SOMETHING NEWBIES NEED TO KNOW ABOUT CRYPTO WALLET
When taking part in the cryptocurrency market, you need a place where you can safely store digital assets. This place is called a crypto wallet. This is an extremely important part of the cryptocurrency exchange process. It helps investors store, send and receive their assets. Let’s find out in this article.
What is a cryptocurrency wallet?
A cryptocurrency wallet (also known as a virtual currency wallet) is a software application used to store digital assets.
Basically, cryptocurrency wallets are a place to store cryptocurrencies, receive money, and track balances. However, these wallets do not store cryptocurrencies themselves; rather, they secure the record of transactions on the blockchain. The cryptocurrency wallet is also a separate private key storage software and public key. If you want to use Bitcoin or any other cryptocurrency, you need a wallet to be able to hold it.
Moreover, e-wallets can also be used to store multiple coins or tokens at the same time, but most wallets only support certain cryptocurrencies. For instance, some cryptocurrencies that e-wallets support are Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), and Ethereum (ETH).
In short, the function of a cryptocurrency wallet is like a bank account. The main difference is that this wallet is more secure thanks to the information encryption mechanism, and the money stored is cryptocurrency.
The three main elements of a crypto wallet
Typically, a cryptocurrency wallet will have three main components: address, private key, and passphrase.
The address is a random sequence of characters consisting of letters and numbers. This is the user’s wallet address. It’s used to receive money and transfer money. Like your bank account number, you can share it with other users, let them send you money, or take money from your account when allowed.
Wallet addresses of different blockchains will have different structures. Binance Smart Chain and Ethereum, for example, are BOTH EVM Compatible, so it starts with 0x…, however, with Solana or BTC, it will be a series of random characters.
The private key (also known as the personal key) is set up from random characters and numbers without any rules. The private key has access to the virtual currency wallet to use the number of coins in possession.
Like a Battery password or a bank account password, this information needs to be kept secret. To protect your property, you should not share your private keys with anyone.
Unlike Address, Private Key doesn’t have any structure, but rather a string of non-statutory characters, whether they have the same blockchain structure or not.
A passphrase is also a form of the private key, consisting of 12 or 24 random English words, but depending on the decryption mechanism in different wallets, the passphrase will give different wallet addresses.
Types of cryptocurrency wallet
Virtual currency wallets are divided into two main categories: hot wallets and cold wallets. Each investor has different wallet options with different storage requirements and objectives. In addition, wallets can be divided according to the level of asset control and the number of supporting platforms.
According to the level of property control
1. Centralized Wallet
Advantage: Don’t create a wallet, just create an account.
- The level of security is lower than in decentralized wallets.
- The property is 100% controlled by a third party.
- The risk from a third party if something goes wrong.
2. Decentralized wallet
Hot wallets: Hot wallets are the type you can trade whenever you want over an internet connection.
- Quick and easy access to transactions anywhere. Therefore, hot wallets are a suitable choice if investors want to invest in the short term.
- Store a variety of virtual currencies.
- Low security, vulnerable to attacks when surfing the web
- The Internet is a mandatory and prerequisite condition.
Cold wallets: Cold wallets are considered a bank account, it automatically receives money when someone sends it without having to connect to the internet.
- High security. Secure Element chips are available in the wallet that protects the wallet from hacking or malicious code attacks.
- Always offline, separate from the internet. Only when the transaction needs to be online.
- The price is quite high, from 2–3 million / device.
- Long transaction speed
- Easy to hack or steal
According to the number of support platforms
1. Multiple chains
Multiple chains can support many different blockchain digital assets at the same time. Multi-chain wallets are easier to manage crypto assets because only 1 passphrase needs to be stored for multiple wallets.
2. Single chain
Online wallet belongs to the type of hot wallet, it is operated on the cloud system, so it works 24/7 and can be accessed from any computing device at any location. They are the most popular and easiest to use, but the data they contain is controlled by a third party, as the platform that provides them. However, the third parties are reputable providers who are always very secure, you can store your electronic assets through wallet storage websites (Coinbase, Blockchain.info), or you can directly on reputable exchanges (Binance, Bitfinex, Kraken, Bittrex, Poloniex, Fiahub).
Software Wallet belongs to the type of hot wallet, an App-like wallet that can be downloaded and installed on a PC, laptop, or mobile phone. With a soft wallet type wallet, users will directly manage their keys without any third party.
Hardware Wallet is a form of cold wallet. It differs from software wallets in that the wallet will store the private key on an external device such as a USB.
Although the transactions are online, the private key is left on the device instead of a third party, so it is more secure, for example, Ledger Nano S, Trezor.io, and KeepKey.
Wallets installed on PC/Laptop: bitcoin.org, exodus.co, bitcoinarmory.com
Mobile wallet: Blockchain, Bitcoin wallet.
Paper wallet is a form of cold storage wallet. It’s quite easy to use and very secure. It is basically a piece of paper containing the keys (public key and private key) by QR code, so the paper wallet can be used for scanning for transactions.
So through this article, Snail House has shared with you the information about crypto wallets. Don’t forget to follow Snail House to stay up to date with the latest and greatest news!
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