Historically, the very first crypto wallet to have existed was that of the developer and founder of Bitcoin himself, Satoshi Nakamoto. The second wallet created was held by Hal Finney. Corresponding together, Satoshi Nakamoto would have sent him 10 bitcoins to carry out a test. This was the first cryptocurrency exchange executed between two wallets!
What exactly are crypto wallets?
A “crypto wallet” for “cryptocurrency wallet” allows you to receive, transmit and above all keep your cryptocurrencies. Thus, just as dollars or euros can be put in a physical wallet or on an online account, it is the same with bitcoins, ethereums, and other altcoins in a secure wallet.
In fact, instead of holding these physical elements, the wallet stores the access keys you use to sign your cryptocurrency transactions and provides the interface that lets you access your crypto.
How to distinguish the different types of crypto wallets?
In crypto terminology, a distinction must be made between two main families of wallets:
- the “Hot Wallet” encompasses private key hot storage solutions. We are mainly targeting software portfolios (extensions, browsers, etc.) here. Necessarily connected to the internet, it offers a certain vulnerability to hackers.
- the “Cold Wallet” corresponds to cold storage of private keys via hardware wallets and paper wallets. There is no internet connection which makes it the ideal solution to secure its cryptographic assets. This is why it is quite possible to leave large sums of money there in safety.
Within these categories, there are various forms of storage wallets that meet very different needs, in terms of security and accessibility.
- the “Web Wallet” is directly accessible via a web browser. One of the references in this area remains the site “www.blockchain.com“. This type of wallet offers increased accessibility, but a very high risk of hacking and misappropriation of funds.
- the “Mobile Wallet” is accessible via mobile phone. This is an application to manage your crypto wallet.
- the “Desktop Wallet” is the equivalent of the “Mobile Wallet”, but on a computer. An application is to be downloaded to access its wallet. It can also be a web extension, the best known being Metamask.
- the “Hardware Wallet” is an object, often in the form of a USB key (like Ledger), which allows you to always keep the contents of your portfolio “offline”. Very good way to avoid piracy… as long as you don’t lose it.
- the “Paper Wallet” is a kind of paper certificate (QR code). This can limit the essential functionality of a crypto wallet such as performing transactions, but in exchange for near-inviolable security.
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The pros and cons of these wallets
These may vary depending on the form of the wallet. But we can generalize on the following points:
- Allows safe storage of a multitude of cryptocurrencies.
- Avoid suffering exchange hacking, data theft or embezzlement found in emails, or links in posts on social networks.
On the downside, we can point out:
- The initial cost of these digital wallet solutions. Either by buying a key, or by invoicing via web providers or exchanges.
- The risk of loss, theft or destruction of materials.
- Solution not optimal for traders who step in regularly and trade on a daily basis on cryptocurrencies.
Conclusion: are crypto wallets essential?
Without being essential, each type of crypto wallet has its own characteristics and usefulness. By better understanding all of these categories, investors can determine which best suits their needs.
As always, in order to avoid putting all your eggs in one basket, it is strongly recommended to diversify crypto wallets to protect against damage that could be very expensive.