What is Cryptocurrency Wallet?

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Despite widespread skepticism, blockchain is increasingly becoming part of mainstream discussion, particularly in the world of fintech.

Over recent years, we’ve seen the volatile trading history of Bitcoin and other cryptocurrencies. In late-2017, Bitcoin reached a peak of nearly $20,000; only to crash to as low as $3,500 a year later. To date, Bitcoin is averaging at about $7,000.

As the economic ramifications of the coronavirus crisis unfold, cryptocurrencies are showing a silver lining. The enthusiastic spending of central banks and governments has pushed investors to look for safe-haven assets. And as the world moves to the cyberspace, cryptocurrencies benefit the most.

Although cryptocurrency prices have plummeted in the early part of the pandemic, it has since rebounded while global stock markets continue to fall. Online searches for Bitcoin have spiked and crypto exchanges reported a surge in trading volumes and new users. This underscores the tenacity of digital currencies and its possibility as a safe investment tool.

No wonder, fintech experts expect cryptocurrencies to be in high demand in the post-coronavirus world. So, if you are thinking of investing your money, you should consider cryptocurrency.

Cryptocurrency wallet explained

As a newbie investor, one of the first things that you’ll need is to establish a cryptocurrency wallet. This is a secure software where you can store, receive, and send digital currency. These coins can either be bought or earned through trading. You need to have a wallet to trade in exchanges or brokerage or invest in crypto crowdfunding security token offering platform like Stokr.

Usually, each cryptocurrency has an official wallet. However, some cryptocurrency wallets can be used for different coins.

While there are many types of cryptocurrency wallets with unique attributes and features, they basically work the same. Basically, cryptocurrency wallets are like online bank account platforms, wherein the public address is the account number, the custodian is the banker, and the blockchain is the bank ledger.

They all use coin-specific “public addresses” that act as user account numbers. These accounts can be used to transact or receive a specific type of digital currency and can be shared publicly. Every transaction relates to the address.

The wallet allows you to view account balances as well as move funds around on the blockchain. However, you need to prove your ownership of the public address. With non-custodial wallets, this can be done by using a private key. Meanwhile, in custodial wallets, such as exchange or broker, the custodian holds the key and you just access your public address through their wallet app.

Types of Cryptocurrency Wallets

There are several types of cryptocurrency wallets that include desktop, mobile, web, hardware, paper, and universal wallets.

Desktop wallets

Desktop wallets are software programs that are installed on a PC. Crypto traders transact their coins using this app. It can also securely store the private key. Some examples are Electrum, Hive OS X, Bitcoin Core, Armory, and MultiBit.

Mobile Wallets

Like desktop wallets, mobile wallets facilitate cryptocurrency transactions through mobile devices. It can also be used to pay in physical stores through the QR code or “touch-to-pay” method. These mobile apps are either Android or iOS system compatible. With the proliferation of malware posing as cryptocurrency wallets, you need to be extra careful when choosing an app. Some examples are Mycelium Bitcoin, Bitcoin Wallet, and Hive Android.

Web wallets

Web wallets offer added convenience by allowing access to your account through any platform, either PC or mobile. Make sure to choose a secured and trusted web wallet since it will store your private keys online. Major cryptocurrencies like Coinbase offer online wallets.

Hardware wallets

Considered the most secure cryptocurrency wallet, a hardware wallet is a physical piece of equipment that is plugged into the PC through its USB port. Unlike wallets that are carried online, physical storage is practically immune from malware and hacking. It has the least report of theft. However, these digital storage equipment come for a fee, usually around $100 to $200.

Paper wallets

A paper wallet is offline cryptocurrency storage, wherein users print out a QR code for both private and public keys. Users can then transact using the paper wallet. This prevents the unnecessary need to store digital data.

Universal wallets

Also known as multi-coin or multi-asset wallets, universal wallets store public addresses from several coins. However, this does not mean that a universal wallet can hold all crypto assets. So, before opening a crypto wallet make sure it holds the coin you will trade.

Setting up a cryptocurrency wallet

First, consider what cryptocurrencies to invest in. Then, decide on whether to use an online or offline wallet. Take note that these wallets do not work across all platforms. Do your homework by investigating the wallet that you plan to use. You want a trustworthy and reputable digital currency wallet that offers optimum security.

Cryptocurrency wallet providers offer an easy, step-by-step guide on how to set up their app. It’s just like other online accounts.

Crypto wallet security

Since crypto wallets are high-value targets of cybercriminals, emphasis should be given on the security standard of a wallet. Some of the possible security threats include malware attacking both offline and online wallets, unscrupulous digital exchange running off with your money, and even losing your mobile device or laptop.

This makes it important to stringent security safeguards like choosing cold storage and encrypting with a strong password. Set up back-up storage for your private key and regularly back up your online wallets. As much as possible, avoid using online wallets and use cold storage. Be extra cautious when it comes to your cryptocurrency wallet. For instance, you might receive phishing emails that attempt to extract your details. If you are not careful, you can lose all your crypto assets immediately.

Now that you know the basics of cryptocurrency wallets, you can start your journey in the world of crypto trading.

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