Types of cryptocurrency wallets - features, pros and cons

Wallets are classified according to several criteria, each of which we will consider separately.

The crypto wallet is an important and truly integral part of the Blockchain system, which is necessary for users to carry out operations with cryptocurrencies - buying and selling, stacking, mining, transactions and receiving funds. In other words, it is not just a means of storing cryptocurrencies, it is a tool for active interaction with the blockchain.

Hot and cold wallets

Wallets are divided into hot and cold according to the principle of their work. Hot wallets exist directly on the Internet or have a connection to it. That is, linking such a wallet to the network allows you to always have access to funds and quickly perform operations with them at any time - for example, transfer them to trading platforms. This is an undoubted plus, but there is also a minus - vulnerability. Hot wallets are more often attacked by scammers who are constantly looking for gaps in the software and trying to seize funds.

Cold wallets, in turn, are not connected to the Internet in any way. The speed of operations in their case is lower, but they are much more resistant to hacking attempts and are considered more secure, so they are often chosen by those who follow investment or long-term trading strategies - for example, by the same hodlers.

A system of decentralized finance DeFi is available on some cryptocurrency exchanges. In her case, most of the capital is in cold storage, the rest is in hot wallets. Such decentralized wallets allow, on the one hand, to ensure the security of assets, and on the other - to actively use them without withdrawing from the system. In this case, only the owner has a private key, and he also has the right to conduct transactions promptly, and trading on such exchanges is carried out directly from cold storage.

Software wallets

Software wallets have their own internal classification into types, for each of which a unique set of functions is provided. Among them:

- web wallet is as convenient as possible, it can be used even through a standard browser without the mandatory need to install special software. The owner comes up with the password himself during registration. This is an ideal option for beginners, but it is better not to store serious large sums in such wallets for reasons of the same security.

- dextop wallet is a special software that is installed on a computer, provides full control over transactions and private data due to a high level of protection. In the process of creating it, the "wallet.dat" file appears on the desktop of the PC, where the keys necessary for each login are located. The loss of the key makes the assets inaccessible, so it is highly desirable to make a backup copy of this file.

- a mobile wallet is similar to a desktop wallet, in other words, it is its mobile version with advanced functionality and the ability to transfer funds by QR code. This is a great solution for daily operations. And again, it is worth taking care of the security of such a wallet - come up with a complex PIN code, delete all questionable applications from the phone, make a backup copy of the file with login data.

Hardware Wallets

Hardware wallets are a separate device without any Internet connection that generates private and public keys automatically. In essence, this is a cold storage, which is rightfully recognized as the safest. Its conditional disadvantage is not such a high speed of operations due to a rather complex internal device, but now many platforms offer linking such a wallet to a trading account, which preserves its high security, but at the same time improves communication with the exchange. 

Paper Crypto Wallet

Despite the age of high technology, paper media has not yet outlived itself. A paper cryptocurrency wallet is a piece of paper with keys for entry and transactions in the form of QR codes. These codes are scanned when making transfers. A paper wallet is a kind of alternative to cold wallets with its advantages in the form of the same high security due to autonomy and lack of Internet connection. But there is also a significant disadvantage - you can only transfer all the funds available on the balance sheet.

It is also worth taking into account that a large part of wallets have certain limitations on the possibilities of work - for example, not all popular coins may be supported. In the case of GRIN4, there are no such restrictions.

So, in order to choose the most suitable crypto wallet, you need to determine the key goals of working with cryptocurrency, the operations that you are going to perform, and the amount of capital being placed. And based on this, make the best decision.

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