What do you think of when you hear the words cryptocurrency wallet- a wallet you can slip right into your back pocket pops into your mind right? Well a cryptocurrency wallet is not a physical wallet but a software program that holds the private and public keys of an individual’s cryptocurrency account and it interacts with various blockchain to enable sending and receiving digital currencies and gives the user an opportunity to monitor their balance. To make use of any cryptocurrency, you need a cryptocurrency wallet.
How do these wallets work?
Cryptocurrency wallets do not store physical currencies like your pocket wallets. Instead of currencies it stores your public and private keys and interfaces with various blockchain. This ensures that users can check their balance, send and receive money etc. In other word all that exists are records of transactions stored on the
Types of Cryptocurrency Wallets
There are basically three categories of cryptocurrency wallets –software, hardware, and paper.
These wallets are like software programs or applications that can be downloaded on desktop, mobile or online. Wallets installed on a PC or laptop can only be accessed from the single computer in which they are downloaded and they are the most secure wallets. You could also have an Online wallet which runs on the cloud and can be accessed from any computing device. But then, online wallets are more vulnerable to hacking attacks and theft. You could also make use of a mobile wallet that will run on an app on your phone.
Instead of storing your private keys online, you can store them on a hardware device like a USB. You can also make transactions online with your hardware wallets. Since they stored offline, they promise increased security. All you need to do to carry out a transaction with your hardware wallet is to simply plug in your device to an internet-enabled computer, enter a pin, send and confirm currency.
Although paper wallet refer to a physical copy of your public and private keys, they could also be a piece of software that can be used to safely generate a pair of keys which can then printed. Paper wallets are not only easy to use, they also provide a very high level of security.
How to Keep Your Cryptocurrency Wallets Safe
- You should always remember that no matter the wallet you use,you will lose your money if you lose your private keys. Also you’d lose your money if your wallet gets hacked. You cannot reclaim lost currency or reverse transactions you made so if you send money to a scammer it’s gone. You must be very careful when transacting. You can take these steps to protect your currency.
- Ensure you backup your wallet. You can keep the bulk of your funds in a cold storage such as a paper or hardware wallet. This will ensure that you are protected in the event of a computer failure and you can recover your wallet if it gets lost or stolen. However you will not be protected against determined hackers.
- Update your software to ensure you have the latest updated security available. Update the software of your wallet and your computer or mobile.
- You should also add extra security layers such as setting long and complex passwords. You could also ensure that all withdrawal of funds requires a password. Also ensure to use reputable wallets that provide extra layers like two-factor authentication.
What wallet do you use? Share your opinion with us in the comment section below.
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