With cryptocurrency gaining so much popularity and widespread acceptance, users now have to find storage in which they can keep their digital assets safe and secure. However, there are so many to choose from to best fit your investment type and what kind of cryptocurrency you currently have.
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How do crypto wallets work?
Cryptocurrency wallets can be a program, app or device that provides storage services for your cryptocurrencies. When transacting with your digital assets, a soft or hard wallet is needed to receive or send them to other crypto users.
Crypto wallets are password-protected storage with a lot of security features like encryption and two-way authentication to ensure that you’re transacting online in the safest manner possible.
More specifically, they store public and private keys that are needed to trade and keep Bitcoin and other altcoins like Ethereum. Similar to a password, a private key is used to digitally sign an authorisation for a crypto transaction. On the other hand, a public key is used to verify this signature. These keys are important to keep your transactions safe from cyber attacks.
While it’s necessary to have a digital wallet to make basic transactions using cryptocurrencies, they alone can’t completely do the trading function themselves. Instead, a crypto trading platform is needed to facilitate and complete transactions. Some platforms even offer storage services as well.
The different kinds of crypto wallets
Just like real money, cryptocurrencies need wallets as well. There are two different types of crypto wallets you can choose from to store your cryptocurrencies:
Soft wallets are a type of virtual currency storage that can be accessed online and facilitate crypto transactions between an owner and an end-user.
They store a collection of private keys on a program so users can store and make crypto transactions. In simpler terms, it allows parties to send and receive crypto tokens through the internet.
Soft wallets are known to be the easiest crypto wallet to use for most users because they offer some of the most basic functions like trading, making purchases or sending crypto coins to other soft wallet users.
- Soft wallets are easy and convenient to use. Because they are already online, there is no need to plug in a physical device to your computer and connect it to the internet in making a crypto transaction. For instance, many investors use mobile soft wallets in trading or purchasing goods and services using crypto tokens.
- Soft wallets are usually free to use. Compared to a hard wallet, opting for a soft wallet is going to cost you significantly less since you don’t need to buy a physical device to use it.
- Since it’s online, there are still instances in which hackers can breach the system where your coins are all at risk of getting stolen. Because of the security risks involved in storing your digital assets online, it’s best to keep smaller amounts of cryptocurrencies in your soft wallet to avoid large losses when storing your coins.
Hard wallets are physical electronic devices that store private keys, completely isolating them from your easily hackable gadgets. To access your digital assets in a hard wallet, you will need to input any associated PINs or passwords.
Since they are not directly connected to the internet, hard wallets are less vulnerable to cyber attacks. In contrast to soft wallets, hard wallets store digital assets offline so they are more suitable for crypto users who want to store large amounts of cryptocurrencies.
While the main feature of a hard wallet is its offline functionality, you can still connect to the internet if you choose to make transactions with other people. Here are several examples of hard wallets:
- Privacy Pros
These are currently the best hard wallets in the market right now due to their accessibility, affordability and effectiveness.
- It’s more secure because hackers won’t have access to your crypto coins through the internet. Instead, hard wallets are physical devices designed to be immune to hacking. This makes hard wallets ideal for storing huge quantities of digital assets as well as long term HOLDing.
- It can store many cryptocurrencies in one location. This means that you can simultaneously manage your BTC and other altcoins.
- Hard wallets are incredibly portable because they come in small plug-devices that can log you into many different dApps and even regular applications like Google and Facebook.
- Hard wallets allow you to trade directly with another wallet using platforms like Radar Relay. Instead of waiting for deposit delays, you waste no time exchanging your token with other wallets.
- If you want a more seamless experience in trading and purchasing using cryptocurrencies, you might find it more challenging to do so with a hard wallet. This is because you first need to plug the device into a computer and connect it to the internet.
- Hard wallets are notoriously expensive. They can go from $59 to $170 depending on the hardware wallet device you want to use.
- While hard wallets are resistant to cyberattacks, different kinds of firmware failures can still occur to these electronic devices.
- In the past, there’s no way to access your digital assets anymore if you forgot your device PIN but now, hard wallets come with a recovery function. However, if the actual physical device is lost or stolen, then your digital assets can no longer be retrieved.
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