A wallet is a most essential accessory that everyone carries around them.
In Cryptocurrency, a wallet is used as a gateway to a blockchain network.
A wallet securely stores the public keys (address),
private keys (secret phrase/words) and transactions of user.
A person will get complete access to the data stored in your wallet using
the private key (keep it safe). Sometime, we hear in the news about
cryptocurrencies getting stolen, this means that someone got access to
the private keys of the user and all the cryptocurrencies were sent to
another wallet and since blockchain changed be changed so the process
can't be undone.
Types of Cryptocurrency Wallets :- Cryptocurrency wallets can divided into two category as "hot" or "cold," according to the way they operate.
A hot wallet is any wallet that is connected somehow to the Internet. These wallets are quite easy to set up, and the funds are quickly accessible, making them convenient for traders and other frequent users. Hot wallets can be sub-divided into 1. Web wallets 2. Desktop wallets 3. Mobile wallets.
Web Wallets :- You can use web wallets to access blockchains through a browser interface without having to download or install anything. In most cases, you can create a new wallet and set a personal password to access it. However, some service providers hold and manage the private keys on your behalf. Although this may be more convenient for inexperienced users, it's a dangerous practice.
Desktop Wallets :- Desktop wallet is a software you download and execute locally on your computer. Unlike some web-based versions, desktop wallets give you full control over your keys and funds. When you generate a new desktop wallet, a file called "wallet.dat" will be stored locally on your computer. In general, desktop wallets may be considered safer than most web versions, but it's crucial to make sure your computer is clean of viruses and malware before setting up and using a cryptocurrency wallet.
Mobile Wallets :- Mobile wallets function much like their desktop counterparts but designed specifically as smartphone applications. These are quite convenient as they allow you to send and receive cryptocurrencies through the use of QR codes. Just as computers, however, mobile devices are vulnerable to malicious apps and malware infection. So it's recommended that you encrypt your mobile wallet with a password, and backup your private keys (or seed phrase) in case your smartphone gets lost or broken.
Cold wallets, on the other hand, have no connection to the Internet. Instead, they use a physical medium to store the keys offline, making them resistant to online hacking attempts. As such, cold wallets tend to be a much safer alternative of "storing" your coins. Cold Wallets can be sub-divided into 1. Hardware Wallets 2. Paper Wallets.
Hardware Wallets :- Hardware wallets are physical, electronic devices that use a random number generator (RNG) to generate public and private keys. The keys are then stored in the device itself, which isn't connected to the Internet. While these wallets offer higher levels of security against online attacks, they may present risks if the firmware implementation is not done properly. Also, hardware wallets tend to be less user-friendly, and the funds are more difficult to access when compared to hot wallets. You should consider using a hardware wallet if you plan to hold your crypto for a long time or if you're holding large amounts of cryptocurrency. Some good hardware wallets are made by Ledger and Trezor.
Paper Wallets :- A paper wallet is a piece of paper on which a crypto address and its private key are physically printed out in the form of QR codes. These codes can then be scanned to execute cryptocurrency transactions. As such, these wallets are highly resistant to online hacking attacks and may be considered an alternative to cold storage. Owing to the numerous flaws, however, the use of paper wallets is now considered dangerous and should be discouraged. They can be easily lost and paper don't have a long life.
Our recommendation :- Use Hot wallet ( Yoroi Wallet for ADA and Exodus for other cryptos ) for keeping small amount of crypto for daily use and any hardware wallet for keeping large amount ( entry level- Trezor One Premium choice- Ledger X ).