What are crypto wallets?
Cryptocurrency wallets are used to store users’ public and private keys, they provide an easy-to-use interface to manage crypto balances while also supporting cryptocurrency transfers through the blockchain.
Some wallets even allow users to perform certain actions with their crypto assets, such as buying and selling or interacting with decentralised applications (dapps).
cryptocurrency transactions cannot be depicted as ‘sending’ of crypto tokens from one person’s mobile phone to another person’s mobile phone.
When you order a crypto transaction, a user’s private key signs the transaction and broadcasts it to the blockchain network. The network then includes the transaction to reflect the updated balance in both the sender’s and recipient’s address.
cryptocurrency wallets do not really store cryptocurrency in the same way as a physical wallets hold cash. Instead, they read the public ledger to show the balances in a user’s addresses, as well as hold the private keys that enable the user to make transactions.
Types of Crypto wallets
There are two main types of cryptocurrency wallet, namely the HOT AND COLD WALLETS
The HOT wallet is a type of wallet that is connected to the internet and the public and private keys are help in wallet. Examples of HOT wallets are:
- Web wallets,
- Mobile Wallet Apps
- Desktop Wallet extensions.
This types of wallets are easily accessible and connects to the internet which predisposes them to attacks by hackers since they are on the phone or computer network. And computer networks are known have vulnerabilities that can be targeted by hackers or malware programmes.
COLD WALLETS:
Cold wallets are wallets that are entirely offline and never connects to the internet. This kind of wallets are inconvenient to manage but are far more secure than hot wallets.
Examples are:
- Paper wallets and
- An engraved hardware wallet
A paper wallet is a place a locations where the public and private keys of a wallet are written in a piece of paper or diary and kept securely. This form of wallet is very secure as hackers have no means of accessing it.
Hardware wallet: This is an hardware device, usually a USB or bluetooth device that stores your public and private keys and transactions on the wallet are typically ordered by pushing a button on the device and they are not connected to the internet in any way or form. E.g safepal wallet.
HOT wallets can also be divided into 2 types,
Custodial and non-custodial wallets.
Custodial wallets are wallets in which the public and private keys are held in trust by a centralised organization or servers. Example are exchange wallets. E.g Binance, gate.io, bybit wallets are all custodial wallets
While non-custodial wallets are wallets whose private and public keys are solely kept in the custody of the wallet owners and are help in a hardware or written on a piece of paper and kept securely. Metamask, Aptos, Sui, etc are examples of non-custodial wallets
In general, Cold wallets are safer and more secure than hot wallets.
I shall talk about my personal strategies for ensuring that I never loose my private keys or passphrase in my next diacussion