What Is A Crypto Wallet?
Just like how our everyday currency requires wallets for storage, a cryptocurrency realm also needs a wallet. In essence, a cryptocurrency wallet is a piece of software that helps in the storage, transaction, and handling of crypto coins.
A cryptocurrency wallet is one of the most crucial user-facing elements of the crypto ecosystem. Every wallet is identified by a unique address that also assures anonymity. With this address, users can send crypto money to specific wallets.
It is to be noted that the wallet does not store cryptocurrency physically but rather functions as a gateway for users to transact.
A crypto wallet is accessed using a combination of alphanumeric strings. Just like how most online entities have a username and password, a crypto wallet has a public key and a private key. The public key functions like our user name and the private key works like the password.
Since the wallet is expected to be the gateway between the real world and the blockchain world, it has to be extremely secure. It should ensure that no malicious access is allowed by introducing security layers like multi-signature wallets and two-factor authentication.
Its Most Practical Application — Exchanges
It wouldn’t be an exaggeration to say that cryptocurrency exchanges brought cryptocurrencies and blockchain technology from the confines of technology experts and high-performance computers for the common man. The need for cryptocurrency wallets exploded proportional to the number of cryptocurrency exchanges and the users. The growing legal acceptance of cryptocurrency exchange as a valid business model all over the world also contributed to this spike in the number of wallets.
Since it is mandatory that every cryptocurrency exchange user needs to have a cryptocurrency wallet, the cryptocurrency exchange can be considered the most powerful fuel behind the proliferation of cryptocurrency wallets.
The Different Types of Wallets
There are different types of cryptocurrency wallets available, and based on what you need, you can choose the type of wallet you want. Wallets are majorly classified into physical/paper hardware and software wallets.
A paper wallet is simply a piece of paper that has the private key and the public key printed on it. It might also contain a QR code that can be scanned to access the wallet. It is the most secure type of wallet that keeps the information away from all malicious forces in the digital realm. However, there is an ongoing need to keep the piece of paper secure and not lose it. It is also to be remembered that you can only transact either all the contents of your wallet or nothing at all. This is The ideal wallet for people who would like to store their cryptocurrency for an extended period of time.
The hardware wallet is in most cases a USB device. It can be plugged to your computer where it connects with the network to finish the transaction. Unlike the paper wallet, the hardware wallet can be used to transact a part of your funds. Just like any other USB device security best practices, you should ensure that your computer is free from viruses and malware that might interfere with the security of your hardware wallet. That said, it is one of the most secure and versatile digital wallets.
Both the types mentioned above are cold wallets as they are not connected to the network all the time. Cold wallets, similar to cold storage, keep the information on your wallet away from the network, thereby making it extremely secure relative to the hot wallets that are in most cases connected to the network.
There are Three Different Types of Hot Wallets
A desktop wallet is a simple desktop application that can be installed on your Windows or Mac. Just like any other software, it can be launched and you can access your phones using the desktop wallet. It is considered to be the most secure among the hot wallets. It is to be remembered that you will need to ensure that your computer is safe from viruses and malware that might steal information from your desktop wallet.
A mobile wallet is one of the most versatile wallets as it is quite likely for you to have your mobile phone in your hand at all times. It is a simple mobile application that stores information on your cryptocurrency storage. Just like any other mobile app, you will need to ensure top-notch security for your mobile. In addition to keeping your mobile away from malware, it is also important to have the usual security measures for your mobile like having the screen locked using a button or a fingerprint or a password. It is one of the most common types of wallets.
The browser wallet is a simple web address that you can use to access your crypto fund information. It is the least secure among the wallet types. However, it also brings you the convenience of accessing your crypto funds from almost anywhere. Considering how common mobile phones have become and how versatile mobile apps have become, browser wallets are rendered obsolete. They also present quite some security threats making it one of the least preferred wallet types.
The Essential Features
As we have already seen, the cryptocurrency wallet is considered to be the user-facing dimension of the crypto world. Therefore, it needs to be equipped with certain features that make it versatile, usable, and intuitive.
The first and foremost feature expected out of a cryptocurrency wallet is its usability. The wallet should make it easy for users to transact and access their crypto funds. The user interface should be on YouTube and it should be usable even for beginners.
Another paramount feature when it comes to cryptocurrency wallets is security. The security of a cryptocurrency wallet, and especially the desktop, mobile, and browser wallets should be enhanced using features like multi-signature authentication and two-factor authentication. A multi-sig wallet can be considered highly secure as it requires more than one authentication — even compromising on one because of some malicious act will ensure that the multi-sig wallet still remains unharmed.
The relevance and practicality of a cryptocurrency mobile app have been proven beyond a question. It is also a lucrative business opportunity in the crypto space. If you are one of those expiring entrepreneurs who would like to build a business out of developing your own cryptocurrency wallet, all you need to do is get in touch with the company that specializes in cryptocurrency wallet development.
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Decrypting The Process of Crypto Wallet Development was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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