What is a Cryptocurrency Wallet?
The 5 types of cryptocurrency wallets explained
A cryptocurrency wallet is a safe electronic wallet, not unlike a physical wallet sitting in your pocket or bag. This digital wallet is used online to shop, send to others, as well as receive incoming currency like Bitcoin, Ethereum etc.
Many, if not most of the coins in the top 100 by market cap have a main or ‘official’ wallet developed by their team and some formally advised and recommend wallets from third party developers and businesses.
In order to make use of any kind of cryptocurrency no matter what it may be, you will need to have a cryptocurrency wallet ready and be familiar with its uses.
The actual coins themselves are never actually “saved” in a crypto wallet. Rather, something called a ‘private key’ (a long safe and secure electronic code known to just yourself – and your wallet!) is kept that reveals possession of a public secret (another piece of electronic code, this time known publicly and linked to a specific quantity of cryptocurrency linked to yours – this is your money!).
So, rather than physically holding your coins, your crypto wallet actually just holds your private and public keys, the important keys needed for you to send and receive coins, as well as acting as your own accounts book, noting down incoming and outgoing transaction.
Desktop: Probably the most used of them all, a desktop wallet is just that. A piece of software or app that’s installed on your computer which is linked to the cryptocurrency client itself. These can be the ‘official’ wallet provided or recommended by a project which stores that coin exclusively, or a multi-coin wallet like JAXX which can support multiple currencies.
Online: With an online wallet, no apps or pieces of software need to be installed anywhere, your records are instead held on a server accessible via an internet browser. Currency exchanges such as Poloniex or Bittrex have wallet addresses built into them. These exchange wallets are a good place to hold cryptocurrency temporarily until a longer term, more secure solution is found.
Paper: Yes, you really can hold digital currency on paper. Your own private key and public key can be printed onto a standard piece of paper, printed with a normal home printer, which – alongside a handy QR code, allows you to send and receive virtual currency as with any of the electronic wallet options.
Physical Hardware: Affordable USB gadgets which enable you to safely and securely carry your currency with you. Hardware wallets allow you to send and receive transactions online and then be disconnected from the ‘net and safely stored for security.