Cryptocurrency is a medium of exchange which has the same function as a fiat money. The only difference is that it is digitalized.
In order to secure our fiat money, what we usually do is to deposit our money in banks and have our personal wallets with us in case we needed some cash. It goes almost the same with cryptocurrencies, except for the use of banks. Users must have their ‘wallets’ because it is where the coins and tokens are stored.
The wallet have two main distinctions. They are the cold wallets and the hot wallets.
First thing to remember about a cold wallet is that it is a type of wallet which do not need internet connection to function. It is also considered to be safer than a hot wallet because it is not as exposed as the other wallet when it comes to security. This can also be compared to banks since most users store the large share of their cryptocurrencies here.
It is more advisable to store the larger share of a user’s cryptocurrency in a cold wallet since it is believed to be less risky. However, cold wallets are not as convenient to be used as hot wallets in terms of day-to-day use.
The available types of cold wallets are offline desktop wallets, hardware wallets, and paper wallets.
Hot wallets are like our pocket-sized wallets where we store our money that is to be used immediately. In a hot wallet, what the user needs is only internet connection and a finger (in order to tap the screen or type on their keyboards). Mobile wallets, desktop wallets, and web wallets are some of its examples.
Now, a mobile phone seems like an essential gadget to everybody. Who lives without a phone, right? A mobile wallet is one of the most used and downloaded wallet, for the reason that is more accessible and convenient to be used. This type of wallet is under the hot wallet which means that it needs internet connection in order to be used.
A mobile wallet and a desktop wallet almost have the same function. It is just that mobile wallets are installed on mobile phones while desktop wallets are installed on computers. Desktop wallets are also the most downloaded application of all the wallets.
Moreover, there are also two types of desktop wallets. These are the offline desktop wallets and online desktop wallets. The difference is that offline desktop wallets can be used without any internet connection.
Web wallets is a type of wallet which can only be browsed over the internet browser. It does sound risky however, some people use this type of wallet because it is easier and faster. In addition, the transaction costs are cheaper.
A hardware wallet is an example of a cold wallet. This type of wallet offers a physical device, wherein users only need to click a button and all the transactions can be seen and tracked. However, this wallet is quite expensive compared to the other wallets.
Another type of wallet is the paper wallet. This type of wallet of is obviously easier to be created, and are also hack-proof since it is written on a paper. Internet risks are definitely impossible to happen. However, this type of wallet can be lost or distorted through time.