Blockchain is a technology that has in many ways revolutionized the way we conceptualize money, presenting us with cryptocurrencies and the plenty of things we can do with them.

To enter this world, however, you’ll need to get yourself a crypto wallet, a special application used to handle your crypto assets. With a variety of options available, it’s essential to understand, what they are and in which cases they will be useful for your particular case. To this task, we’ll dedicate the article of today

Understanding the Blockchain Wallet

A blockchain wallet is a software solution that allows users to perform operations on their cryptocurrency, keeping it, transferring it to other users, or receiving it.

Exploring the Functionality of Blockchain Wallets

The key principle behind the functioning of a blockchain wallet is the utilization of a pair of cryptographic keys – a public key and a private key. The public key is the address that other users use to transfer funds to your wallet. The private key is a secret key that is used to keep your assets in security.

exploring the Functionality of Blockchain Wallets

Reasons to Delve into Cryptocurrency Wallets

A cryptocurrency wallet is your way into the world of cryptocurrency. For this reason, if you are interested in cryptocurrency as such, a cryptocurrency wallet is a necessary condition to enter this world. If you know the advantages of cryptocurrency, the corresponding wallet is exactly the thing that will let you enjoy it.

Varieties of Cryptocurrency Wallets

Although the general purpose of a crypto wallet is rather straightforward – to provide users with a service to store and work with their crypto assets, however, there are different types of crypto wallets with different functionalities and usage cases.

1. Desktop Wallets

Desktop wallets are wallets that are installed as programs on your PC. They are pretty well-balanced in terms of security and convenience. The private keys are stored on your device locally, which significantly reduces the chance that some hacker succeeds in acquiring them.

Nevertheless, they are still vulnerable to malware and viruses that happen to end up on your device, so you have to pay special attention to protection against malware.

Some notable examples of desktop wallets are Electrum (for Bitcoin), Exodus, and Atomic Wallet.

Desktop Wallets crypto wallets

2. Mobile Wallets

Mobile wallets are wallets that are installed as apps on your mobile device, be it a smartphone or a tablet. They are also pretty handy to use, being mobile, offering quick transactions and some other practical features like a QR code scanner, etc.

The problem you may face with a mobile crypto wallet is that a mobile device can be lost or stolen, which can result in you losing access to your crypto assets, and even an undesired person acquiring them. However, it’s less likely due to the security measures applied on mobile devices (PIN codes, biometrics, and others).

Some notable examples of mobile wallets include Trust Wallet, Coinomi, and Jaxx.

3. Cold and Hot Wallets

Cold and hot wallets are two basic categories of crypto wallets that differ according to the type of their connection to the internet.

Hot wallets are wallets that necessitate an internet connection to operate.

Cold wallets are wallets that can independently function offline.

Hot wallets are more flexible for everyday usage, however, they are also more vulnerable to online threats.

Cold wallets are in turn less fast and flexible for frequent usage but offer a higher level of security of your assets.

Different crypto wallet applications may offer different wallet modes at the same time.

4. Online Web Wallets

Online web wallets are wallets that are cloud-based and can be accessed through your web browser.

They are rather convenient and fast to deploy since you don’t need to download anything and can access them as long as you have an internet connection.

Nevertheless, they are more vulnerable to cyber threats as the private keys are stored on a third-party server.

Online web wallets are also often integrated into exchanges like Binance, which is rather practical, especially if you are interested in trading.

Some popular examples include Coinbase and Blockchain.info.

5. Paper Wallets

Paper wallets are pieces of physical paper that contain your public and private keys. This type of wallet is immune to hacking, which makes it a secure option for long-term storage. However, the paper option is vulnerable to physical damage, can be lost and stolen, and you will permanently lose your assets this way.

Paper wallets are generated with the help of various online generators. When the key is generated, it gets removed from the network so the generated key is the only version of the wallet and the assets cannot be accessed other than using the generated document. These wallets are in the first place intended for people dealing with huge amounts of money, like investors, for long-term assets storage in a safe or some other specifically secure place.

6. Hardware Wallets

Hardware wallets are physical devices for storing private keys offline. This approach offers also a high degree of security, as the keys are stored online on a dedicated device and are accessed with a PIN code or a passphrase.

This type of wallet comes at a cost, so it’s an option if the security of your assets is particularly crucial for you.

Notable examples include Ledger Nano S, Trezor, and KeepKey.

7. Bitcoin Wallets

Bitcoin wallets are crypto wallets designed specifically for the needs of the Bitcoin cryptocurrency, although they often offer support for other cryptos. They offer special features intended for Bitcoin users while the users of other currencies may find them a bit less flexible.

A common example of a Bitcoin-specific wallet is Electrum.

Secure Practices for Safeguarding Your Cryptocurrency Wallet

Since a cryptocurrency wallet is responsible for keeping your valuable assets, applying the right security practices is critical.

1. Regularly Backing Up Your Wallet

Make sure to regularly back up your wallet. Most wallets offer the option of creating a backup in the form of a recovery seed or phrase, which is a series of words, which are to be written down and kept in a safe physical location. In case you lose the access of to your wallet, it can be restored with the help of the backup seed of the passphrase.

Alternatively, you can create digital backups. Make sure to apply measures of digital security to them, such as encryption and strong passwords.

Secure Practices for Safeguarding Your Cryptocurrency Wallet

Also, make sure to test your backups from time to time to make sure that they actually work.

2. Strengthening Wallet Security

Apply all the general recommendations to digital security to make your wallet resistant to any common digital threats.

Use strong passwords: as always, take time and make up an adequate password to protect your assets from brute-force attacks.

Enable two-factor authentication: Activate 2FA if it’s supported by your wallet. This way you’ll add a supportive authentification method without which no one except you can access your wallet.

Secure your private key: Your private key is the main element of your wallet, so make sure only you have access to it and don’t save it at places others may potentially find it.

Protect your device: Apply security measures to the device you use for the crypto wallet. Make sure that the system is up-to-date while security antivirus and antimalware software are installed.

Keep an eye on phishing attacks: While using your device, make sure not to open suspicious emails and websites.

Secure your physical wallets: If your wallets exist in a physical form (paper or hardware) make sure that they are always in the same place as well

3. Keeping Wallet Software Up-to-Date

Always keep all the software that is responsible for your wallet’s operation up to date. Perform updates regularly, and make sure you download them from the official website if they aren’t automatic. If you want to treat your assets with special caution, you can also test the new updates upon installation on a smaller scale.

Choosing Between a Single or Multi-Currency Wallet?

When opting for a cryptocurrency wallet, you’ll have the possibility to choose between a wallet that is specialized for a a single cryptocurrency (like a Bitcoin wallet) or a multicurrency wallet.

Even if you want to focus on a single currency, the first option may seem more viable. They often are more straightforward to use, offer special features and functionalities specific to the particular cryptocurrency they are designed for and are theoretically less susceptible to vulnerabilities as they are tailored to be used within only one blockchain.

However, if you are going to use multiple currencies, managing several single currency wallets might turn out as a tedious task. In this case, you may also consider a multi-currency wallet. This option is likely to be easier to manage than several single-currency wallets, however, its interface will likely be also more complex. Also, such wallets are more prone to vulnerabilities.

Choosing Between a Single or Multi-Currency Wallet

Summing up

A cryptocurrency wallet is crucial for performing any operations with cryptocurrency. In the article above we’ve presented everything you need to know if you consider getting yourself such kind of a wallet. We hope that his guide was helpful and now you exactly know what you need. Thank you for your attention.