Before owning any cryptocurrency, you need to have a place to store them. That place is referred to as a “wallet.” Instead of you holding your Bitcoin, the wallet contains the private key that enables you to access your Bitcoin address – otherwise known as your public key. A well-designed wallet software offers you convenience and security when carrying out transactions.
Wallets can be stored on some platforms including your computer and smartphone, on a physical storage gadget such as a USB drive, or even a small piece of paper. Here are some of the different types of wallets.
With online (or cloud-based) wallets, you can access your cryptocurrencies from any mobile device, laptop, or desktop PC as long as you have the right passwords.
Online wallets are easy to set up, and they come with desktop and mobile apps which makes it convenient to carry out transactions. Apart from this, most online wallets are free.
However, online wallets are not as secure as other types of wallets. Since your private keys are stored in the cloud, you have to depend on the security measures your host has put in place to defend against hacks and malware attacks.
Hardware wallets are portable physical devices such as USBs that can store your cryptocurrency funds offline. They can generate private keys and digital signatures without having to connect to the internet.
They are incredibly secure as their features make them almost impossible to hack. If your device is stolen or damaged, most hardware wallets have a restore feature that you can use to retrieve your funds.
Software wallets are a form of hot wallets that you can download and install on your PC or laptop, but you can only access your wallet from the device you downloaded it on.
Software wallets are relatively easy to set up, they offer greater control over your private keys, and they are free.
However, using software wallets can be inconvenient because you need to have the device you downloaded it on before you can make transactions. Also, you need to carry out regular maintenance checks and backups. If your computer gets stolen, hacked, or corrupted, you might lose your cryptocurrencies.
It is a piece of paper on which the public and private keys of your Bitcoin address are printed out in the form of QR codes.
Paper wallets are the simplest and most convenient manner of storing cryptocurrencies. Because they are generated offline, paper wallets cannot be hacked or affected by malware attacks and hardware crashes.
However, the safety of your cryptocurrency depends on how well you keep your paper wallet. It shouldn’t be that hard to keep a piece of paper.
Hardware wallets are arguably the safest ways to keep cryptocurrency – once they are kept offline and in a secure location. Doing this will ensure that your account cannot be hacked, nor your keys stolen.
On the other hand, online wallets are the least secure choice. Your private keys are stored in the hands of a third party. Although the wallet is easy to set up and convenient to use, choosing the safety of your funds over convenience is a no-brainer.
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