Crypto Wallets Explained

Updated: Feb 8

Advancements in modern technology are continuing to change the way that we use our money, from online banking to digital payment systems like PayPal. The world of finance is almost completely unrecognisable to what it was like even a decade ago. With money becoming digital and the recent boom in interest around cryptocurrencies, many people are unsure on how to store their newly acquired digital assets. When you have a significant amount of physical currency you require a safe & secure place to store it. Similarly, when you have cryptocurrency, it too requires a safe place to be stored. This significantly reduces your risk of it being stolen or lost. There are a few different options to explore when thinking about crypto storage so let’s run through the basics.

What is a Crypto wallet?

A wallet is a software program or a physical device that can be used to store, send, and receive your cryptocurrency. Similar to a bank's relation to fiat currencies in terms of “safe” storage, to what a wallet is to cryptocurrencies. However, cryptocurrency isn’t actually “stored” in these wallets, the coins exist on the blockchain, and a wallet allows you to interact with the balances held on the blockchain. The wallet itself stores addresses which allows their owners to move coins elsewhere while also letting others see the balance held at any given address. There are two categories of crypto wallets, hot wallets, and cold wallets.

What is a Hot wallet?

A hot wallet is online. It can be used on devices connected to the internet such as laptops and mobile phones which come in the form of web-based wallets, desktop wallets and mobile wallets. These wallets are easily accessible which is very convenient when making transactions online. However, this convenience comes with risk, due to the nature of hot wallets being constantly connected to the internet users are exposed to greater chance, although unlikely, of losing their crypto due to hackers. You can also use the wallets provided by exchanges, but this isn’t recommended. Exchange wallets are what is known as...

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