A crypto wallet is not that different from your bank account number, which enables you to receive and save your money online. A crypto wallet is used for storing, sending, and receiving assets and currencies on the blockchain.
Different types of cryptocurrency wallets have emerged over time and are used for various purposes.
But first, let’s look at what a cryptocurrency wallet is.
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WHAT IS A CRYPTO WALLET
A cryptocurrency wallet is a simple program, software, or system for storing cryptocurrency’s public and private keys.
These two keys allow you to send and receive money from others.
The public key, also known as the wallet address, is the key you send out in order to receive crypto assets in your wallet; your private keys, on the other hand, are not to be shared or disclosed to anyone; they serve as a password to access your wallet.
A cryptocurrency wallet is a tool that allows you to interact with the Blockchain network.
TYPES OF CRYPTOCURRENCY WALLET
There are three types of cryptocurrency wallets, the soft wallet, and hard wallet
A soft wallet, also known as a hot wallet, is a piece of software that stores cryptocurrency and private keys. They store user data and information in the cloud or on a server.
To use this wallet, you must also have an internet connection. Trust wallet, metamask wallet, and so on are some examples. These wallets are installed on a desktop or laptop computer and mobile applications. They allow you to access your cryptocurrencies make transactions, view your balance, and do a variety of other things.
This wallet puts you in charge of keeping your keys (public and private). Some software wallets also include extra features, such as exchange integration if you use a wallet created by a cryptocurrency exchange.
These exchange wallets are called noncustodial because you do not have access to your keys(private and public). For example, the wallet you get on Severus, Binance, coinbase etc.
A hard wallet also known as a cold wallet is a physical device used to store private keys, tokens, or cryptocurrency. It is believed that hard wallets are more secure than soft wallets.
Because private and public keys are completely isolated from the internet, hackers will find it extremely difficult to steal from you.
There are various types of hard wallets, such as ledger wallets, Safepal, and Trezor. These devices resemble USB drives, and modern hardware wallets include a variety of features.
You can conduct a cryptocurrency transaction on your computer or device by plugging in the hardware wallet and removing it when finished. This device costs between $100 and $200.
LIMITATIONS OF THE TYPES OF WALLETS.
Hackers frequently target soft wallets. this is due to the fact that they are set up to have a seed phrase that acts as the master key for the wallet. One can quickly lose their cryptocurrency to cyber attackers if the private keys and seed phrases are stored online and the device is compromised. Another limitation is with exchange wallets, where the exchange instead of you has the keys to your cryptocurrency. This creates a risk in the event that the exchange is compromised.
Because they are not usually connected to the internet, hardware wallets are said to be the most secure wallets available; however, they are not without risk. If the wallet and private keys are lost, a person may permanently lose all of his cryptocurrency.
Another limitation concerns the cost of hardware wallets. Hardware wallets can cost up to $100 or more, which can be exorbitantly expensive for people in various parts of the world.
HOW TO SET UP A WALLET
Simply visit the wallet’s website and download the PC extension or the mobile application to get started with a soft wallet. As an illustration, let’s look at the trust wallet.
Install Trust Wallet from the Apple Store or Google Play Store. ensure that you are downloading the appropriate app.
Once you click on “create a new wallet,” you will be one step closer to accessing your soft wallet. Backing up your wallet gives you protection, be sure to do so.
Write down or store your wallet’s private key phrases in a secure location; just be sure to use the right terms because they serve as your private keys and must be maintained safely and accurately to prevent asset loss.
Continue by placing the private keys in the proper order. Since you noted it down, reordering it shouldn’t be difficult.
Once verified, your wallet is configured.
To set up a hard wallet,
Purchase a hard wallet from a trusted supplier. like Trezor. Set up the ledger live on the device. Before creating an account, you must connect your ledger to a computer or other system.
Record your seed phrase as many times as you can offline, never digitally, and if you can, include images.
Verify the recovery phrase. Make sure the sequence and accuracy of anything you wrote.
Make sure you import your cryptocurrency assets.
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