What is a crypto wallet?

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If you want to own a cryptocurrency, either because you are looking to invest or because you want to spend money online, you will need a crypto wallet. Using one will allow you to keep your crypto safe, while also allowing you to make transactions.

What is a crypto wallet?

A crypto wallet has nothing to do with your usual and real wallet. Right now, you can probably take your wallet, open it, and either withdraw physical money or hand over money to it, or at least some sort of charge card. A wallet does not protect your money in any way except perhaps from inclement weather or getting lost in your purse.

A crypto wallet is a completely different beast. A crypto wallet is more or less your identity when you buy Bitcoin or any other cryptocurrency: its address is how your purchases and sales are recorded on the blockchain (and also the reason why these currencies are not anonymous) .

For this reason, technically you don’t need a wallet when doing anything with cryptocurrencies – you can just leave them on the exchange where you bought them, or write down the address of the wallet and access keys and hope you don’t forget where you left them. This method is jokingly called a paper wallet, and a great way to ensure that you never see your cryptocurrency again.

It is better to be safe than sorry with these sums of money, which is why using a software wallet is a good idea. Fortunately, you have a lot of options. For example, many crypto exchanges come with built-in wallets, which means you can trade and store from a single interface (Coinbase is one example).

Coinbase

That said, a lot more options don’t do more than just provide a simple graphical interface where you can see what you’ve got and very little else. If you prefer to keep your exchange and wallet separate, wallets like Electrum and Mycelium may be a good choice for you.

Hot wallets vs. cold wallets

All of the above are examples of software wallets, also known as hot wallets or hot storage. Hot storage means the wallet is connected to the internet and you can use it to directly pay for things, as well as acquire new cryptocurrencies in real time.

The flip side of hot storage is, unsurprisingly, cold storage. This means the wallet is not connected to the internet and actually just stores your keys and that’s it. In almost all cases, that means you are using a hardware wallet. This is usually a kind of USB key that you plug into your computer and which then gives you access to the exchange of your choice.

register

Paper wallets – where you write your access codes on a piece of paper – are also technically a form of cold storage. As you can imagine, this isn’t particularly safe, especially if you’re the type to leave scraps of paper around the house.

Hardware or software portfolios

While there is a definite line between hardware and software wallets, the line sometimes blurs a bit. For example, you can use a hardware wallet to access your hot storage, and you can use a software interface to update your cold storage.

Apart from these marginal cases, however, you can assume that software wallets are for hot storage and hardware wallets for cold. In practice, this means that you are using your software wallet to trade crypto and make purchases with it. Cold storage is more for people looking to buy crypto and hoping for a hefty paycheck somewhere down the line.

If you are not sure which one is the best for you, you might want to think of it like this: if you want to be able to see in real time what your crypto is doing and love to be glued to charts showing its performance, a portfolio hot is the way to go.

If you just want to buy low-priced cryptos right now and then cash in if you ever get wind of a massive recovery – or even just because you want to keep for the sake of keeping – then cold storage is the best option. for you .

Whichever option you choose, just make sure you know where your access keys are and that you’ve kept your wallet passwords safe; you don’t want to lose your cryptocurrency because you misplaced your keys …

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