What is crypto wallet? General knowledge of crypto wallets
- 1. What is a crypto wallet?
- 2. What components are included in a crypto wallet?
- 2.1 Wallet Address
- 2.2 Private key - Private key
- 2.3 Passphrases or key phrases
- 3. How crypto wallets work
- 4. What types of crypto wallets are there?
- 4.1 Based on the number of platforms supporting
- 4.1.1 Single-chain wallet
- 4.1.2 Multi-chain wallet
- 4.2 Based on the level of control of assets
- 4.2.1 Centralized wallet
- 4.2.2 Decentralized wallet
- 5. Basic knowledge of hot wallets
- 5.1 Definition
- 5.2 Types of hot wallets
- 5.2.1 Online wallets
- 5.2.2 Software wallet
- 5.3 Advantages and disadvantages of hot wallets
- 5.3.1 Advantages
- 5.3.2 Cons
- 6. Basic knowledge of cold wallet
- 6.1 Definition
- 6.2 Types of cold wallets
- 6.2.1 Paper wallets
- 6.2.2 Hardware wallet
- 6.3 Cold wallet advantages and disadvantages
- 7. Factors to keep in mind when looking for crypto wallets
- 7.1 Security
- 7.2 Wallet utility
- 8. Top 10 best crypto wallets in 2022
- 8.1 Exodus Wallet
- 8.2 Electrum Wallet Electrum
- 8.3 MyCelium Wallet
- 8.4 Trezor Wallet
- 8.5 Ledger Nano X
- 8.6 Coinbase Wallet
- 8.7 SoFi Wallet
- 8.8 Robinhood Wallet Robinhood
- 8.9 Atomic Wallet
- 8.10 Trust Wallet
- 9. Is it safe to store on crypto wallets?
- 10. Some security measures Safe use of crypto wallets
What is crypto wallet? How does it work? BHO Network will answer these questions to investors in the article below. We provide readers with knowledge about crypto wallets, including concepts, components, and how to use crypto wallets properly. Let's find out together!
1. What is a crypto wallet?
A cryptocurrency wallet is software that helps store, send, receive and track the balance of cryptocurrencies like coins/tokens. In short, a crypto wallet is like a bank account. The main difference is that this wallet is more secure. Thanks to the information encryption mechanism, the wallet's owner is not identified, and cryptocurrencies are stored in the wallet.
2. What components are included in a crypto wallet?
When creating a crypto wallet, you are provided with three codes corresponding to 3 components: wallet address (Address), private key (Private Key), and password (Passphrase).
2.1 Wallet Address
The wallet address, also known as Public Key, is a random string of letters and numbers. A wallet address is like a bank account; when someone sends crypto to your wallet, they will send it to this wallet address.
The Public Key is the user's identity address on the blockchain network, corresponding to the wallet address.
Wallet addresses of different blockchains will have several different configurations. For example, Binance Smart Chain and Ethereum are EVM compatible, so that it will start with 0x..., but for Solana or BTC, it will be a random chain.
The wallet address functions like a bank account, helping the sender determine where to send it
2.2 Private key - Private key
A private key is also a random alphanumeric string used to connect to a wallet.
If the wallet address is a bank account number, the private key will be your password to log into the wallet. The difference is that the bank password can be changed, while the private key cannot.
When setting up a wallet on any platform, you will also be asked to store your private key, so keep it carefully as it is the only key that gives you access to your crypto wallet.
Unlike a wallet address, a private key will not have any structure; it is just a random string of characters, with or without the same blockchain structure.
- Protect and do not reveal your private key to others; either write it down on paper or store it in a safe place.
- If you lose your private key, you will lose your money forever.
2.3 Passphrases or key phrases
Passphrases are also a private key, consisting of 12 or 24 random English words, but according to the decryption mechanism in different wallets, the password will give different wallet addresses.
Because the two wallets have different decryption mechanisms and will provide different wallet addresses, you must remember which wallet your Passphrases was generated from.
You should store both the password and the private key just in case. Some wallets are programmed to be able to decrypt the correct password with another wallet to solve the complexity mentioned earlier.
Each wallet address will be given a unique password
3. How crypto wallets work
When you create a wallet address on Blockchain, you get two keys: address and private. You can understand it simply as follows: The address is like an email address, and the private key is like an email password.
The email message corresponds to the amount of data inside. You receive messages from others and can notify them of your email address. Anyone having this email address can email you.
Like the email, if the password is exposed, anyone can access your email and send out the email. So it is vital to keep the key private.
There are more and more sophisticated forms of fraud these days. For experienced people, it's okay, but newcomers to this market do not fully understand the importance of keeping the above information secure, so it is easy to be scammed and lose all their money.
So take note: Do not reveal your private key or password to anyone, not even the administrator of any group. If they're a real admin, they'll never ask for your private key or password (the address can be used to test support).
Top 10 best crypto wallets you should know today
4. What types of crypto wallets are there?
One of the questions of investors when having a certain token is which types of e-wallets are suitable for the Token they have. Here are some of the knowledge that BHO summarizes.
