Over time has brought multiple changes: social, cultural, technological and in the last decade, especially economic. It is not surprising that globalization and economic - commercial integration have brought as a consequence the evolution of financial management towards the digital age. Such is the case of the already famous cryptocurrencies, digital money that works as a global currency, which have the property of being able to be used, as is done with fiduciary money, for payment of products and services without geographical, economic or political restrictions, totally Free exchange while owning a wallet. This term is the basis of our article today: What are wallets, how are they used and how many types are there?
The money needs to be stored: In vaults, bank accounts, purses, piggy banks. The same happens with digital currencies, but due to its digital aspect it is much simpler, since to be able to store and use them, you only need a wallet, which is basically a unique alphanumeric digital address where crypto are stored, from where cryptocurrencies are sent and where the cryptocurrencies are sent, basically it is a digital wallet.
The easy handling of cryptocurrencies has made them ideal for global transactions, interesting every day more people, leaving aside intermediaries such as banking institutions and making the economy an immediate movement, monitored by millions of nodes (here comes the blockchain) verifying the authenticity of transactions without the possibility of manipulation, and controlled by the owners of the money.
There are different types of wallets for different users: online, offline, mobile devices, hardware, desk and paper, since not all people have access to the same technology, but the only thing they have in common is the need to mobilize your money, and here we give you the characteristics of each type of wallet.
- Desktop Wallet or Desktop Wallet: It is the most common type of wallet since it is born with bitcoin. They are wallets that are installed through software on our computers, for this you have to download them from the internet and install them. There are software wallets for each operating system, you can find these programs for IOS, Linux or Windows. The most important thing regarding cryptocurrency wallets based on software is the additional security that occurs because they are not managed by intermediaries, as in the case of having the funds on the web, maintaining control of our balances and with the possibility of being able to review them with or without internet conexion. They are quite safe and as a main feature, this type of wallets store the private key of the wallet in the computer itself and, in this way, it is safer because we avoid the risk of the website being hacked. The private key is usually encrypted to grant an extra degree of security in case the security of the computer is compromised.
- Mobile Wallet: It is an application that only works through a phone or mobile device. The essential thing about this type of wallet is that the equipment must be connected to the internet. They are usually used to make small payments. They are not wallets where we should have all our funds for the possibility of loss of the device. This type of wallet usually downloads a small part of the blockchain, trusting that other nodes have the correct information of the blockchain. This system is known as Simplified Payment Verification (SPV).
- Online wallet: It is usually the first wallet that is created. They are the most used, the easiest to use and the least safe. They are wallets that are based on the web. No application is downloaded but the data is stored on an online server. This type of wallet stores the private key of users on a server controlled by a company. The client does not know or has the private key of the wallet and, therefore, the responsible for maintaining and saving that private key is the company that offers the wallet. They are ideal to have a small amount and be able to operate quickly and comfortably, but not to have all the funds there. Some say that these are not digital wallet per se, but a corporate management of funds by a intermediary, the most equitable to a bank without legal responsibilities.
- Physical wallets: The physical wallets are the safest, they are not practically exposed to the internet, therefore, it is very complicated that someone can steal the private key. There are two types, hardware and paper:
- Hardware wallet: These are devices specifically created to store cryptocurrencies, similar to a portable hard drive or a flash drive. They store private keys and allow payments to be made. For people who make many transactions and store many cryptocurrencies this would be the best solution to find the balance between very high security and speed. These devices connect to the Internet only for transactions at the moment and sending data, then they are disconnected and are safe for transport. The care you should have with these devices is based on not losing them, because if you lose it and someone else finds it that person could empty the funds from the wallet, however if you have the private key and saved it, there is no problem in that lose the physical device beyond its cost, since you can recover your funds on another device.
- Paper physical wallet: It is the most used option to create a wallet to store cryptocurrencies that are not going to be used for a while, also called cold wallets. This type of wallet offers a very high degree of security but is somewhat slow when it comes to using it. A QR code is printed for a public and private key. This allows you to send and receive digital currency with a paper wallet. With this option, the digital cryptocurrency data storage can be completely avoided.
With this information we hope you decide which is the best option for you according to the use you give to your cryptocurrencies, because the idea of the Blockchain is that the user is the one who decides which is the best option according to their needs.
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