Bitcoin has consistently proved the sceptics wrong. Many years down the line, and the crypto market crash still doesn’t show signs of happening.
As the world is starting to take this cryptocurrency seriously, so are the cybercriminals, who have a lot to gain by hacking people and exchanges and robbing them of digital currencies.
Enter the Bitcoin wallet – online crypto world’s safety pillar. Let’s learn more about different crypto wallet types.
Why Use a Wallet
The main division of wallets that you can store Bitcoin and other cryptocurrency information on is between exchange and private wallets. Crypto exchanges are the central hubs of crypto trading and, therefore, clearly need a means of balance storage for each user. The information that is communicated with the blockchain is inside the exchange wallets.
Think of these as fiat (non-crypto) money bank apps – they don’t store money on them either, only data for communicating with the bank. Instead of banks, crypto wallets communicate with the blockchain.
The second type of crypto wallets works in the same way; only it isn’t stored on an exchange’s server. Instead, private wallets are located on the user’s computer, external devices, as an app, as a browser extension, or on paper.
Using both of these wallet types is essential if you want to trade and store Bitcoin or any other cryptocurrency.
Private Wallet Types
Exchange wallets don’t have subtypes. They are used via the exchange’s website or mobile/tablet app. Private wallets, on the other hand, are a different story.
Here are the different types of private Bitcoin wallets.
Web wallets are the least secure wallet type out there.Instead of being under the user’s ownership, the private keysare located on the server. They are both operated and controlled by third parties.
That said, web wallets are easy to connect to and can be used anywhere and from any device. This brings a lot of ease of use to the table, but at the risk of decreased security measures. Web wallets work similarly to exchange wallets.
This is the most common Bitcoin wallet type. Desktop wallets are installed onto a computer’s hard drive, where the private keys are kept. Although they are generally considered safe, desktop wallets are still prone to cyber-attacks.If a hacker manages to assume control of your computer, they can get to your private key, at which point you are bound to lose all your funds.
Generally, it is recommended that you only keep smaller Bitcoin and other cryptocurrency amounts on your computer.
Desktop wallets come in the form of a browser extension and desktop apps.
Mobile wallets are another crypto info storage option that boasts solid amounts of security. It is also very convenient and particularly useful for people who frequently make crypto transactions. This option is safer than the desktop option, as hacks are less likely to happen on mobile devices.
However, if your smartphone or tablet gets stolen, it doesn’t matter if the thief knows how to use cryptocurrencies or not. Your private key is stored on the device, and losing it means losing access to your funds. The same goes if your device breaks down. If you can’t retrieve the private key from it, you lose all the funds on that key.
Paper wallets are very safe because they store your private key offline. Paper wallets are actual pieces of paper with QR codes. Scan the QR code and make the transaction.
You should avoid taking photos of a paper wallet because this makes it susceptible to online attacks. Additionally, if you lose a paper wallet, you also lose your private key, so safe and secure storage is more than advised.
Hardware wallets usually take the USB drive form and are used by plugging them into another device. They are very safe but, if you lose them, you lose all the related funds.
Which Wallet Should I Use?
Convenience and security are two vital factors that influence your crypto wallet choice. Meeting both of these factors is difficult. The best way of storing crypto information is to divide it into all five private wallet types.Putsmaller crypto amounts in a more convenient Bitcoin wallet. Online storage means convenience at the cost of security.Store the bulk of your balance in safer, offline wallets.
In any case, keep your private key safe and don’t lose it. It’s the pillar of your crypto safety.
Hitesh is a digital marketing strategist and entrepreneur with more than 15 years of experience in digital marketing, start-ups, branding, and customer acquisition strategies. Hitesh is the CEO and Founder of Reposition Group, which specializes in digital growth strategies for companies in the cryptocurrency market such as Bitamp.com.