Where do we keep fiat money? Usually in a regular wallet made of leather, leatherette or any other material, with compartments for notes, change and cards. But how do you store funds that don't exist physically? We are talking about cryptocurrencies – assets that cannot be touched with your hands. There is a special trust crypto wallet for them, for example, Vouwallet. Let's talk in more detail about what these storages are, what types there are and how to create your own crypto wallet.
What is a crypto wallet?
Cryptocurrency is a set of special code symbols. That is why you cannot touch it – you cannot feel it, hold it with your hands, put it into the pocket and give it to the cashier in a supermarket. Nevertheless, everybody knows that digital currencies serve as a payment tool which can buy anything from a chocolate bar to a great business. For you to store them, or engage in fast transactions in any place, you require a cryptocurrency wallet. I readily agree with the statements above, even when coins are obtained and used for investment purposes, one must have a place to store them.
A cryptocurrency wallet is special software that can be written to different media. On them, special encryption keys are stored.
They are divided into two types:
- public – the address of the cryptographic wallet, used to deposit and debit funds from the account;
- private – the password itself, which provides access directly to the vault.
Private and public keys are part of the same mechanism. They are as interconnected as the login and password for your email, messenger or banking application. A transaction only goes through when you confirm it with a private key. You can also use additional security methods – two-factor authentication, a password for financial transfers, etc.
Most vaults are tied to the computers or smartphones on which they are installed. If the device fails, access to cryptocurrency can be lost. To prevent this, crypto wallets generate a special SEED phrase when registering. It should be transcribed, scanned or saved in any other way. If you lose your laptop or phone with storage, you can install the software on a new device and enter the SEED-phrase.
Ways to store cryptocurrencies
Digital currencies can be stored in three ways. Let's consider them in more detail.
- Hot. Cryptocurrencies can only be accessed using an internet connection (online vaults and accounts at crypto exchanges).
- Warm. These include desktop, or mobile, wallets that provide access to the blockchain through the network.
- Cold. Does not require a connection to the Network (hardware and paper wallets).
Each option has its own advantages and disadvantages. “Hot” storages do not consume the memory of devices, with their help you can quickly make a transfer of coins. “Cold” storages are considered safer and more secure.
Conclusion
Cryptocurrency wallet is necessary for every person who wants to invest in digital assets. But, it is impossible to answer the question of which storage is better, as everything depends on your wishes. Remember that a properly chosen wallet will not only protect your cryptocurrencies, but also provide convenience in their use!
