If you a beginner in the cryptocurrency market, and you are diversifying between Bitcoin, Ethereum, and the newest and most promising cryptocurrencies, you’ll need a digital wallet to protect your investments, and to make transactions whenever you want.
A digital wallet is a software used to store your cryptocurrencies in a secure way, and to send or receive cryptocurrencies. Wallets can be compatible with a single currency, such as the official Bitcoin and Ethereum wallet, or they can be multi-crypto wallets, usually created by third parties.
Private and Public Keys
Cryptocurrencies are stored in the Blockchain and are accessed by means of your private key and public key. Your private key is a confidential code of multiple characters and a your public key is a public code that indicates the amount of cryptocurrencies you have; you need both of these keys to access your cryptocurrencies.
When cryptocurrencies are sent through Blockchain, they are actually being sent to a hashed version of your public key. Your private key is hidden for all users and is used to derive your public key.
Both the private key and the public key are very large numbers and are usually represented by a separate wallet import (WIF) format ,consisting of letters and numbers. Your private key gives you full control over your cryptocurrencies associated with their corresponding public keys, so you should not share it with anyone.
What types of digital wallets are there?
Digital wallets can be classified into hot or cold wallets; hot wallets are those connected to the Internet permanently and cold wallets are the ones that don’t have to be connected to the Internet. There are also hybrid wallets.
Hot wallets: private keys are stored in online servers.
Online wallets run in the cloud and can be accessed from any device in any location. Although they are more convenient to access, they store your private keys online and are controlled by a third party, which makes them more vulnerable to attacks.
Mobile wallets run in phone’s applications, and are useful because they can be used anywhere. They tend to be much smaller and simpler than desktop wallets due to the limited space available on a mobile device.
Cold Wallets: a physical device that stores your keys generally in offline hardware.
Desktop wallets are downloaded and installed on any computer, and can only be accessed from where they are downloaded. These wallets offer the highest levels of security, however, if your computer is hacked or has a virus, there is a possibility that you will lose all your cryptocurrency funds.
Hardware wallets store private keys in a hardware device such as a USB, and although they do online transactions, they are stored offline, which offers greater security. They can be compatible with various web interfaces and can support different currencies, make transactions easily and, at the same time, keep your money offline and risky free.
Paper wallets can refer to a physical copy of your public and private keys, or a piece of software that is used to securely generate a pair of keys that are then printed. To make transfers to your paper wallet, you must transfer your funds from your software wallet to the public address shown in your paper wallet and viceversa.
There are many options of digital wallets from which you can choose, the important thing is to you consider your needs, and always think about the security of your cryptocurrency investment.
When choosing a digital wallet always make sure that whatever option you are going to take, that it is a reliable institution, because there have been many frauds with digital wallets, and only choose providers that can guarantee your security.
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