Many wallet providers have entered the market as user demand continues to grow for new ways to spend, swap, and store their crypto. Each wallet type has its benefits and flaws, so it is crucial to understand how they work before moving your funds.
The different types of wallets depend on user cases, the type of blockchain, and the platform's choice.
We look at the different types of wallets in the crypto space.
What Is a Cryptocurrency Wallet?
A cryptocurrency wallet is a software program that stores your public and private keys. It consists of a private key and a public key.
Cryptocurrency wallets may also be "hot" or "cold" according to their operation.
A hot wallet is any wallet that is connected somehow to the Internet. For example, Trustwallet, Tronlink Pro, Metamask, Solfare, Phantom, etc. These wallets are quite easy to set up, and the funds are quickly accessible, making them convenient for traders and frequent users.
On the other hand, cold wallets have no connection to the Internet. Instead, they use a physical medium to store the keys offline, making them resistant to online hacking attempts.
Cold wallets are a much safer alternative to "storing" your coins.
Types of Crypto Wallets
There are six main types of crypto wallets that you can use.
1. Online Crypto Wallets
This is a service owned by a third party. Depending on the wallet, the keys are stored on a remote server or downloaded as an encrypted file to the user's computer.
They allow not only to open several wallets for different cryptocurrencies but also to carry out currency conversions, trade on cryptocurrency exchanges, calculate commissions with the help of built-in calculators, etc.
2. Mobile Crypto Wallets
This is a program to install on mobile gadgets. Interesting for those for whom cryptocurrency is a means of regular payment for goods and services.
Besides, the current blockchain version is usually stored on the application server, providing access to updated data and not requiring the user to download large amounts of data.
3. Hardware Wallets
This is a separate removable device that looks like a flash drive. This method of storing keys is not very popular because it is suitable only for long-term storage (it is inconvenient to trade with it). But it does not overload the computer.
4. Desktop Wallets
Desktop wallets are software applications that allow crypto users to manage and securely store their private keys on a computer hard drive.
They provide a convenient option for anybody who frequently sends or receives crypto payments from their computer.
5. A Smart Contract Wallets
A smart wallet is an Ethereum wallet managed by a smart contract instead of a private key. It enables users to enjoy advanced features such as multi-sig transactions, daily transfer limits, emergency account freezing, and more secure account recovery.
6. MPC Wallets
MPC wallets or multiparty computation wallets represent the generation of wallets for tokens and cryptocurrencies oriented to offer the highest security standards for users interested in greater security.
Takeaway
Crypto wallets are an integral part of using crypto. They are one of the basic infrastructures that make it possible to send and receive funds through blockchain networks.
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