When starting to invest in cryptocurrency, it is necessary to have a wallet. The latter is used to store assets, as well as to sell them. There are several types today. But what are the options and what are the advantages of this kind of portfolio? All the answers in the rest of this article.
The cryptocurrency wallet, presentation
The cryptocurrency wallet is similar to a material or immaterial medium, making it possible to store, receive, or send assets of this kind. They are directly linked to the blockchain, digital currencies not being considered physical currencies. On the other hand, you should know that a crypto-currency has a device of its own that does not allow it to communicate with others. For example, Bitcoins cannot be transferred to an Ethereum wallet and vice versa. It is therefore necessary to create a crypto wallet for each virtual currency. Concretely, here is how a cryptocurrency wallet works. It consists :
- From a public key. It could be compared to the bank identity statement. This key consists of a series of numbers and letters and corresponds to the address of the wallet on the blockchain.
- From a private key. It is considered a password and allows access to funds stored in the blockchain. It should never be communicated.
It is by combining these two keys of a digital signature is created and allows it to consult its balance and to carry out transactions.
The main types of portfolio
Today, there are several types of cryptocurrency wallets. Among the main ones, we find the mobile wallet. It takes the form of a mobile application to be downloaded via a smartphone. It is the simplest wallet to use, in particular, because it contains fewer features than other crypto wallets. Usable for carrying out transactions, it also offers the possibility of scanning other wallet addresses using a QR Code. The disadvantage of the mobile wallet is that it remains subject to hacking. Another option is the desktop wallet. This is software to be installed on a computer. Intermediate between the online and offline portfolio, its level of security against viruses and other forms of cyberattacks is relatively high. In case of failure, it is possible to use a recovery code, which will have been transmitted during the installation of the software. Nevertheless, it requires having a firewall and an effective antivirus.
Cold hardware wallets
Cold hardware wallets are the most common. They are characterized by their high level of security. They use keys generated via a source that is not connected to the blockchain. Therefore, they are also not connected to the Internet. It is for this reason that they are called cold purses. These crypto wallets can therefore play the role of a savings bank account. While they are not prone to hacks, there is still a risk of losing the assets. It is therefore recommended to make several backups and keep your cold hardware wallet in a secure place.
The advantages of the cold crypto wallet are numerous. First, the data is stored on a device that is disconnected from the network. An important point, in addition to the fact that these wallets are small and therefore simple to carry discreetly. This solution will also allow you to store a large amount of data, through various agents. And in case of loss, it remains possible to recover the funds, via a sequence generated especially for this and known as the seed. If it is particularly appreciated, the cold wallet remains relatively expensive. It will therefore not necessarily be the most appropriate for investors new to cryptocurrency.
Hot Cryptocurrency Wallets
Hot wallets differ from cold wallets in that they have a special property. They are permanently connected to the network and therefore to the blockchain. While this is a plus point, it is also a minus. Indeed, this highlights a greater vulnerability to potential attacks, the objective of which remains to deprive the investor of his cryptocurrencies. It is therefore better to ensure that your source code is of good quality, but also that your computer is equipped with an antivirus. In this way, you will be less afraid of malware and possible cyberattacks.
This type of portfolio has various advantages. Being mobile, they offer the opportunity to make fast transactions. In addition, many of them are open source. In other words, this allows you to check the security level of your crypto wallet. You should know that making a code public allows you to continue improving a portfolio. On the other hand, hot models support various alternative cryptocurrencies, which cold hardware wallets cannot. Finally, the last advantage, and probably the main one, is that they are mostly free. These crypto wallets are therefore aimed at the greatest number, of novices or experts in the field of cryptocurrencies.