various systems and gives you a unique mnemonic phrase that can be used for restoring your wallet. 

Pros:  Desktop wallet is secure, highly functional and has lots of features and tools to maximize your work. Such types of wallets do not need additional protection from other services. 

Cons: With a connection to the Internet, you might face various malware or viruses that can break into your wallet. Do not forget to use a firewall, antivirus, and software against malware.

Hardware wallet

This wallet saves all your private keys on offline devices, like USB. To work with wallets, you just need to plug the device on your laptop where you have a connection to the Internet. If you have big savings and do not plan to send anytime soon, such a wallet is the best option. 

Pros:  Hardware wallets pay a lot of attention to the security of your assets. While their keys are saved offline, you still can do transactions online. This way you have a low chance of losing your money online. 

Cons: Hardware wallet is not known for being user-friendly. Moreover, it is very difficult to buy one, when such wallets are quickly sold out. 

Online wallet

This wallet exists only in the cloud. Usually, this type has a combination of features of desktop wallet and simplicity of mobile ones, making it more favored than other types. 

Pros: You do not need to abide by the connection between the app and the server while you are doing transactions. Moreover, they are linked with cryptocurrency exchanges. 

Cons: Online wallet has a low level of security. 

Paper wallet

This wallet is a prototype of a hardware wallet. With this wallet, you print your public addresses and private keys and then you can transfer your money from a software wallet to a paper one. And if you need to send coins you do a reverse operation. 

Pros:  This wallet has low prices but is still secure. You may find it unbelievable, however, a paper wallet is one of the most protected wallets against hackers and other similar issues, mainly because this wallet is stored on paper rather than on a computer or online service. 

Cons: This type of wallet is not for beginners. You need a lot of patience, technical expertise and attention to develop such a wallet and then make use of it. Moreover, the paper is not quite fire-, water-, timeproof. 

Cryptocurrency wallets: from the most to least secure ones

With all these pros and cons we can form a certain list of security hierarchy of cryptocurrency wallets. It goes like this:  hardware wallet, paper wallet, a desktop wallet, mobile wallet and, finally, an online wallet. 

How to protect your wallet?

We have prepared for you a checklist that will help secure your desktop and mobile wallets from any risks. This list includes: 

  • Do not cooperate with dubious companies and download walled only from checked sources:
  • Install a strong firewall;
  • Always check the final address where you transfer coins;
  • Never use public Wi-Fi;
  • Work only with protected wallets with reputation;
  • Use strong usernames and passwords;
  • Keep in check of your software against malware and antivirus. 

Summary

As you can see, you have many variants among the cryptocurrency wallets. All have similar and extra features, some are more secure than others. However, it is up to you to decide which one is going to be more suitable for you. Test them and do not forget to keep your digital wallet safe from prying eyes.

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