What is a Crypto Wallet?
A cryptocurrency wallet is a software program that stores your private keys and public keys. When you create a new wallet it generate a new pair of keys for you. You can send and receive cryptocurrencies using your wallet address.
Crypto wallets can be either hot wallets or cold wallets. Hot wallets are connected to the internet and are therefore more vulnerable to attack. Cold wallets are not connected to the internet and are therefore more secure.
Private Keys
Private keys are like passwords that allow you to access your cryptocurrency. It private key is a long, random string of numbers and letters. The public key is generated from the private key using a mathematical algorithm. Unlike the public key, theprivate key is kept secret and should never be shared with anyone.
Public Keys
Your public key is your address, similiar to a bank account number, where people can use to send you cryptocurrency. It public key can be shared with anyone. When you send cryptocurrency to someone, you use their public key. The recipient uses their private key to sign the transaction, which proves that they own the cryptocurrency.
Cold Wallets
Cold wallets are not connected to the internet and are therefore more secure than hot wallets. They are typically used for storing large amounts of cryptocurrency. Here are some examples of cold wallets:
- Paper wallets are a type of cold wallet that is printed on paper. They contain your private key and public key. To use a paper wallet, you need to scan the public key into a cryptocurrency exchange or wallet app.
- Hardware wallets are a type of cold wallet that is a physical device. They store your private key offline and sign transactions using a button press. Hardware wallets are considered to be the most secure type of cold wallet.
- Offline computers or smartphones can be used as cold wallets if they are not connected to the internet. To use an offline computer or smartphone as a cold wallet, you need to install a cryptocurrency wallet app that does not connect to the internet.
Hot Wallets
Hot wallets are connected to the internet and are therefore more vulnerable to attack than cold wallets. They are typically used for storing small amounts of cryptocurrency that you need to access frequently. Here are some examples of hot wallets:
- Desktop wallets: installed on a desktop computer. They are a good option for users who want to have more control over their cryptocurrency and who are comfortable using a computer. Desktop wallets are typically more secure than web wallets, but they are not as portable.
- Mobile wallets: installed on a mobile device. They are a good option for users who want to have easy access to their cryptocurrency and who are on the go. Mobile wallets are typically less secure than desktop wallets, but they are more portable.
- Web wallets accessed through a web browser. They are a good option for users who want to have easy access to their cryptocurrency and who do not want to install any software. Web wallets are typically the least secure type of wallet, but they are also the most convenient.
Which is right for me?
I must stress that there is always a risk with a hot wallet. At CryptoProjects, we use hot wallets when we are storing small amounts of crypto for a short period of time. The bulk of our funds are secured in cold wallets.
Access is not ownership
With most hot wallets, you don’t own the private keys, then you don’t truly own the funds. You’re entrusting them to a third party. This means that they can do whatever they want with the assets on your account.