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A cryptocurrency or crypto wallet is a secure digital wallet used to store, send, and receive digital currency. A wallet will have two components: your public key, and your private key. The public key is the wallet’s address that to which you can send cryptocurrency and a private key lets you access the wallet and withdraw funds.
There are five types of cryptocurrency wallets: online wallets, mobile wallets, desktop wallets, paper wallets, and hardware wallets. You may also hear the terms “hot” and “cold” storage. Anything connected to the internet is considered hot, and anything offline is considered cold.
Most crypto wallets are capable of holding several different crypto coins at once; for example, Bitcoin and Ethereum. However, some wallets will only support certain cryptocurrencies, this is why it’s important to check what your wallet allows if you plan on holding a particular cryptocurrency.
Before you can create your wallet, you need to decide which kind of wallet you want.
Online Wallet: these are cloud-based wallets that you can access at any time across many devices as long as you have an internet connection. Online wallets are popular because they are convenient and almost function like a traditional banking app; however, the drawback of this is that they are vulnerable to theft.
Mobile Wallet: These wallets are also simple and convenient to use since they are an app on your smartphone. You can also use a mobile wallet to pay for items in stores that accept cryptocurrency payment which is a huge plus. If your phone is hacked or stolen, you may run the risk of having your mobile wallet compromised.
Hardware Wallet: A hardware wallet is a physical device, such as a USB, that securely holds your private key inside the hardware. It is essentially an added security step so because if your computer gets hacked, the attackers wouldn’t be able to obtain your private key and your wallet would be off limits. If you lose your hardware wallet, there are also ways to set up a new hardware wallet and retrieve your previous private key.
Desktop Wallet: These are downloaded and installed on your computer and are safer than an online wallet. However, if your laptop is lost, stolen or hacked, it is possible that you will lose control of the wallet and your funds.
Paper Wallet: This is the old school approach to modern tech. Your public and private keys are stored on a physical piece of paper and you can access your account and transfer funds through QR codes. This is a safe approach since no one can hack a piece of paper.