Having a cryptocurrency wallet
By Crypto Nation – 20 July 2020
Cryptocurrency Wallets are one of the most important things to know if you decide to invest in them. Whether for a long or short term vision, knowing how to create or use a Wallet is essential. They can store cryptocurrency, but also receive and send it.
We will therefore see what the different types are, and their use cases.
How a cryptocurrency wallet works
Regardless of the type of Wallet, it is always made up of at least the following two elements:
- The public address: this is the identifier that is communicated to third parties to receive cryptocurrency on its Wallet.
- The private key: This element must never be communicated. Because anyone with knowledge of it can move the funds of the Wallet. It is therefore unique to each portfolio.
Let’s see the summary of Wallets:
It is the easiest type of wallet to use. They also offer very good responsiveness and flexibility.
The big advantage of this type of Wallet is that you can keep your funds almost safe, while being responsive to the market.
The disadvantages, because there are inevitably some, are the following:
- In case of funds on a Wallet of an exchange platform, this one, although secure, is managed by a trusted third party. So you don’t really have control over your wallet.
- You are not always the holder of your own private key.
- Security is therefore far from being the main asset of this type of Wallet.
Beyond a certain amount, which you deem reasonable, it is therefore not advisable to store your cryptocurrencies on a Web Wallet.
You still have to differentiate between the two types of Web Wallet. Those provided by specialized organizations, such as MetaMask, already have a good level of security, because you are the holder of your private key. We rather point the finger at Wallets directly embedded on the exchange platforms.
The exchange hacking attempts are numerous, and the lost funds can be counted in the hundreds of millions. Nevertheless, some giants like Binance, claim to benefit from insurance funds, and it is in their long-term interests to refund their customers quickly in the event of theft.
Also offering a very good level of security, Desktop Wallets are the most widespread.
Here again, you are the holder of your own private key, and the storage is done in a device which belongs to you and which is more complicated to steal than a smartphone.
Desktop wallets interact directly with the blockchain and no third party is involved in the management of your funds.
Note that some of these Wallets download the entire blockchain directly to your machine. They can therefore be heavier in terms of storage.
But they can also offer staking directly integrated into the wallet. This gives you passive income while your funds are safe.
There are many Desktop Wallets directly issued by the creators of the project in question. Examples, the Daedalus Wallet for Cardano (ADA), the Divi Desktop Wallet for DIVI, the Qtum Wallet for QTUM, etc.
There are also more generic ones, like Atomic Wallet. We recommend it without hesitation, beginner or not. This wallet can securely store more than 300 different cryptocurrencies . While allowing the staking of Cosmos, Tezos, Algorand, Tron, Band, Komodo, Vechain, Ontology, Zilliqa and Neo. Cardano, Icon, Qtum and Polkadot coming soon.
If this does not suit you, an alternative can be the Exodus Wallet.
The disadvantages of this type of wallet:
- The private key is stored on your machine. But it remains vulnerable to computer attacks. It is therefore essential to protect your computer, or if possible, dedicate one especialy for your wallet, thus avoiding exposure to viruses and malwares as much as possible.
- We must also be attentive to the updates of these wallets, which must be done regularly.
Mobile Apps Wallets
These Wallets are very similar to Desktop Wallets in terms of their functionality, but they are actively developed in a mobile focused version.
The two best known are:
- Trust Wallet, bought by Binance, it has become the benchmark mobile wallet.
- Cosmostation, the flagship platform for cryptocurrencies running on the Cosmos Blockchain (ATOM). A web Wallet of the same name also exists, but we recommend the mobile application.
These wallets are very secure. You own the private key and they offer a simple and smooth interface.
Much less flexible and practical on a daily basis, but very highly secure. Cold wallets are recommended for storing your large cryptocurrency funds. They are named so because the data is stored offline, in a disconnected way.
Among the cold wallets, there are two sub-types of wallets here:
The Paper Wallets
Paper wallets are generated via specialized sites, and are available for a large number of cryptocurrencies. Its main advantage is that it gives us access to our private key. It can thus be stored on a paper medium and put it away in a safe. It is the most secure type of wallet for storing cryptocurrency. But it is not at all suitable for making frequent transactions.
Hardware wallets look like USB keys. The private keys are encrypted there. No one can access it, not even the owner. This also makes them very robust in terms of security.
In fact, cryptocurrencies are not stored on the device. The hardware wallet only allows you to access your private keys, in order to prove to the network validating the blockchain that you are indeed the owner of the cryptocurrencies presented.
Undoubtedly, the best compromise between accessibility and security is hardware wallets.
The most famous are those sold by the Ledger company. Including the most widespread on the market, the Ledger Nano S.
Now that you know about all these different Wallets, no more excuses to secure your cryptocurrencies!
Now it’s up to you to see which type suits you best according to your use.