Cryptocurrency wallets explained
Both men and women are familiar with placing cash and plastic forms of currency in a physical wallet. Women may carry this wallet in a purse, men generally stick it in a pocket of their pants, and this guarantees you have readily available access to your money … as long as you have your wallet. Where cryptocurrencies are concerned, wallets are still required, though they are usually digital rather than physical in form.
A crypto-wallet is nothing more than a piece of software. It is used to hold the public and private keys which determine how much of what types of cryptocurrencies you possess. The value of these virtual dollars is automatically updated in your wallet and the wallets of everyone else who carries the same cryptocurrency.
This is a really neat feature that is different from your physical wallet.
If you place a $10 bill in your wallet on Tuesday, and the value of that dollar drops 10% before you use it, you have no way of knowing that your buying power has just decreased. The only way you may realize your money is not worth what it used to be is when you see prices going up on the products that you use that physical money to purchase.
In a crypto-wallet, the value of your virtual money is automatically updated. And in fact, digital wallets don’t actually “carry” your cryptocurrencies. Your wallet simply contains records of verified transactions that have been updated in the blockchain. In one similarity with the wallet you are used to, a digital wallet allows you to send money to another cryptocurrency user to make a transaction.
This is just like reaching into your wallet, removing money, and handing it to someone in exchange for a product or service. When you send some digital currency to someone else, your wallet and theirs are automatically updated, as well as every wallet on that network. This happens automatically, without a centralized authority interfering. This movement of a cryptocurrency balance only happens when the private keys held in your wallet match the public keys kept in a digital public ledger.
If you buy any type of cryptocurrency, bitcoins, ether, steem or any other virtual coins, you must store them in a digital wallet. The type of wallet you choose is up to you.
- Online – These crypto-wallets are operated in the cloud. Because of this, they are extremely convenient and easy to access. Simply log in to any Internet-connected device, and you have access to this wallet. However, since they are controlled by some third party (such as a cryptocurrency exchange), some people prefer one of the following types of wallets instead.
- Mobile – These wallets are stored on your phone or tablet. The interface is streamlined, because you may be using your wallet on your phone, which has a smaller screen than tablets or computers. The downside is, if you don’t have your mobile device with you, you have no access to your wallet.
- Desktop – These types of wallets are downloaded to your personal computer or laptop. If you choose this type of crypto-wallet, understand that your money is only accessible from that particular device.
- Hardware – You may choose to employ a hardware wallet, such as a USB thumb drive, to hold your cryptocurrency balances. When you are ready to send digital money or make a purchase, you simply plug your wallet into any computer or Internet-enabled device, enter your pin, and send currency.
- Paper – Yes, you can have your public and private keys printed out on paper and stored in a physical wallet. You could also keep these important keys in a filing cabinet, or somewhere else you feel they are safe.