Cryptocurrency Digital Wallets
If you own a physical wallet, then you know how indispensable it’s to your valuables (read: cash, cards, etc.). However, cryptocurrencies, unlike conventional currencies like dollar bills, are virtual/digital currencies that cannot be physically stored or carried around. That’s where a digital cryptocurrency wallet comes in handy.
In this quick guide, we’ll cover the nitty-gritty of a digital wallet — what is a digital wallet, how a digital wallet works, and how to choose the best digital wallet for your cryptocurrency needs.
So What is a Digital Wallet?
The approach to handling cryptocurrencies, as opposed to traditional money, is entirely different, especially when it comes to obtaining and storing them. As they don’t exist in any physical form or shape, cryptocurrencies like Bitcoin cannot be technically stored anywhere. Instead, it is the private keys used to access the cryptocurrency address and trigger transactions that can be securely stored. Remember it’s a combination of the sender’s private key and the recipient’s public key that makes cryptocurrency transactions possible.
With that said, a digital wallet is a nifty software program that is designed primarily to store both public and private keys. It also interfaces with several different blockchains to allow users to receive or send cryptocurrencies and keep track of their balances. Simply put, a digital wallet is where you store your cryptocurrency coins, such as BTC, LTC, ETH, and so forth.
You cannot transact Bitcoins or any other crypto without a digital wallet, and to keep this wallet functional and secure, you will need both public and private key. As the name suggests, your public key is the series of numbers that you can share with other users so that they can see your wallet and transact with you. A private key, on the other hand, is a unique series of digitals that are only accessible to you; they are meant to let you access your wallet and initiate transactions on the blockchain.
How do Digital Wallets Work?
Again, since cryptocurrencies don’t exist anywhere, it’s only the records of transactions that are stored on the network. When a user sends crypto coins, he or she is basically signing off ownership of the wallet’s address for the coins.
The public address assigned to cryptocurrency must match the private key stored in a digital wallet for a person to unlock crypto funds and spend the coins. That is, if the private keys and public keys associated with the coins match and confirmed by the blockchain, the sender’s digital wallet balance will reduce as that of the recipient increases. It’s that simple and straightforward, but what goes on under the hood is a little more complicated.
Types of Cryptocurrency Wallets: Choose one That’s Best for your Needs
While it’s easy to create a digital wallet, the more difficult part is finding the type of crypto wallet that’s right for your needs. Cryptocurrency wallets come in several different forms, including:
Desktop Wallets: You can download this digital wallet to your laptop or PC. While it’s incredibly secure, if your computer is compromised you run the risk of losing all your coins.
Mobile Wallets: These digital crypto-stores run as a smartphone app. They are lighter, simpler, and agiler than desktop wallets. Best of all, you can use them on the go.
Online Wallets: These wallets run and are accessible from a cloud platform. Since a 3rd party is responsible, however, they tend to be more susceptible to hacking and fraud.
Hardware Wallets: You can also store your private keys in hardware gadget such as an USB stick. They can be used offline, making them remarkable safe.
Paper Wallets: It’s what it sounds like: a print-out of the actual public or private key. It’s important to note that you will need to move funds from your software wallet to your paper wallet. And, when it comes to spending the funds, you will also have to do the reverse — transfer the funds from the paper to software wallet.
What can one store in a digital wallet?
It’s a no-brainer that you cannot store credit/debit cards. However, a digital wallet functional in a much similar way as an online bank account. It keeps a logical log of your transactions.
How can one access funds in a digital wallet?
Digital wallets are under key and lock thanks to the power of cryptography. You need the master or private keys (often hexadecimal codes) to access the funds. Remember you cannot access your wallet without this key.
Now you know what a digital wallet is, visit our Crypto Wallets page for all the best digital wallets and get your wallet today.