Investing in cryptocurrency and not sure about how to best store your funds? Learn all about crypto wallets in our beginner’s guide! We discuss the different types of cryptocurrency wallets, their pros and cons and how to choose the best wallet for your needs.
Cryptocurrency wallets, also called digital wallets, are electronic currency holders that store your funds virtually. Basically, it’s a software program.
It also contains information that identifies you as the owner. This comes in the form of a pair of public and private keys. These keys are what allow you, and only you, to access any funds transferred to you. The sending and receiving of funds is done on the blockchain ledger which requires the pair of keys. Any transactions made will be registered on the blockchain.
This differs from traditional e-wallets you might already use on a variety of services. These ordinary e-wallets simply hold funds transferred from your bank account, which can be used for whatever purpose. They are not encrypted in the way that digital wallets are, making them less secure.
Digital wallets don’t hold money per se; they simply hold data (the keys) which authorize you in the transaction. Your public key can be considered to be your account number on the blockchain, while your private key can be considered your PIN. For this reason, it’s imperative that you keep this information safe.
The Different Types of Cryptocurrency Wallets
Numerous wallets have been designed over the past few years, each with their own pros and cons. Some are more convenient but less secure, and vice versa. The most ardent of cryptocurrency users will want a highly secure wallet, but such a wallet is best used by someone who knows what they’re doing. A beginner may want to choose a more accessible form of storing their money.
Here are the 5 types of wallets, as well as their pros and cons.