As bitcoin grows in popularity and incorporation into the global economy, the alternatives for storing it have evolved to meet the needs of all users. As of now, there are more than 140 crypto wallets to select from.
Unlike fiat currency, crypto can only be stored digitally, using a variety of options known as crypto wallets. Blockchain.com declares that the company is hosting over 77 million unique wallets on their network while Coinbase has confirmed the verification of more than 68 million customers which may relate to more than 1 wallet at a time.
A crypto wallet is a tool you could use to interact with a blockchain network. Crypto wallets don’t store cryptocurrencies, instead, they provide the tools required to interface with a blockchain, by holding the necessary information to send and receive cryptocurrency via blockchain transactions.
Fig. Blockchain Wallet users growth since launch. Via www.blockchain.com
In the year 2020/2021 alone, 20 million Blockchain Wallets were created, indicating that new consumers are entering the crypto world. Most users of Blockchain Wallets rely on a mobile application to access and control their wallets, from which they can purchase, sell, or even trade cryptocurrency.
As noted earlier, Digital Wallets are not the only sorts of wallets that may be used to store your cryptocurrency. There are various sorts of wallets, but they all include a Seed Phrase as a security mechanism to allow you to access your wallet without the original software or hardware in case they’re lost or damaged.
The Best Kind of Crypto Wallet
Over US $1 billion has been lost in the cryptocurrency market as cryptocurrency users draw a blank on their wallet credentials leaving thousands of coins stranded for good. The wallet owners have exhausted all feasible attempts to regain access to the wallets containing the fortunes of their investment. One wallet belonged to the well-known Stefan Thomas, who was unable to reclaim 7002 Bitcoins due to a lost password. Another belonged to James Howells before carrying 7500 Bitcoins with it into the trash can.
There are three types of cryptocurrency wallets. It’s a good idea to learn about each type and how to safeguard them all to select the best solution. Crypto wallets are classified into three types: software, hardware, and paper wallets. They are also classed as hot or cold wallets based on the operational method of each wallet. A hot wallet is any wallet that requires an online connection to function, whereas cold wallets do not require an internet connection to function.
The majority of cryptocurrency wallet providers provide software wallets. This type of wallet is regarded as the most convenient. It provides users with easy access to their cryptocurrency as well as many quick services such as buy and sell, via a web, mobile, or desktop application. Hardware wallets give up a significant amount of convenience and accessibility in exchange for security to further protect the assets in the wallets. Finally, despite being a cold wallet, the paper wallet is considered obsolete and is not recommended due to numerous flaws and outdated technology. You cannot make micro transactions with a paper wallet; instead, you must send the entire balance at once.
As a general rule, you can create a new wallet and give it its secret key to access it. Some professional organizations, on the other hand, keep and manage the private keys for your advantage. Although this may be gradually beneficial for inexperienced clients, it is a risky technique. If you don’t have control over your private keys, you’re entrusting your money to someone else, exposing your assets to the same risks that your trustee is vulnerable to. To solve this problem, several online wallets now allow you to manage your keys entirely. As a result, it’s critical to examine each wallet’s specific technique before deciding which is the most cost-effective for you.
Web Wallets: A hot wallet accessed through a web interface needless of any software deployment on a personal device. You can use various browsers to access this type of wallet. Both hosted & non-hosted wallet options are available in this category, meaning that you have the luxury of choosing a provider that gives you full control over your private keys or only allows you access to your funds upon need.
Desktop Wallets: Another type of hot wallet that serves as a safe depository for crypto assets on your PC. It is safer to use than web wallets, and will always give you full control over your keys and your funds. To fully utilize the security features of this wallet, a file created by the wallet on a local PC can be encrypted and stored in a safe location. In case the file was lost or corrupted, the seed phrase can be used to restore access to a desktop wallet, so it’s always a wise decision to export and backup the seed phrase. It is recommended to ensure that the PC is clean of malware, viruses and malicious software, as desktop wallets are not immune to them.
Popular desktop wallet options are Exodus, BitcoinCore, Electrum.
Mobile Wallets: SmartCell phone applications. Their ease of use and convenience renders them the most popular hot wallet of choice among users. Mobile wallets allow the sending and receiving of crypto through QR codes. Similar to desktop wallets, they are vulnerable to malicious software on mobile phones, so it’s recommended to monitor the security of the device where the wallet is installed.
Popular mobile wallet options are TrustWallet, SafePal, Mycelium.
With the rise in crypto assets’ value, the need for more solid security gave birth to Hardware wallets. This relatively costly option is built specifically for handling seed phrases and other wallet information. They’re USB-like devices, with an OLED screen and side buttons to navigate through the interface of the wallet. They come with native desktop apps for different cryptocurrencies. Because the private keys never leave your wallet, you can connect a hardware wallet to a PC via USB, even if the device is infected, with no risk of hacking or illicit attacks. At the cost of convenience and purchase fees, Hardware wallets represent one of the most secure options to store crypto. It is recommended for storing large amounts of cryptocurrency and as a long-term repository.
To overcome the drawbacks of hardware wallets, some web wallet service providers made advancements in the technology to allow them to be connected to the browser interface. Other services like Binance DEX also facilitate the use of the crypto stored in your hardware wallet. Security is not jeopardized in the process as the seed phrase does not leave the hardware device in the process.
Popular hardware wallet options are Ledger Nano X, Ledger Nano S, Trezor Model T.
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