A cryptocurrency wallet’ is an application or a program that allows users to send and receive virtual currencies. The physical medium also stores private and public keys that allows people to monitor their balances as well as interface with other blockchain networks.
How Cryptocurrency Wallets Work
Unlike traditional wallets, cryptocurrency wallets don’t store cryptocurrencies in a single location or anywhere in a physical location. Instead, the cryptocurrency wallet consists of transactional records that indicate which private or public key has control over crypto holdings.
Just like a bank account, a cryptocurrency wallet act as a bank account number. By giving other people your cryptocurrency wallet address, they will be able to send you cryptocurrencies. The fact that no two addresses are ever the same means you can have as many cryptocurrency wallets as possible to receive and send cryptocurrencies.
Whenever a person sends you cryptocurrency to your wallet, they are essentially signing off ownership to your wallet. To be able to access the cryptocurrency sent to your wallet, a private key stored in your wallet must match public address the cryptocurrencies are assigned whenever the private and public keys match then the balance in the digital wallet increases.
Types of Cryptocurrency Wallets
Desktop Wallets. These types of cryptocurrency wallets are downloaded’ and installed on a PC or laptop. The private keys, in this case, can only be accessed from a single computer in which they are stored. While they provide the highest level of security, you should always ensure your computer is not hacked as it could lead to a loss of the keys.
Online Wallets: Online Cryptocurrency Wallets can be accessed from any computing device. While they offer the convenience of accessing keys from anywhere, the fact that they are stored and controlled by a third party increases the risk of being lost.
Mobile: Mobile cryptocurrency wallets run in the mobile devices allowing people to access their cryptocurrency holdings while on the go. Such wallets are smaller and simple than desktop wallets
Hardware Wallets: They differ from the other wallets as they store users’ private keys on an external hardware device such as a USB drive. The fact that the wallets store the keys offline accords users of high levels of security from potential attacks.
Are Cryptocurrency Wallets?
The level of security that one gets to enjoy depends on the cryptocurrency wallet in use as well as the service provider. Using wallets that store private keys online is much riskier than relying on hardware wallets that store the same keys offline.
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