The Ultimate Guide to Blockchain Wallets: Secure Your Crypto

Author: Mark Wood

Imagine that you’re ready to make your first crypto transaction on a Decentralized Exchange Platform but how do you make it safe? Introducing crypto wallets. Crypto wallets are digital wallets that store cryptocurrencies such as Ethereum, Bitcoin, Dogecoin, etc.

The best way to ensure the security of your crypto transactions is to leverage crypto wallets. As per Exploding Topics, international B2B blockchain transactions can hit $1.7 billion by 2025. Considering such a massive number, it is imperative to secure and authorize transactions across the globe.

This guide is a perfect icebreaker for individuals looking to learn what a crypto wallet is, how it works and the significant types of crypto wallets.

What is a Crypto Wallet?

Numerous individuals believe that a crypto wallet is merely the digital manifestation of a wallet that stores cryptocurrency. However, it is much more than just a wallet.

A major misconception about the crypto wallet is that it stores cryptocurrencies. It does not! However, it stores the keys to manage, send, receive and access cryptocurrencies such as Bitcoin, Ethereum, stablecoins, NFTs, tokens, etc. The cryptocurrencies are accessed on the blockchain where the transactions are recorded.

Therefore, using a crypto wallet allows you to navigate the world of decentralized finance confidently and perform safe transactions on the Web3.

How Does a Crypto Wallet Work?

The role of a crypto wallet is to interact with blockchains to send and receive cryptocurrency, etc. The crypto wallet can do so by leveraging its two main components:

  • Public Keys

The public keys are not confidential and can be shared with the other party making the transaction.

  • Private Keys

The private keys are confidential and cannot be shared with anyone else. They act like passwords to access all your decentralized assets and cryptocurrencies.

Process of a Crypto Wallet Transaction

Let’s suppose that you want to make a Bitcoin transaction. Here’s how it occurs from one crypto wallet to another:

  • The transaction is initiated and the digital wallet generates a digital signature using your private keys.

  • The digital signatures confirm your identity as the Bitcoin owner and ensure that no one else can modify the transaction.

  • The blockchain platform verifies your identity as a sender by using the public keys.

  • Once the transaction is verified, it is added to the blockchain, and the balance is reflected in the sender’s account.

What are the Types of Crypto Wallets?

Crypto wallets can be divided into various types based on their method and location of the wallet.

Based on the Internet connection, there are two main categories of the crypto wallets:

  • Hot wallets

  • Hot wallets work in online mode as they’re connected to the Internet.

  • Although they’re user-friendly, their Internet connectivity makes them less secure, and therefore, they are at a high risk of being attacked.

  • They’re also easy to set up, and funds can be accessed quickly, making them a suitable choice for traders.

  • Cold wallets

  • Cold wallets do not require Internet connectivity to function.

  • These wallets store all the blockchain assets in offline mode.

  • Since these wallets work without Internet connectivity, they are very secure and cannot be hacked.

  • Cold wallets are more suitable for individuals who are holders.

Hot and cold wallets can be further divided into various types:

Types of Hot Wallets:

  1. Desktop Wallets:

  • The desktop wallets can be installed directly on an Operating System.

  • They are the best method of cold storage for cryptocurrencies.

  • They’re simple to use and provide high security.

  • Examples include Bitcoin Core, Exodus, Electrum, etc.

  1. Web Wallets:

  • Individuals can access web wallets through Internet web browsers.

  • The private keys are stored in web wallets.

  • Web wallets are the least secure because they are prone to distributed denial-of-service (DDoS) attacks.

  • Examples include MetaMask, Coinbase Wallet, etc.

  1. Mobile Wallets:

  • Mobile wallets work similarly to desktop wallets but are dedicatedly built for mobile phones.

  • These wallets are most suitable for individuals who want to use them daily.

  • They are prone to viruses and malicious attacks.

  • Examples include Mycelium, Coinomi, etc.

Types of Cold Wallets:

  1. Hardware Wallets:

  • Hardware wallets are hardware devices that store public addresses and keys individually.

  • It looks like a USB with an OLED screen and side buttons.

  • They’re more secure than hot wallets.

  • Examples include Trezor and Nano S.

  1. Paper Wallets:

  • A paper wallet is nothing but a printed QR code from the wallet.

  • They are not sensitive to malicious attacks.

  • You cannot send partial funds with paper wallets.

  • These wallets are less secure than hardware wallets.

Conclusion

With the growing need for secure blockchain transactions over Web3, the demand for crypto wallet development is skyrocketing across industries. From logistics to fintech, every sector is eager to leverage the power of robust and secure payments worldwide, and blockchain technology paves the way for such transformative advancements.

If you’re an enterprise, startup or SME that wants to create a dedicated crypto wallet app, it is imperative to outsource your project to a reliable crypto wallet development company for extraordinary results.