Types Of Crypto Wallets for Traders in 2020-2021
If you are serious about having a profitable venture in altcoin and bitcoin trading, it is not enough to know which is the best crypto trading platform. You also have to be aware of the types of crypto wallets so you can safely keep your digital assets.
Types of Crypto Wallets List:
- Web Crypto Wallets
- Desktop Crypto Wallets for full control
- Mobile Wallets as the most convenient one
Software Crypto Wallets Explanation:
Software wallets can be categorized under hot storage options. Since most software crypto wallets are connected to the internet, then they can also be considered as hot wallets.
But know that software wallets come in different forms - mobile app, desktop, and web. Let’s take a look into each of them:
1. Web Crypto Wallets
Web wallets are mostly connected to the internet because you need a browser interface to access the blockchain. Among the most common types of web, wallets are crypto exchange wallets and browser-based wallet providers.
If you are registered in a crypto exchange platform like Binance, then you will need to put some of your digital assets that will be used for trading on the Binance exchange wallet. This is an example of using a web wallet. Other web wallet service providers are separate from a crypto exchange.
With web wallets, you don’t need to install anything on your desktop or device. You simply create a new wallet on the platform and set a password to access the wallet.
Some wallet service providers hold and manage the private keys on users’ behalf. For those who are just starting to learn crypto trading and bitcoin investing, this can be the most convenient option. However, letting your private keys to be held and managed by a third party may not be a safe practice.
Remember that web wallets are always connected to the internet. There have been instances when these online crypto wallet platforms and exchanges have been hacked, which resulted in lost funds. That’s why it is essential to choose a crypto exchange that offers fund insurance and a range of protection tools and security features. Keep in mind also the old wisdom to never put all your eggs in one basket - don’t store all your crypto assets in a web wallet.
So when should you opt to use web wallets? First is for trading purposes when you only leave a portion of your assets intended to be spent for buying and selling coins. And another is for more frequent transactions that may involve the purchase of goods or services and transfer of funds to other persons.
2. Desktop Crypto Wallets
Desktop wallets are also run through software. In order to have a desktop wallet, you will need to download and install a crypto wallet software on your own computer. With desktop wallets, you can have full control over your crypto keys and digital assets. Your wallet will only be accessible from a single machine - the PC or laptop that you have used to download the software. It is because of this that some crypto enthusiasts consider desktop wallets to be among those that offer the highest level of fund security.
How does a desktop wallet work?
Once you generate a desktop wallet, a file that is named “wallet.dat” will be stored on your desktop or laptop. This file will contain the private key associated with your cryptocurrency on the blockchain. And it is through this private information stored on the desktop wallet that you will be able to access your cryptocurrency address.
To protect your private keys, you have to encrypt your desktop wallet by setting up a personal password. This password will be required to run the software and read the wallet.dat file and prevent others from accessing the wallet. Once you have set this up, make sure that you remember your password to avoid losing access to your wallet.
But what if your computer crashes down? This is where the danger lies in desktop wallets. If you have not adequately backed up your desktop wallet, then you could lose all your funds in case your laptop or desktop crashes down, gets hacked, or gets infected by a virus.
To backup, your desktop wallet, export the corresponding private key or seed phrase so that you can still access your funds on another computer in case of unforeseeable events. Also, make sure that your computer is free from viruses before setting up your desktop cryptocurrency wallet.
3. Mobile Crypto Wallets
Mobile wallets are crypto wallets on a smartphone; thus, they are in the form of mobile applications. A lot of people who use bitcoin and altcoins for daily transactions use mobile crypto wallets simply because they are the most convenient types.
With mobile wallets, you can send BTC, receive ETH, or spend any other cryptocurrency through the use of QR codes. For example, if a merchant can accept certain digital currencies for the purchase of their products, then you can simply access your mobile crypto wallet to pay in BNB, BTC, ETH, or any other cryptocurrency that is compatible and accepted.
There are a lot of similarities when it comes to mobile wallets and desktop wallets. For both of these types, you have to back up your private keys or seed phrase in order to retrieve access to your funds in case the device gets stolen, crashes down, or gets a malware infection. Secure your mobile wallet with encryption, which you can make by setting up a personal password.
Again, hot wallets are usually convenient to use because they can provide easier access to funds. However, because they are somehow connected to the internet, you have to be very careful of malicious attacks online.
If you would like to consider using both hot and cold storage options for your cryptocurrency wallet, know that it is possible. You can keep a portion of your assets in hot wallets for more frequent transactions and another portion in cold wallets for long term crypto investing.