March 31, 2022
Wallets of the Future
Allison Lawrence
Cryptocurrency is changing the way money is thought of and in turn, this new currency also needs a new place to be stored. After all, crypto can’t be kept in a traditional wallet that you keep in your pocket as it has no physical element. A blockchain wallet must be used to manage different kinds of cryptocurrency to quickly and easily exchange funds.
Crypto wallets work by using a combination of a private and public key to secure the account. The public key can be shared with others in order to receive funds. The private key is like a password that should be kept secret and is used to spend the currency. This is similar to how email works, with your email address being public and known by anyone to receive messages while the password is secure and needed to send messages.
One of the big reasons it is important to select the right wallet is because each type offers varying levels of privacy and accessibility. There are two overarching types of wallets: hot and cold. The main difference between these two are whether or not they are connected to the internet. Hot wallets do connect to the internet which means they have good accessibility but they are less secure. Cold wallets are stored offline and are more like vaults that can be used for typical transactions. Users can also use a combination of hot and cold to take advantage of both.
Hot wallets are typically comprised of software wallets with three main types: mobile, web, and desktop wallets.
Mobile Wallet
Mobile wallets require an application to be downloaded onto a mobile device, which serves as the wallet. It is capable of storing currency as well as sending and receiving. In terms of security, most use a username password combination to access the account. Advantages of mobile wallets include quick processing times and easy accessibility.
Web Wallet
A web wallet runs on the internet and a large benefit of this type is that the wallet can be accessed through any device. However, this also leads to a large security concern with risks of malware and password stealth.
Desktop Wallet
Desktop wallets make use of an application downloaded on to a computer. It is very similar to a mobile wallet except it being on a desktop.
For cold wallets, there are two primary types: Paper and hardware wallets.
Paper Wallet
Paper wallets are simply a physical piece of paper that includes all the necessary information needed to access your cryptocurrency. While this type of wallet can not be hacked, if the paper is lost, there is the risk that you also lose your crypto assets. It is also much more time consuming to use than the other wallet types. Of all the wallet types, this is the least common.
Hardware wallet
Hardware wallets save information on a physical device like a USB drive, making it stored completely offline. This makes them very secure as the data never actually leaves the device. Also compared to other cold wallets, it is the easiest and quickest to use.
It is very important that you select the wallets that makes the most sense for you. Many people use a combination of multiple different types to suit all of their needs as each one offers its own advantages and disadvantages with the levels of accessibility and security it offers. Though at least with cryptocurrency wallets, it is not possible to lose them in the bottom of your backpack.