To own a bitcoin , you need to find a way to store cryptocurrency . This can be done in a place called the crypto wallet. Instead of actually storing bitcoins, the wallet has an individual key that allows you to access your bitcoin address as your public key. If the portfolio software is well designed, it will make it look as if your bitcoins are really there. This makes the use of cryptocurrency more convenient and intuitive.
Wallets can function on your computer or mobile device, on a physical storage device, or even on a piece of paper. Here we will briefly look at the different types.
Hot and cold crypto wallets
As mentioned earlier, cryptocurrency portfolios can also be defined as “hot” or “cold” according to how they work.
A hot wallet is any wallet that is somehow connected to the Internet. For example, when you create an account on the Binance platform and send funds to your portfolios, you deposit them in the Binance hot portfolio. These portfolios are easy to set up and funds are quickly available, making them convenient for merchants and other frequent users of the platform.
Cold wallets, on the other hand, have no Internet connection. Instead, they use physical storage media to store their keys offline, making them resistant to online hacking attempts. As such, cold wallets tend to be a much safer alternative to storing your coins . This method is also known as cold storage and is particularly suitable for long-term investors or hodlers.
Online or cloud based portfolios offer greater convenience. Generally, you can access your bitcoins from any device if you have the correct passwords. They are all easy to set up, used with desktop and mobile applications that make it easy to spend and get bitcoins, and most are free.
The downside is lower security. With your private keys stored in the cloud, you need to trust the host’s security measures. However, make sure that this wallet does not disappear with your money, cease to function or be denied access to it.
Some of the leading online portfolios are related to crypto exchanges, such as Coinbase and Blockchain . Others offer additional security features, such as offline storage of cryptocurrency. Such are Coinbase and Xapo.
Installing a crypto wallet directly on your computer gives you the assurance that you control your keys. Most have a relatively easy configuration and are free. The downside is that they require more backup in the form of archiving. If your computer is stolen or hacked and your personal keys are also not stored elsewhere, you lose your bitcoins. More popular software portfolios are Electrum and Bitcoin Core .
Mobile wallets function similarly to those designed for desktops, but they are designed specifically for smartphone applications. Using them is quite convenient as they allow you to send and receive cryptocurrencies using QR codes.
As such, mobile wallets are particularly well suited to make day-to-day transactions and payments, making them an important option for spending bitcoins, BNBs and other cryptocurrencies in the real world. Trust Wallet and Mycelium are some of the best examples of mobile crypto wallets.
Just like computers, however, mobile devices are vulnerable to the impact of malicious applications and software. Therefore, it is recommended that you encrypt your mobile wallet with a password and back up your personal keys or sidecar if your smartphone gets lost or fails.
Hardware portfolios are small devices that occasionally connect to the network to make bitcoin transactions. They are extremely secure as they are usually offline and therefore not susceptible to hacking. However, they can be stolen or lost along with the bitcoins stored on private keys. Some large investors keep their portfolios in safe places, such as bank tellers. Notable examples of hardware wallets are Trezor and Ledger Nano X .
A paper wallet is a piece of paper on which the crypto address and its personal key in the form of QR codes are physically printed. These codes can then be scanned to perform cryptocurrency transactions.
Some paper wallet websites allow you to download their code to generate new addresses and keys while offline. As such, these wallets are highly resistant to online hacking and can be considered as an alternative to cold storage.
The specific companies and sites mentioned here are not the only options available and should not be taken as a recommendation.