Between 2021 and 2026, the cryptocurrency market is expected to grow from $1.6 billion to $2.2 billion. The COVID-19 pandemic had a huge impact on the global economy, triggering business closures and job losses all over the world.
Against this backdrop of unparalleled economic uncertainty, digital currencies like Bitcoin and Ethereum have garnered significant attention, with banks tentatively starting to invest in crypto. This article looks at crypto wallets, explaining the different types, and their benefits and limitations.
Crypto wallets enable users to keep their cryptocurrencies safe and accessible, providing them with a platform to store their private keys. Crypto wallets also enable users to send, spend and receive Bitcoin, Ethereum and other cryptocurrencies.
Private keys are essentially passwords that enable users to access their cryptocurrencies. Today, crypto wallets come in many forms, from mobile apps to hardware wallets like Ledger, which looks like a USB stick. Crypto wallets make using crypto as easy as shopping online with a credit card.
While a normal wallet can hold real cash, crypto wallets do not technically store cryptocurrency. With crypto, holdings live on the blockchain and are only accessible by using a private key. Rather than storing physical coins or tokens, crypto wallets store private keys.
Keys prove ownership of digital money, allowing key holders to complete transactions. If the user loses their private key, they lose access to their money. This is why it is so important for cryptocurrency investors to use only trusted wallet providers and keep hardware crypto wallets safe.
Ranging from simple-to-use applications to more complex security solutions, there are several different types of crypto wallet:
- Online Wallets: With private keys stored within an app or other software, it is important to use only an online wallet protected by two-step encryption, making sending, using and receiving crypto as simple as using an online bank account, brokerage or other payment system.
- Mobile Wallets: These wallets are run via a smartphone app.
- Hardware Wallets: These wallets essentially consist of a thumb-drive device, providing a secure place for keys to be stored. Hardware crypto wallets are only connected to the computer when the user wants to access their crypto, enabling them to balance convenience and security.
- Desktop Wallets: Typically an app which connects directly to a coin’s client, this is the most common form of crypto wallet used today.
- Full Node Wallets: A type of wallet that enables users to control private keys, hosting a full copy of the blockchain. Each coin has an official crypto wallet of this type which is usually linked on the official website.
- Paper Wallets: Finally, with a paper wallet private keys are written on physical mediums, such as paper, and stored in a safe place. Since digital money can only be used on the internet, this makes sending, spending and receiving cryptocurrency more difficult.
Each type of crypto wallet has its pros and cons. Since paper and hardware crypto wallets are stored offline, they are generally harder for malicious users to access. Nevertheless, both formats are limited in function, presenting significant risk of loss, damage or destruction of private keys, in which case the user will lose access to their cryptocurrency.
Online wallets are typically the easiest format for those who have just got started in crypto, providing a balance of easy access and security. However, since the user’s private information is stored online, its protection against hackers is only as good as the wallet provider’s security, so it is important to seek out online wallet providers offering two-step verification.
Fully licensed for financial services, Navasu provides a virtual currency service, supplying clients with a crypto wallet so they can retain and manage their cryptocurrencies, as well as providing a prepaid card, making it easier for clients to spend their Bitcoin.
Online crypto wallets enable users to manage digital assets via a single secure platform, control their own private keys, and send and receive cryptocurrency to and from anywhere in the world 24/7. Online wallets also facilitate interactions via usernames rather than relying on long hexadecimal public key addresses, enabling users to shop at any store that accepts cryptocurrency.
Selecting the right wallet for a particular user depends largely on their individual needs. No single wallet stores every coin, so it is important for users to figure out which crypto wallet will best serve them based on which coins they want to use or invest in.
Users should beware that with any noncustodial wallet, if they lose their private key they will lose access to their cryptocurrency. There is no way to reclaim cryptocurrency without the key. In addition, if their wallet is hacked and funds are taken, they will also lose their money, highlighting the need to implement best practices to keep crypto wallets secure.