What Is A Cryptocurrency Wallet?

Are you directly or indirectly interested in crypto-currencies and NFTs? So you will probably have already heard of Wallets, or “cryptocurrency wallet”. What is it about ? What is the cryptocurrency wallet? What is it used for ? How to choose it? Many questions we will answer in this new article! 

What is Cryptocurrency?

First of all, to understand the principle of crypto wallet, one must understand crypto. Cryptocurrency is digital currencies, which are counted by the thousand in 2022. However, only 20 of them represent 90% of the market, in particular, Bitcoin or even Ethereum.

Based on the blockchain, the value of these cryptocurrencies largely depends on speculation. Supply and demand govern their value, which can rise or fall in just a few hours. Cryptocurrencies are considered investment opportunities (and beware, a risky investment). And it is possible to pay for certain things with your crypto-currencies, such as NFTs for example. 

Understand everything about Cryptocurrency Wallets

If you have understood the principle of crypto, then we can move on to the next principle: wallets.

What is a Cryptocurrency Wallet, and what is it for?

The cryptocurrency wallet can also be called “Purse” or “Wallet”. This is a way to securely store your cryptocurrencies. This storage secures in particular the passwords (security keys) which allow you access to your cryptos. 

A crypto wallet therefore stores your currencies, allows you to spend them, exchange them, or receive them. It will therefore facilitate your exchanges and the management of your crypto-currencies.

 What are the different types of wallets?

It seems important to note that depending on your use and your preferences, there are different types of wallets. In particular, we can recognize 3 main categories: 

• Software wallets (or Software Wallets)
  These are wallets generally connected to the Internet, and taking the form of online wallets. These are software or web applications specialized in the management of crypto-currencies. Several types are recognized:
  
  • Web wallets, (or Web Wallet) These are accessible directly online and some are in the form of browser extensions. They do not require a software download and will be accessible through login credentials. Although this solution is practical and fast, it remains dangerous because it is subject to possible attacks and phishing.
    
  • Desktop applications, (or Desktop Wallet) These wallets take the form of software to be downloaded to your computer desktop. These usually include additional features besides storage for cryptocurrency holders. In general, it is advisable to use a computer only for this, so as to avoid hacking.
    
  • Mobile wallets. (or Mobile Wallet) These work like the desktop apps, but on your smartphone. Your wallet will include other functionalities such as payment by NFC for example.
    
• Hardware (or physical) wallets also called “Hardware Wallets”
  Hardware (or so-called physical) wallets are wallets that are not digitized. They take the form of a hardware storage space that you can connect and disconnect from your computer. For example, a USB key, a hard drive, specifically designed for that. They will only be connected to your machine during actions on your cryptos, so as to maximize security. 

• Paper wallets (or Paper Wallet)
  Paper wallets consist of the printing of your security keys and passwords. In general, these keys and identifiers take the form of QR codes. This solution allows you to keep your coins completely outside the digital system. However, this is a disadvantageous solution in the event of a transfer. Since funds can only be transferred in their entirety, they are exposed to more risk. 

Let us also mention, in principle, the first wallets to have appeared: full nodes (called full nodes) . These software are not just wallets! They present a multitude of possibilities in terms of tasks: mining, downloading the blockchain… They are generally not used by small investors. The difficulty resulting from their many features, these software will be used by the big players in the sector. 

These portfolios can then be categorized into two sub-categories: 

• Hot Wallets
  They correspond to so-called “Hot” wallets, which must remain connected to the Internet. This includes several types of wallets, including those in the Software Wallets category. These wallets allow rapid solicitation of cryptocurrencies. However, it is advisable not to leave large sums there, due to the risk of hacking. 
• Cold Wallets
  They correspond to so-called “Cold” wallets. These are generally offline and allow the secure storage of your keys and cryptos. Here, we will seek to store larger sums, and over the long term. Typically, these are hardware and paper wallets, which pose fewer security risks. 

So how you store your cryptocurrencies and keys may depend on:

• Your future use and the exchanges you wish to carry out,
• Your need to secure it as much as possible, 
• Your need, on the contrary, to be able to quickly access them and make them work, 
• the equipment you have, 
• Or, the type of currency you have! 

Are Crypto Wallets Or Purses Secure?

You may have already understood: the security level of your wallet depends on its type. Moreover, the risks to which your portfolio is exposed differ according to this type. 

Leaving your crypto-currencies on your exchange platform is, for example, a risky solution! You expose yourself in the event of hacking of your account, or attacks on the platform. 

Hot Wallet-type wallets (online wallets) have the advantage of allowing you quick access to your cryptos. However, they will have the disadvantage of being constantly connected to the net, which presents significant risks. Indeed, these risks may correspond to hacking the platform, hacking your account, or your machine. In this sense, it is advisable not to leave large sums in your Hot Wallet. This will act as your real wallet, which you go out with. Typically, you don’t walk out with your entire bank account in your wallet. 

We will therefore store large sums, to be placed and secured over the long term, in Cold Wallets. And we’ll transfer what we need for our transactions to the Hot Wallet. 

How to choose your Crypto Wallet?

You will surely have understood that you have several options for your portfolios. Thus, you can determine certain criteria to choose your Wallets. We suggest you consider at least these features: 

• The security of your cryptocurrencies
  As you will have understood, depending on the type of Wallet, some will ensure the security of your cryptos better than others. You can absolutely choose a Hot Wallet to ensure quick and easy transactions. However, we strongly recommend that you acquire a Cold Wallet for long-term storage.

• The type of access to your wallet
  The choice of your Wallet can also be made according to the accessibility of your wallet. By this, we mean the fact that it is accessible with/without the internet, with your mobile or computer. Moreover, depending on the smartphone and the operating system used, not all wallets can be installed. You must therefore choose a wallet compatible with your hardware. 

• The cryptocurrencies supported by the wallet
  Be aware that not all wallets allow you to store all cryptocurrencies. Moreover, many wallets only support one type of crypto. You will thus find Wallets specialized in Bitcoin, others in Ethereum. There are of course multi-currency wallets, which will allow you to manage and store your different cryptos. 

• The ergonomics of the portfolio, its ease of use and its target
  There are more or less complex wallets to use. Some wallets are specifically designed for beginners, and others for regulars. Thus, depending on your investor profile, certain portfolios will be more or less suitable. Moreover, the wallets themselves can have a target of their own. Some portfolios, for example, will be specialized in large transactions. 

• The management fees applied by the portfolio.
  One of the last selection criteria may correspond to the fees applied by the portfolio. Indeed, wallets can apply fees for management, transactions, storage. The goal will not necessarily be to take the cheapest wallet. These costs can be justified by better securing the portfolio. Or, by shorter deadlines for obtaining your certificates and triggering your transactions.

The criteria for choosing portfolios are therefore multiple, but it is necessary to analyze them. 

Overall, we hope that this article has given you a better understanding of what a Wallet is. These differ in many ways, and choosing the right wallet is not something to be taken lightly. Cryptocurrency wallets, like the environment to which they belong, are complex in operation. To invest intelligently in crypto-currencies, we suggest that you train yourself in this medium in depth.