Almost in your pocket
In the “Fiat” world most wallets are literally speaking hard. It is an object that allows you to store cash, credit cards and maybe even your driver’s license. A wallet, for the most part, a malleable object.
In the ‘cryptosphere’, wallets are essential to ensure that we have a place to store our cryptocurrencies’ private keys and that they are safe from hackers. Although most of these wallets are not designer products, there are a variety of different wallets of different quality and for different uses.
Why do we need wallets for crypto?
In crypto, we need wallets to store our private keys, which is essential to sending and receiving funds. Like the old school mail service, once you have someones address you can send something, this is the ‘front end’. That is equal to the public code or blockchain that everyone can see. Similar to a house, although people can send mail to your address, they can’t just walk in. That is the private key or ‘the back end’. They would have to break in or in the crypto world, hack in. Cryptocurrency is made up of blockchain, that is what is accessible to the public, but it doesn’t mean that your funds have to be.
That is why it is important to pick a wallet that works for you. Wallets have their own strengths and weaknesses that distinguish them. It is comparable to picking a security system for your house.
What are the different kinds of wallets?
There are a total of five types of wallets for your crypto. Desktop, mobile, hardware, online and paper wallets.
The most basic is none at all. Technically speaking, you can buy crypto on an exchange and leave it there. The exchange will simply store your coins in their wallet for you. That is not recommended.
What people who are new to crypto will do, is sign up for an online wallet. This way you have personal access to your private keys, this is called ‘hot’ storage. This means desktop wallets, mobile wallets or web wallets. These include coinbase.com, Electrum, blockchain.info or Mycelium.
You can also download your private keys offline (cold storage) and store them on any device (laptop, external hard drive) or literally print them out. Hardware wallets are actually an object and are the safest. Trezor is a great hardware wallet to start with.
What are the advantages and disadvantages of hard wallets vs. online?
The advantages and disadvantages vary. For one with a hard wallet, it is possible to have your crypto offline, this means that unlike online wallets, your keys are offline and can be untouched by a third online party. They can’t be touched by a virus or hacked via an internet connection. A Trezor hardware wallet, for example, is 100% immune to remote attacks. The same is true for other hardware wallets such as Ledger and KeepKey If you use a strong passphrase, your device will also be immune to all physical attacks.
A disadvantage is that it is on a hard drive. It can be misplaced, and at that moment you lose all your crypto and will never get it back again. For online you can have two-factor verification systems that can as easily be lost as the physical object that is a hardware wallet.
Being a physical object, hardware wallets come at a price versus hot storages that can cost you nothing.
Crypto is very much going to be the real world, so if it feels dodgy, just don’t. Do your research and make sure to avoid scams. Research and a good password are KEYS to success in the world of crypto.
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