4.1 Based on the number of platforms supporting
4.1.1 Single-chain wallet
A single-chain wallet only contains coins or tokens of a particular blockchain that can be stored, sent, and received, which is safer than multi-chain wallets.
4.1.2 Multi-chain wallet
The multi-chain wallet can support many different types of blockchain digital assets at the same time. Multi-chain wallets make crypto asset management easier as many wallets only need one password.
4.2 Based on the level of control of assets
4.2.1 Centralized wallet
You only have to create a trade account when you participate in trading on a centralized cryptocurrency exchange like Binance or Kucoin. In that account, the exchange has made wallets for all coins/tokens listed on the exchange. You must choose the correct coin/token you want to deposit, copy the wallet address, and send money to it.
Advantages: No need to create a wallet, only create an account. Cons:
- The level of security is not as high as a decentralized wallet.
- Your assets will be 100% controlled by the exchange.
- The risk from 3rd party (exchange) if something goes wrong.
4.2.2 Decentralized wallet
A decentralized wallet includes a hot wallet and a cold wallet, and we will learn more about these two types of wallets in the next section.
Decentralized wallets include two types hot wallets and cold wallets
5. Basic knowledge of hot wallets
The hot wallet is a wallet address where you can use cryptocurrency anytime while connected to the Internet.
5.2 Types of hot wallets
5.2.1 Online wallets
This is the most popular cryptocurrency wallet today. You can store your crypto assets through reputable intermediary websites, such as cryptocurrency exchanges (Poloniex, Btc-e, Cex, Bittrex, Bitfinex, Kraken) or Coin wallet hosting service websites (Coinbase, Blockchain. info).
The advantage of this wallet is that it is very convenient to use, and the transaction speed is also fast. The downside is that it can be hacked, or malicious code can save your wallet account information.
5.2.2 Software wallet
A software wallet is a hot wallet that can be downloaded and installed on your computer, tablet, or phone. With this type of wallet, your funds will be under your control as the application does not store your private key information on the server.
There are different software wallets to choose from:
- Desktop software wallets like Exodus, bitcoin.org, multibit.org, and bitcoinarmory.com.
- Software wallets are installed on mobile phones like Blockchain, Bitcoin Wallet, Mycelium, and Xapo.
The downside of software wallets is that if your computer is stolen or your hard drive is damaged, your stored assets will disappear.
5.3 Advantages and disadvantages of hot wallets
- Offers many choices
- It can be connected via a mobile app or extension on a computer browser.
Easier to attack because the Private Key data is stored in the connecting-to-the-Internet app or extension
Hot wallets, although convenient, have the potential to be hacked
6. Basic knowledge of cold wallet
The cold wallet is usually in the form of a USB and works like your bank account; it will automatically receive money when someone sends it without connecting to the Internet. However, if you want to check balance fluctuations, you need an internet connection, just like Internet Banking.
6.2 Types of cold wallets
6.2.1 Paper wallets
A paper wallet is simply a piece of paper that contains your public and private keys. Usually, paper wallets will have a QR code, so you can scan this QR code to use an encrypted wallet and transfer money typically.
6.2.2 Hardware wallet
A hardware wallet is an offline micro USB computer that stores confidential information, similar to a paper wallet, and can be plugged into a laptop when needed.
Hardware wallets are more secure than paper wallets because when you make a transaction, the hardware wallet asks you to confirm the transaction by manually pressing a button on the device, one thing that hackers also have to give up.
The three most trusted and chosen hardware wallet brands are Ledger Nano S, Trezor.io, and KeepKey. These wallets support many different coins such as Bitcoin, Dash, Ethereum, Ethereum Classic, Litecoin, Namecoin, ZCash, Dogecoin, and Testnet.
6.3 Cold wallet advantages and disadvantages
- Pros: Higher security.
- Cons: High cost and lack of flexibility.
Cold wallets have high security but lack flexibility
7. Factors to keep in mind when looking for crypto wallets
The main changing factor with the crypto wallet is the security feature. Every year, crypto wallets upgrade their security measures to curb all types of online and offline theft. The best offline Bitcoin wallets have cold storage, which is more secure than hot crypto wallets.
In addition, the best Bitcoin wallets are developed using powerful blockchain mechanisms that can securely store and transfer cryptocurrencies. Therefore, cold wallets are more secure than hot wallets, which is a point worth considering when choosing the safest crypto wallets types.
7.2 Wallet utility
In terms of utility, hot wallets are more practical and user-friendly than cold wallets. Software wallets can do more than hardware wallets. Hot wallets are also much more helpful than cold wallets due to their online accessibility.
Similarly, the use of hardware wallets needs to be improved to be as applicable as software wallets. With the help of these two factors, it is quite easy to choose the best crypto wallet to take care of your digital currency management.
