A big challenge in cryptocurrency is to secure private keys from hackers. The technical solution to protect private keys is a cryptocurrency wallet.
Cryptocurrency wallet is used for cryptographic applications that manage private keys and addresses of a user in blockchain and cryptocurrency. It could be on desktops,smartphones and even in particular hardware. It securely generates and stores keys and provides some mechanism to back up and restore them.
Public keys allow users to receive cryptocurrency transactions it is public and can be open to everyone, they are like bank account number which can be shared.
Private keys prove the ownership of their respective public key and should be kept secret. They are like bank account PIN.
Types of Crypto Wallets
- Hot Wallet
One of the most popular wallet is the hot wallet where the user stores the keys on an online cloud server. It is convenient and accessible to everyone on desktops, laptops and smartphones, but if a hacker exploits a cloud server, all keys will be compromised.
- Cold Wallet
Cold wallets are also called offline wallets that are installed on an offline air-gaped device to avoid any online hack and virus. The device has no internet connection and transfers keys and transactions with USB stick.
- Paper Wallet
A paper wallet is usually one-page paper where the secret key is printed in QR-Code format. Users can use QR-Code on the printed paper wallet to recover the secret key. A paper wallet can be easily backup.
- Desktop Wallet
Desktop wallet stores the secret keys on desktops or laptops. Desktop wallets usually require passphrase from the user and encrypt the keys on computer storage. It is vulnerable to viruses and hacks because desktop and laptop are general-purpose computers, a hacker can install malware to capture the user’s passphrase or copy the secret key.
- Mobile Wallet
The mobile wallet is mobile application installed on smartphones. These wallets store the secret key on the smartphone and not on an online server. The wallet is protected by smartphone locks such as password, fingerprint and facial recognition. Mobile wallet is not appropriate to store large amount of money as they can be lost or stolen and they do not have backup solution.
- Hardware Wallet
The most secure wallet is a hardware wallet which is a dedicated cryptography device to generate and store secret keys and sign transactions. This type of wallet usually is a USB stick, Bluetooth device or smart card with special embedded software to do cryptography functions. It is not general-purpose computer so hackers cannot install a malware program easily.
Through cryptocurrency wallet you can:
- Store your digital assets in one place.
- Control your private keys.
- Send and receive cryptocurrency anywhere in the world.
- Browse Dapps (Decentralized applications).
Features of Cryptocurrency Wallet
- Flexibility: Crypto wallets offer the flexibility for adding multiple accounts. Crypto wallets are the primary thing before dealing with cryptocurrencies. Multiple accounts refer to the creation of accounts for different activities such as crypto trading, NFT trading and DeFi investment.
- Address Book: With address book users can have a better experience. Address book is an important feature of crypto wallet as it can avoid discrepancies in the identification of receiver addresses.
- Ability to import wallet: Crypto wallets must offer the facility to import wallets where the users can copy and paste their private keys for importing transactions. It facilitates secure importing of accounts.
- Supports Multiple cryptocurrencies: Crypto wallet must support multiple currencies it can ensure the diversification of portfolios in one wallet.
- Account information and price: Crypto wallet offers a precise estimate of account balance to users and provides real-time pricing information of all the cryptocurrencies.
- Automated logout facility: Crypto wallets must provide an automated logout facility to users so that the wallet cannot be hacked.
Cryptocurrency wallet holds public and private keys which allow users to exchange currencies and keep track of the balance of their currency. Crypto wallets are safe as well as suitable for use as they reduce the additional cost when paying with physical money.The only cost is payment to the network in which transaction is executed, depending on the speed of transaction execution, there are different fees but they are much less than traditional payment system.