If you’re interested in venturing into trading or investing in cryptocurrencies, you’ll need a digital wallet. A digital wallet is a type of wallet that supports the storage and trade of cryptocurrency (especially the one you want to buy or trade). The wallet also stores all that digital currency for you, just like a bank account.
What is a Digital Wallet?
This is a secure place to store the private keys that give you access to your cryptocurrency assets. It keeps the information about your public and private keys and the amount of crypto you own. A digital wallet also makes it easier to keep track of your assets. You can access your information from any device with an internet connection. This means that you always have instant access to your funds no matter where you are in the world.
How Do Cryptographic Wallets Work? Cryptocurrency digital wallets work by creating a public address and a private key. When you want to send cryptocurrency, you need to know the recipient’s public address, and you use your private key to sign off on the transaction. This ensures that only you can send cryptocurrency from that wallet.
For example, when you create a Bitcoin wallet, it will show your public key as an address. You can share that with anyone who wants to send you Bitcoins. Likewise, anyone who knows your public address can send Bitcoins to your wallet. However, to access your balance and execute transactions, you need to have your wallet’s private keys (seed phrase). These keys are vital since they help secure the crypto coins in your wallet. If you lose your private keys, you lose access to your crypto.
Digital Wallet Examples
There are two distinct types of digital wallets: hot wallets and cold wallets.
Examples of Hot Wallets
Hot wallets (or software wallets) are connected to the internet via computer, phone, or tablet. They’re very convenient to use, but they lack enough security to protect you from hacking or theft. So, they’re best for storing small amounts of cryptocurrency.
However, a few hot wallets come with robust security safeguards and features to protect your digital assets. Some of the most secure online wallets include:
1. Coinbase Wallet
Coinbase Wallet is probably the most secure Bitcoin wallet with an excellent reputation. It boasts excellent security features such as multi-sig vault storage, which requires multiple people to enter their keys to access funds. In addition, the wallet’s highly intuitive interface and best-in-class security features make it the best option for beginners with little to no experience in crypto.
A reputable exchange also backs it, so you don’t have to worry about losing your funds. Given that the wallet is non-custodial, users are fully in control over their crypto assets – no need to worry about locked funds or hacking on the Coinbase website.
Coinbase also offers a one-click cloud backup for your private keys, keeping them on your personal cloud drive. This can help ensure that you don’t lose access to your wallet’s funds or digital assets.
2. Blockchain.com Wallet
Blockhain.com is another secure wallet for storing your digital assets. It comes with cold wallet storage that lets you keep a large portion of your funds offline and only uses the hot wallet for day-to-day transactions. It has two-factor authentication and gives you the ability to note down your recovery phrase – though the company stores the keys on their servers. The wallet also allows trading cryptos within the wallet itself – making it highly convenient for buying, selling, and converting cryptocurrency. Blockchain.com wallet is available on both Android & iOS.
3. Mycelium Wallet
Mycelium is one of the most secure, convenient wallets with excellent security features. This wallet is available on iOS and Android, making it easy to manage your cryptos anywhere.
Mycelium also provides a great backup solution through its 12-word backup phrase, which you can use to restore your wallet if anything happens to your phone or tablet.
The wallet has an in-built feature called “cold storage” that allows users to store large amounts of coins on external drives for security purposes. This feature allows for added security for those who are not comfortable with the idea of leaving their coins on an online server.
4. Electrum wallet
Electrum is a secure Bitcoin wallet that enables you to set up a strong level of security very quickly. Your wallet is encrypted by default which helps protect your coins against hackers. Electrum also offers two-factor authentication and multi-signature support for extra protection.
5. Trust Wallet
Trust Wallet is another excellent option for storing your cryptocurrency offline. It’s straightforward to use and has many features, including support for the most popular cryptocurrencies and altcoins. It’s also available on Android and iOS so that you can access your funds from anywhere.
6. Bitgo Wallet
Bitgo Wallet is an excellent choice for those who want to store their cryptocurrency in a safe and secure place. It offers two-factor authentication, multi-sig security, and HD wallet services. Plus, it has a very user-friendly interface.
Examples of Cold Wallets
Cold wallets are probably the most secure crypto wallets because they keep your private keys offline, unlike hot wallets. Cold wallets (or hardware wallets) also come encrypted, keeping your keys safe.
Trezor is a small device wallet with an interface integrated for making secure payments. You need to plug the USB cable into your computer or phone and enter the pin to access your funds. Even if you lose this device, your coins are safe because Trezor creates a 24-word seed after setup. The seed phrase is generated using randomness from your movements while setting up the device. So it can be re-generated anytime in case of loss or damage to your Trezor device. There’s also an option to choose between the more affordable Trezor One and Trezor Model T.
Ledger is a company based in France that produces security hardware for cryptocurrencies such as Bitcoin, Litecoin, Ethereum, etc. Ledger has been around since 2014 and has created the most secure hardware wallets with high-security standards. Ledger Nano X, for instance, uses a specialized chip – the same one also used for credit cards and passports — to protect your wallet against attacks.
The Ledger Nano X wallet connects via USB to a computer or mobile device via USB. When you plug in a ledger, you will need to access the Ledger Wallet App on the specific device you are connecting it. From there, you will be presented with options to set up a new wallet or access an existing one.
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