To start investing in digital assets, you will need a Bitcoin Wallet to purchase and store cryptocurrencies. If you are new to cryptocurrency trading, choosing the right Bitcoin Wallet can be challenging. Before using one, here is what you need to know about digital cryptocurrency wallets.
What is a cryptocurrency wallet?
It is a digital wallet that holds Bitcoin and Altcoins such as Ethereum, either used for trading or as a long-term investment. It holds digital cryptocurrency like a typical wallet holds paper money. Investors store private and public keys required to purchase Bitcoin and Altcoins. In addition, crypto wallets provide users with the digital signatures that authorise transactions on the crypto blockchain.
Bitcoins Wallets are offered by crypto exchanges by running programmes on a website or an app. Wallets are essential because they protect digital assets from cybercrimes.
Do you need a crypto wallet to trade Bitcoin?
As an investor, you need a cryptocurrency wallet to trade in Bitcoin. To purchase or sell a cryptocurrency asset, you will need a wallet address that gives you the power to transfer to another user. Further, digital wallets provide enhanced security through two-factor authentication, encryption and password protection.
Types of Bitcoin wallets
Cryptocurrency wallets are categorised into hot and cold storage wallets. However, they store different cryptocurrencies where some can allow more than one digital asset.
Hot storage Bitcoin wallets
Hot storage wallets connect directly to the internet-connected devices through an app, a website or a software program. Hot storage wallets are popular among users because they have less transaction cost. However, they are vulnerable to hackers who can access the passwords through the internet. Nonetheless, digital crypto wallet providers have done their best to enhance security and reduce online theft. Hot wallets are anticipated to be free from theft in the future.
Mobile wallets
Mobile wallets are run as apps on smartphones, such as mobile or tablets. The apps are used to store the cryptocurrency and you can trade anytime. Using mobile apps makes face-to-face transactions convenient and the use of QR codes as addresses makes the payments quicker. Additionally, you can back up your smartphone to keep your digital investments safe. They include Bitcoin Wallet, Mycelium and GreenAddress.
Web wallets
Web wallets are browser-based. However, they fail to provide full control of the funds like in mobile or desktop wallets. They include Coinbase and Robinhood.
Desktop wallets
Desktop wallets are apps run on a computer. You have control over your crypto investments stored in the desktop wallet. Even so, you must protect your computer from malware and stolen password issues. They include Bitpay, Bitcoin Core, Electrum, Atomic Wallet and Exodus.
Cold storage Bitcoin wallets
A cold wallet is an encrypted physical device that allows you to keep your digital investments safe off the internet. Once you require to transact, you are needed to connect to a hot wallet through an internet-connected device. On the downside, their transaction costs can go up to $100. Cold wallets include Trezor and Ledger.
Which is the best wallet for you?
A wise investor holds a hot and cold wallet, the hot storage Bitcoin wallet for short-term investments and the cold storage wallet for long term digital asset investments. That said, it is crucial to consider that the crypto market is highly volatile and without proper research, one can incur massive losses. At the same time, cryptocurrency investments are very profitable, which attracts many users.
