Understanding Different Cryptocurrency Wallet Types

A cryptocurrency wallet is a software program that enables crypto users to buy, sell and store cryptocurrencies. In simple terms, we can compare it with a physical wallet, which stores fiat currencies. However, unlike conventional wallets, it does not store cryptocurrencies. Instead, it holds records of all cryptocurrency transactions on the blockchain network. It uses the concept of public and private keys to enable transactions on the blockchain network.

In this blog post, we have discussed the types of cryptocurrency wallets, their features, and advantages.

Before diving into the types of wallets, let’s understand the difference between hot and cold wallets.

Hot wallets become accessible with an internet connection, while users can access cold wallets offline.

In hot wallets, funds are easily accessible, which enables users to make day to day trading or payments. However, since they require an internet connection, they also become susceptible to risks like hacking. The types of hot wallets are desktop software wallets, web wallets, and mobile wallets.

Cold wallets are physical wallets, which users can use offline. However, it also counts as a benefit, since hackers cannot easily access users’ assets. Cold wallets don’t come in use frequently as users prefer to use them to hold digital assets for the long-term. Their examples include hardware wallets and paper wallets.

Also Read: The Ins and Outs of Cryptocurrency Wallet Apps Development

As the name indicates, these are web-based online wallets which are accessible through a URL. They run on the cloud and are accessible from any computing device and any location. Generally, these wallets work on account system, which requires a username and password to login to the wallet. While they provide users with convenient access, they store private keys online, which are in control of a third party.

Advantages:

• Quick transactions with instant access to the wallet
• Storage, transfer, and management of a range of different currencies
• Ideal for small cryptocurrency investments
• Easy to access and no installation required
• Advantageous for advanced buying and selling options

Mobile wallets are similar to desktop wallets and work as smartphone applications. These are quite convenient as they enable users to transfer cryptocurrencies with QR codes.

They are suitable for daily transactions and payments. However, they may require wallet encryption with a password and backup of private keys as additional security measures.

Advantages:

• Provision to use QR code scanning to conduct transactions.
• Designed to be used on the go, especially for conducting in-person payments to merchants, individuals, and businesses that accept cryptos
• Provide complete access to private keys, which means users are in control of their funds

A desktop wallet is a software that users can download and execute locally on personal computers. Unlike some web-based versions, desktop wallets provide complete control to users over their private keys and funds. Upon encryption, desktop wallets require users’ password every time they run the software.

Advantages:

• Support a wide range of assets
• Provide additional features like portfolio charts
• No need to store private keys on a third-party server

Designed as a hardware device, they are one of the most preferred wallets to ensure the security of a user’s crypto wealth for long term use. Users connect these devices to their computer and mobile via USB ports to execute crypto transactions. To overcome the lack of accessibility, they can directly connect the device to a trading platform, which provides integration capabilities. Currently, most hardware wallets have provisions for setting up PIN code for increased protection.

Advantages

• Robust security features
• Protection for private keys from malware and hackers
• Approvals for transactions occur through the device

As the name indicates, paper cryptocurrency wallets do not require the internet and are useful for long-term storage of crypto assets.

Advantages

• Not prone to internet-related risks

Deciding which crypto wallet is best to use depends on business requirements. For instance, whether you need to access your wallet every day, or is it for more long-term use. After obtaining answers to these questions, you can decide which of the above wallets will suit your needs best.

Another aspect of cryptocurrency wallet development is ensuring security with stringent measures like DDoS mitigation, anti-phishing software, two-factor authentication and much more. We will cover them in our next blog post which lists the important security aspects one must consider for cryptocurrency wallet development.

Oodles’ cryptocurrency wallet development services provide flexible and secure crypto wallet solutions to be used in everyday life. Our developers integrate wallets with convenient QR Code, NFC or URL payment options, and implement best security practices to ensure maximum security, and keep assets safe and secure.