What Is a Crypto Wallet?

The other half of buying cryptocurrency is storing it securely. And to do this, you need a cryptocurrency wallet. Beginners who are buying crypto for the first time may not be aware of what a crypto wallet is. However, understanding the meaning of crypto wallets and getting to know how they work is an essential part of getting started with buying and selling these digital assets. 

 

So, let’s take a closer look at what these wallets are. First up, we have the crypto wallet definition.

What is a crypto wallet?

A cryptocurrency wallet is a program, a device or a service that keeps your cryptocurrency holdings safe. More specifically, a crypto wallet does not actually store your cryptocurrencies. Instead, it stores the private keys or the passwords you need to send and receive cryptocurrencies. So, nobody else can access your digital assets unless they have access to these private keys. 

 

A crypto wallet can be hardware-based like a ledger, or it could be software-based like an app or a program. 

Why are crypto wallets important?

Crypto wallets are very important in the blockchain and cryptocurrency ecosystem. They play many pivotal roles in the trader’s and investor’s journey to buy, sell or hold cryptocurrencies. Here is a closer look at the top reasons crypto wallets are important.

 

• They allow you to access your crypto holdings

Your crypto holdings are on the blockchain, but they can be accessed only using a private key. And it’s your crypto wallet that holds the private key needed to access your Bitcoins and other cryptocurrencies. Without the key, you cannot sell your holdings and you lose access to your assets.

 

• They make your transactions more secure

Without a private key, anybody can get access to your account and your cryptocurrency holdings. A crypto wallet is a secure ledger or app that prevents this from happening, thereby keeping your holdings and your transactions secure. You can buy, hold, or sell your coins without any other party being privy to this information.

 

• They make it easier to buy and sell crypto

A wallet makes it much easier to send cryptocurrencies to or receive cryptocurrencies from anyone, anywhere in the world, at any time of the day or night. This makes it easier to purchase or sell goods or services in exchange for crypto, and it also allows you to swap coins without any hassle. 

What are the types of crypto wallets?

Crypto wallets can be hot wallets, which are connected to the internet, or cold wallets, which offer offline storage. Furthermore, depending on the mechanism of storage, cryptocurrency wallets can be of two types:

• Hardware wallets
• Software wallets

 

Hardware wallets

As the name indicates, hardware wallets use a hardware device like a ledger or a flash drive to store the private keys of the wallet holders. These wallets can be used for online transactions. However, since their key purpose is to store the user’s keys offline, they are cold wallets that are generally not connected to the internet for the most part. The upside to using hardware wallets is that they are easily compatible with most devices, although they may be more expensive than software wallets. Using a hardware wallet is easy. You just need to connect it to your computer before you undertake any transaction, and once you’re done, you can unplug the hardware wallet. 

 

Software wallets

A software wallet is typically a hot wallet since it is connected to the internet. These wallets are run by programs that help store the private keys. Software wallets can be any one of the following types.

 

Desktop wallets

These wallets are programmed to run on a computer only. The only risk is that they are vulnerable to computer viruses.

 

Mobile wallets

Mobile wallets are apps that you can download to your mobile phone and use to access your crypto holdings. 

 

Online wallets

These hot wallets run on a cloud, making it possible to access them via any device that is connected to an internet.

Summing up

So, this should give you the basic details about offline and online crypto wallets, and how they make up an important part of the crypto ecosystem. You can easily learn to use a crypto wallet once you decide on the kind of wallet you need. It’s as easy as using an app on your phone or plugging in a device to your computer. 

A quick recap

• A cryptocurrency wallet is a program, a device or a service that keeps your cryptocurrency holdings safe. 
• It does not actually store your cryptocurrencies. Instead, it stores the private keys or the passwords you need to send and receive cryptocurrencies. 
• Crypto wallets can be hardware or software wallets.