Cryptocurrency is changing not only the digital world but business, financial transactions, and investing. More and more business owners admit that digital currencies possess numerous advantages such as security, confidentiality, faster payments, and low transaction fees. Here you can read more about implementing cryptocurrency and blockchain technology in business. Though cryptocurrency becomes extremely popular every year, not everyone understands how exactly digital wallets work and what do you need to know about blockchain and the security of your transactions. In this guide, we will focus on understanding cryptocurrency wallets and how to choose the best one based on your needs.
What is a cryptocurrency wallet?
A cryptocurrency wallet is an app that allows managing your cryptocurrency. You can store it, trade, make transactions, and monitor your balance. A cryptocurrency wallet has two keys, a public, and a private one (secret number). Your public key is also called a receive address and it is used to make transactions, a private key provides you with full access to the wallet. The most important thing is to keep your private key safe and do not share it with anyone. Some wallets can hold multiple cryptocurrencies but most of them support a limited number of cryptocurrencies. There is a wide range of wallet types to choose from and below we discuss how do they work, and give some tips on which wallets are applicable to different business goals.
How does a cryptocurrency wallet work?
Unlike physical wallets, cryptocurrency wallets don’t store currency because in fact it isn’t stored anywhere. Cryptowallet is designed to interact with a blockchain, it’s an accounting ledger that stores every single transaction as well as the wallet balance.
There is no real exchange of bitcoins, only ownership of digital assets changes, if you lose the private key (an encrypted digital code), you essentially lose control over your digital money. Each wallet type is slightly different, but their working principle is the same.
Types of cryptocurrency wallets
There are dozens of different wallets and 5 main wallet types available. They offer different features, security level, user-friendliness, accessibility, or convenience.
Desktop wallets should be downloaded to a laptop or computer and this type provides good security. They are more secure than mobile or online wallets because third parties don’t own your private keys and they are harder to steal. They are still connected to the internet, which makes them inherently less secure. Good option if you trade small amounts of cryptocurrency.
A mobile wallet is very convenient and you can use it by downloading to your mobile device. An ideal solution for those who use cryptocurrency on a daily basis. However, it requires several gigabytes of storage on your smartphone. Numerous mobile wallets are running on Android or Apple.
They have the highest convenience level while making transactions but security is not their advantage. The best way to use this wallet type is to store only a small number of coins. Their drawback is that private keys are stored on a server and controlled by a third party.
A paper wallet is a printed document usually in the form of a QR-code that contains a public address and a private key. The main advantage of a paper wallet is that the keys are stored offline.
In this case, private and public keys are stored on a physical device that is not connected to the internet unless you have to make some transactions. In terms of security, a hardware wallet is well-protected but it remains the most expensive one.
How to choose a cryptowallet?
Now you are aware that there are various wallet types with different convenience and security levels. Any cryptowallet that has constant access to the internet is more vulnerable to hacker attacks. It is always a good option to have two-factor authentication and multi-signature if possible. Don’t forget to backup your wallet regularly. It is also important to find out what commission the wallet has.
Evercode Lab developed unique multi-currency cryptowallets (Atomic Wallet and White Label Wallet) and a coin integration hub for non-custodial wallets (Everchain SDK). Atomic Wallet is easy to use and it can independently determine the best exchange rate. White Label Wallet is a non-custodial cryptocurrency wallet that has all basic features: send tokens, receive tokens, view transaction history, transaction fee control, and many other features upon request. Everchain SDK is a library that is integrated into your wallet and allows your UI to interact with nodes and block explorers of different blockchains, there are already 47 coins integrated. If you have any questions, please leave your contacts, and Evercode Lab will offer you a free consultation.