Once we buy or acquire virtual currencies, we ask ourselves if we have places at our disposal to store them? Of course, now they are working three kinds of purses, but what types of cryptocurrencies wallets are available?
Types of wallets for cryptocurrencies
Once we buy or acquire virtual currencies, do we have places at our disposal to store them? Of course, there are currently three types of purses, wallets or virtual wallets, this is the place where we can keep our cryptocurrencies. It is the equivalent of a bank account since we will have an account number or public keys and a personal password or private keys.
In theory cryptocurrencies such as Bitcoins are not stored in any specific place because they are actually registered, in the form of transactions, in the blockchain. There are public addresses that allow determining the number of Bitcoins that correspond to a specific wallet, this means that the blockchain registers those who have sent or received a specific public address (a wallet), therefore, in everything moment you can know the balance (public form) that has a wallet.
How can you make transfers between portfolios?
For this, the private key must be used, since it is the password that allows the owner to verify that the transfer has been made by him and not by someone else. It is verified through the blockchain and is considered validated. Knowing how a virtual wallet works are just as important as knowing how cryptocurrencies work in the market since it allows us to know the advantages that this monetary system offers us.
The types of virtual wallets to store cryptocurrencies
Currently, we can find three types of wallets: for computer, for mobile and its physical version, to select the most appropriate to our needs we must take into account three fundamental aspects:
- Privacy: Who owns the public keys? And much more important, who owns the private keys?
- Security: Are wallets susceptible to viruses, hacks, information theft?
- Use: How fast and easy is it to make transactions or save long-term savings?
Before starting it is necessary to clarify that the wallets are managed in terms of “hot”, that is, that it is connected directly to the Internet, like the computer and we also have the “cold” ones, which do not have access to the network, such as physical wallets.
1. Online wallets
This type of wallet runs in the cloud and provides a fast and convenient way to store cryptocurrencies, although they are simple to configure and use, they imply higher security risks than other types of wallet, since they store the private key of the users on a server controlled by a company, that is, the client does not know or have the private key, therefore, the person responsible for storing it is the company that offers the wallet.
They are characterized by providing easy access to currencies, most of them are popular in cryptocurrency exchanges. The great advantage of online wallets is ease of use and accessibility, they also allow you to make payments and transfers quickly, they are ideal for handling small amounts, but not for depositing all the savings there.
These types of wallets are offered by almost all exchange houses since when the purchase is made they are automatically deposited in an online wallet and the user can choose whether to transfer them or leave them there.
- Privacy: private keys are stored on the wallet’s online servers. The user only has the username and password of the account.
- Security: if a hacker steals the information from the wallet servers, we can say goodbye to our cryptocurrencies.
- Use: Quick and easy to carry out transactions.
If we talk about the best cryptocurrency wallets, then they would be Blockchain.info, Coinbase, and GreenAddress.
2. Wallets to install on computers or mobile applications
Desktop wallets are installed on a computer when the application is downloaded, they are generally easy to use and compatible with different operating systems, it should be noted that they tend to provide greater security than web wallets. There are also wallets that run installed on our smartphone, most are compatible with Android and iOS, they stand out for offering simplicity and convenience when managing bitcoin assets.
They mostly feature an intuitive and well-designed interface, ideal for crypto beginners, plus they have two-factor authentication and other security features.
- Privacy: In most cases, private keys never leave our mobile device or computer, they are saved and encrypted in our gadgets.
- Security: even though the security system is much better than on web platforms, they are still sensitive to hacking.
- Use: Recommended to store cryptocurrencies in the medium or long term
Among the most popular bitcoin wallets for pc are Exodus, Electrum, and Copay, while for mobiles we have Bread, Airbitz, and Mycelium.
Here we must remember that some work only when they are connected to the internet, becoming “hot” wallets, therefore, we must check the security of our currencies.
It is advisable to select wallets that never allow the private keys to leave our devices, since these should be stored in an encrypted way, never on the wallet servers.
3. Hardware-type wallets (cold, physical, similar to a pen drive)
They are devices similar to a portable hard drive or a Pendrive, which store private keys and allow payments to be made. Ideal for those users who carry out many transactions and store large amounts of Bitcoins, this is the best solution to find the balance between security and speed
They are designed to provide secure, offline storage for bitcoin and other cryptocurrencies. These include Ledger Nano S, TREZOR, and KeepKey.
They mostly support different cryptocurrencies and include an OLED screen for greater security, they have considered a popular option thanks to their security features, they also allow to store an unlimited number of private keys, and their configuration is simple and direct.
- Privacy: the user has all the keys, both public and private.
- Security: the only way to lose all our cryptocurrencies is by losing the hardware.
- Use: it allows us to store large amounts of bitcoins.
The only difference between one type of wallet and another is the way to store the private key and its availability depending on whether we are connected to the internet or not. The crypto wallet consists of a public address and a private key and, therefore, the place where we store the private key will determine the type of wallet and its degree of security.