There are many people who still look for virtual currency wallet information to start their investment with coins. This article will help them explain from the concept to mechanism, and types of them.
1. What is virtual currency wallet?
Virtual currency wallet – Source: freepik
Its nature is a place to store your virtual currency, which is used to send, receive and follow your account balance.
In terms of concept, a virtual currency wallet is a public and private key storage software. If you want to use Bitcoin or any other currencies, you need a wallet to contain it.
Because it can be used to store various coins or tokens at the same time, however, all virtual currency wallets will only support some certain cryptocurrencies.
Just imagine that it is like a key to touch blockchain, so if you don’t have a key, you cannot play Blockchain, enough. And More importantly, you don’t know how to prove ownership of your virtual currency.
2. What virtual currency wallet is used for?
Virtual currency wallet is not only a simple tool where to store, but a place where to follow your encryption, transaction history, or it also saves your addresses on the blockchain network which contains a particular asset. This is your proof of ownership of your cryptocurrencies.
In a case, you lose that address such as a public or personal wallet address, you basically lose control of your electronic assets. But this is also beneficial for society when cryptocurrency is limited at a certain level, simply because it does not totally cause inflation. Due to the fact that you have currency but you can’t use it, this is called deflation and which makes the value of cryptocurrency increases.
3. Virtual currency wallet mechanism
How virtual currency wallet works – Source: markemlickprivateequity
Millions of people have used virtual currency wallets, but they clearly don’t understand it yet, and its mechanism. It doesn’t look like the traditional wallets, in reality, cryptocurrency is not stored at any locations. As all exists are the transaction history records stored on the blockchain.
When someone sends a Bitcoin or other coins to you, they are signing the transfer of ownership of it to you. To use those coins and unlock it, the private key is stored in your wallet, which must match the public address of the assigned currency.
If the public key and personal one match with each other, your wallet balance increases and senders decrease. It doesn’t have real transactions of physical money, just virtual currency. In addition, transactions are displayed by a transaction record on Blockchain and balance changes in your wallet.
4. Type of virtual currency wallets
Hot and Cold Wallet – Source: BitIRA
There are many wallets providing various ways to store and access your virtual currency. Basically, it has 2 main types:
- Hot wallet
- Cold wallet
In general, both of them have functions for you to check your accounts that you can access your wallet, payments immediately. So you should go detail for each one:
4.1 What is hot wallet?
There are 2 types of hot wallets including hot wallet-exchange and hot wallet-software. It has a shared point that is users who don’t hold private key of wallet – a witness of ownership of your coins. For one account, users will create address of coins and transfer it in-out their account, and they can use it free.
- Hot wallet-exchange:
Accounts in exchanges of technical assets like Remitano that are considered as a hot wallet exchange, because this company holds users’ money by their infrastructure and hosting. And when hackers attack their systems, if you have an account on their exchange, you will get risk of losing money.
- Hot wallet – software:
This type is a software application that is downloaded to your computer. When you use this wallet, it doesn’t store your private key on their hosting, so you will have total authority to control your money, not them. But your coins will still be affected as a hacker can steal your money through the Internet.
Although this wallet is great to use, but hot wallet security is a problem for users who should take care because their coins can be stolen by hackers, or stuck with some scam cases. So you just should contain a certain amount of money in your wallet in order to avoid the hacking problems.
4.2 What is cold wallet?
This type is not connected to the Internet, it is a tool designed to store the physical money that we can spend in reality like JPY, USD, and more. One of the major advantages of this wallet is that you can store real coins in your wallet, and you don’t have to worry about attacks from hackers compared to hot wallets. They also have 2 types:
- Paper wallet:
This is a paper containing the copy of public key and private key that create a wallet or cold wallet. It usually has a QR code for you to scan and add key in each software wallet or Bitcoin ATM machines to conduct transactions.
- Hardware:
It looks like a miniature, USB-shaped computer kept offline that stores confidential information like a paper wallet, and it also can be plugged into a computer when needed.
This kind is higher level than paper wallet security because when you transfer, this requires you confirm that transaction by pressing a button on your device. That is the reason why hackers have to give up on stealing your coins.
However, you must pay about 100 dollars for owning this wallet depending on the amount of your investment money.
5. Virtual currency wallets are using on the market
In this part, we will show you about some of virtual currency wallets on the market with hot and cold wallets.
Hot wallets:
- Exodus:
This wallet is considered by many users, because it expresses visual and easy-to-use platform. Moreover, it contains the beautiful graphic attracting users and the nice customer services.
- Coinpayments:
This is a recommended hot wallet as you can access 75 kinds of electronic currencies. And it is free as well as easy to use for everyone. Furthermore, it helps users who can buy goods in the internet with ease.
- Blockchain.com:
As discussed before, this has over 100 million transactions, and attracted 15 million users. It can be said that this is the most popular virtual currency platform at present. In addition, it provides for you dual security, and doesn’t affect your account that is used to log in.
Cold wallets:
- Trezor:
This is a safe wallet, and many people use this most now. It recommends for investors who intend to invest a greater amount of money in virtual currency. Additionally, you don’t waste time to bring it as it looks like a small digital computer, and it has an internal display with pin codes and other sensitive information.
- Ledger Nano S:
This is also a big virtual currency wallet platform in Blockchain, they provide security with increased sophistication. For instance, Ledger Chrome has confirmation and authorization that help users avoid hackers. This type also has nice designs like Trezor, and a screen to watch the pin codes.
Above, this is all of the information that BAP wants to share with you about knowledge of virtual currency wallets. Hoping that this will give you beneficial information that you want, and please don’t forget to follow us for more information of technologies including AI, Blockchain, Big Data, and more.
