Cryptocurrency is an emerging new financial technology. It is a digital currency secured by encryptions known as cryptography and labeled as the hottest digital commodity enticing traders, consumers, and big companies. Cryptocurrency typically exists as “coins”; they are designed to work as a digital medium exchange stored in a public ledger called “blockchains.”
These general ledgers are protected by strong cryptography, ensuring that all transactions are secured and protected. Cryptocurrencies are decentralised as opposed to the centralised, traditional currency and mobile banking systems.
The popularity of cryptocurrency was pioneered by the introduction of Bitcoins back in 2009. Since then, the growth and wins provided by cryptocurrency are undeniable. Early adopters are now sitting in millions and even billions since their investment ten years ago. The market price of Wrapped Bitcoins and Bitcoins soared over $40 million last May 2021.
Buying and investing in cryptocurrencies like Bitcoin, Dash, Litecoins, and Ethereum requires digital storage. The most popular cryptocurrency, Bitcoin, is stored in the “Bitcoin wallet.” There are different kinds of bitcoin wallets, each having its advantages and disadvantages. Start investing in cryptocurrency, learn the trade tricks, and experience the possible wins of crypto trading.
1) Hot Wallet
Digital wallets that require an internet connection are described as more user-friendly and accessible, but this advantage also poses a threat to hackers and fraudsters. Doubts in security and privacy are raised when using wallets for storage and other cryptocurrency transactions.
2) Cold Wallet
An improved version of the hot wallets. This kind of digital wallet stores cryptocurrency in offline mode, providing more secure storage. Comparable to a vault, this is the safest option than any other wallets.
Though hot wallets can be set up easier than cold wallets, cold wallets are used for the long-term storage of crypto coins. Experienced traders use the combination of cold and hot wallets. Cold wallets contain the major percentage of crypto coins for storage, while hot wallets carry a small percentage used for day-to-day trading.
3) Hardware Wallet
Comparable to USB with an OLED screen and side buttons. Hardware wallets store public addresses and private keys of cryptocurrency owners. These wallets can be connected to PC and laptops and are not battery operated. Reviews from users indicate that hardware wallets are more user-friendly than paper wallets and more secure than hot wallets. The estimated cost in the market is about $70-150.
4) Online or Web Wallet
These wallets are ideal for minimal investments and quick transfer of crypto funds. Internet browsers easily access them, and users are provided with private keys. Web wallets allow the user to manage and control various cryptocurrencies at the same time. The disadvantage of this kind of wallet is that they are vulnerable to DDoS attacks and are considered the least secure wallet. Web wallets can be hosted or non-hosted, though users prefer non-hosted because funds are controlled in this type.
5) Paper Wallet
Some digital wallets allow generating and downloading QR codes to generate new addresses offline. This digital wallet is the paper wallet, a QR code system that can be printed and stored physically. The advantage of these kinds of wallets is they are not vulnerable to attacks and hackers. However, these types of wallets do not allow the transfer of partial funds. Further, since one-time addresses are generated, paper wallets are not reusable.
6) Mobile Wallet
These are wallets that can be downloaded and installed on mobile devices, hence the name Mobile Wallet. These wallets provide features wherein users can scan QR codes and make payments. However, mobile wallets use an internet connection. Thus precaution on security and privacy is recommended.
7) Desktop Wallet
Desktop wallets appear in the form of software packs that users store on their personal computers and laptops. To strengthen the security of these wallets, experts require anti-virus features when installing and using desktop wallets. Desktop wallets are anonymous, private, convenient to use, and do not require a third party. These wallets are recognised as the third most secure way to manage cryptocurrencies.
Exchange, sending, receiving, and making a purchase using cryptocurrencies require the use of digital keys. These keys can be public or private. Private and public keys are both in alphanumeric format. Private keys are stored online and must be confidential to secure the bitcoin wallets. Stringent security must be taken when using private keys. Loss or hacking of private keys will result in the loss of all cryptocurrencies stored in any digital wallet.
Investing and trading using cryptocurrency is an evolving and fast-growing technology of cryptocurrency. The race for developing innovative ways to invest, store and manage this digital currency is continuous. Trusted trading platforms are made available, providing neophytes and traders with a more secure and efficient way to discover the cryptocurrency market.