As the word implies, a wallet is a storage device like the one we use for our physical money. This means that if you want to manage your cryptocurrency securely, you can do so by storing it in a wallet.
What is it about?
In a crypto wallet, unlike coins and notes, public and private keys are stored. The actual currency is not stored in it, but the wallet allows the secure storage and management of the cryptocurrency in the blockchain.
Therefore, in a wallet, it is not the money that is managed but the addresses to which certain crypto assets are assigned in the network. With the private key, each participant can then prove beyond doubt that he is authorized to dispose of the respective credit belonging to the public address.
A wallet is used not only for issuing a currency but also for generating an address and also importing addresses from other wallets.
There are different types of wallets that are used in the crypto area. Each has its advantages and disadvantages.
What types of wallets are there?
In the crypto area, a distinction is made between different wallet types. At this point, it should be mentioned that there can be several names for the same wallet type. This is due to the fact that sometimes the designation is made under different aspects. For example, hot or cold wallets are either permanently connected to the network or not and or digital/analog. Examples of hot wallets are the wallets that are used on an exchange like Binance etc.. The paper wallet, on the other hand, is a cold wallet.
We have decided to use the lower designations.
Desktop Wallet
Mobile Wallets
Are very widely used and designed for use on smartphone. They run on the smartphone operating systems and now there are a large number of good wallets for both Apple iOS and Android smartphones. In addition to easy-to-use wallets, there are also full-featured wallets for connoisseurs.
Examples: Coinbase, NURI, etc…
Web Wallets
Here, the addresses and the private keys are stored online, for example in a cloud or on a web server. This means that the control of the key could also be taken over by the webserver provider in the worst case. The web wallet is also exposed to possible hacker attacks. At this point, IN-Browser Wallets should also be mentioned briefly. Here, the wallets are provided as a plugin for browsers. The wallet is therefore installed in the browser.
An advantage that also arises is that you can access your web wallet practically from anywhere. This also corresponds to the usual advantage of a cloud when you store your data on it.
Examples: Binance, Coinbase wallet, etc…
Hardware Wallets
These are devices that operate a secure standalone wallet on special hardware. These wallets are controlled by USB via a web browser on the desktop or NFC from a mobile device. These media are considered particularly secure because they were created specifically for the storage of cryptocurrencies and can be easily connected to the network to send or import addresses/credits. This wallet can therefore hold the storage digitally but does not have to be permanently logged into the network like a hot wallet. These wallets are also very small and handy and can be taken anywhere.
Examples: Ledger Nano, Trezor, etc…
Paper Wallets
Take a pencil or similar and a piece of paper or similar and write down the PRIVATE keys. And you already have the uncomplicated definition as well as the function of a paper wallet. Of course, you would not have to leave the piece of paper lying around and store it in a safe place.
The advantage is clearly that the key is not stored on a digital medium. But this can also be a disadvantage at the same time.
Conclusion
We have listed here the most important types of wallets for us. The wallets all have one thing in common, they require careful handling because once lost you can no longer access the crypto assets. If they are poorly secured, they are a target for thieves and hackers. Each type has its advantages and disadvantages, which have to be weighed up and taken into account when making a decision. Some wallets offer good backup and recovery capabilities, others are easier to use. Still, other wallets are very secure but more complex to handle. Last but not least, it must be checked before use whether the wallet can also hold the desired currency, this is not always the case. There are wallets that can only manage one specific and there other wallets that can manage many different currencies.
One thing is certain, however, if you want to hold cryptos or trade with them, there is no way around a wallet.