Hot wallets provide more utilities for users than cold wallets
8. Top 10 best crypto wallets in 2022
8.1 Exodus Wallet
Exodus is one of the most popular multi-currency wallets in the world and is also considered one of the best Bitcoin wallets for beginners. As a cross-platform crypto wallet, Exodus tops the list. It is for those new to the crypto environment. The wallet makes cryptocurrency transactions faster and easier to understand for a novice user base.
- Exodus Wallet currently supports over a hundred cryptocurrencies. It keeps adding new cryptocurrencies to the supported list every year.
- The wallet has an intuitive user interface. The wallet's user interface features make it user-friendly and easy to navigate.
- It supports all platforms for trading cryptocurrencies.
- Exodus wallet security features are updated every two weeks.
- The wallet is not fully open source and has many proprietary software products.
- The wallet only charges custom transaction fees for high-volume Bitcoin transactions.
8.2 Electrum Wallet Electrum
Electrum is considered the first Bitcoin wallet on the cryptocurrency market. It is one of the oldest crypto wallets, providing high-speed and low-resource cryptographic services. Developed in Python, this open-source wallet helps manage the Bitcoin cryptocurrency using an online server indexed on the BTC blockchain.
- The Electrum wallet (Bitcoin wallet) highlights its transaction fees.
- Users can control fees based on trading volume and market price.
- This wallet can also rotate wallet addresses, making transactions more anonymous and secure.
- Users can export Electrum wallets to multiple exchange platforms and independent devices.
- The wallet has advanced features that support Bitcoin transactions.
- Wallet only stores Bitcoin and BTC-backed cryptocurrency (digital currency).
- Users need a quick learning process to get used to the Electrum wallet.
Electrum Wallet is considered the first Bitcoin wallet in the cryptocurrency market
8.3 MyCelium Wallet
MyCelium Crypto Wallet is a popular Bitcoin wallet. It is available on all mobile platform versions. Therefore, it is also considered the best Bitcoin wallet for mobile users. Since its launch in 2013, MyCelium has been actively used as both an Android app and an iOS app by millions of cryptocurrency holders worldwide.
- MyCelium is an open-source end-to-end wallet.
- It doesn't have any proprietary software issues. Users can open multiple crypto accounts on the wallet.
- MyCelium Exchange offers a built-in Bitcoin marketplace in the wallet.
- MyCelium is a Bitcoin-only proprietary wallet (Bitcoin Wallet).
- There is no desktop version of this mobile wallet available.
8.4 Trezor Wallet
Trezor is a popular digital wallet for cryptocurrencies developed by SatoshiLabs. Trezor can be considered the world leader in hardware or physical wallets.
It was launched in 2014 to make Trezor Model T an advanced crypto wallet for Bitcoin HODLers and active crypto traders. Trezor is rated as the best Bitcoin wallet for many cryptocurrencies.
- Trezor is an open-source wallet with some offline features.
- Its mobile app version has the best color touchscreen dynamics.
- The wallet can be easily set up across devices and used anywhere.
- Trezor supports over 1600 stablecoins and altcoins.
- Trezor Wallet is one of the most expensive wallets on the market.
- There is no two-factor authentication.
- The wallet's latest version, Trezor Model T, currently only supports the Android mobile platform.
8.5 Ledger Nano X
Ledger Nano X Wallet is used for the high-end storage of cryptocurrencies. Also, it is one of the best Bitcoin wallets among the prominent hardware wallets available today. It is a hardware wallet designed to protect digital assets and personal data at the highest level.
Ledger Nano X cold wallet is one of the best hardware wallets today
Ledger Nano X is not vulnerable to attack online as a cold wallet. The Nano X ecosystem is a network of storage devices that can only use private keys offline.
- This is one of the most accessible cold crypto wallets to use.
- The security features of this wallet could not be tested.
- The wallet also has enhanced Defi capabilities, an advantage for building smart contracts.
- Overall, the wallet has an attractive user interface design.
- Browsing wallets could be more straightforward.
- Recently, there was a data breach on the Nano X network.
8.6 Coinbase Wallet
Coinbase is one of the largest cryptocurrency exchanges in the world. Coinbase wallet (Decentralized wallet) supports all transactions on cryptocurrency exchanges. Therefore, it is one of the most sought-after digital wallets in the cryptocurrency market.
- Coinbase wallet is user-friendly and has some of the features of an exchange platform.
- It is designed to support off-chain BTC transfers and non-blockchain Defi projects.
- Coinbase Wallet also supports storing multiple fiat currencies, acting as a digital wallet for traders and investors.
- The fee structure of the Coinbase Wallet app becomes complicated when transferring among multiple currencies.
- The wallet also tracks cryptocurrency usage, raising concerns about its anonymity features.
8.7 SoFi Wallet
SoFi is a digital investment platform that provides personal financial services in the cryptocurrency space.
Platform users and investors mainly use the SoFi wallet; that's why it is widely used in the United States. SoFi is expanding its capabilities into cryptocurrency (digital currency) cold storage.
- SoFi is one of the cheapest wallets and is very simple to operate.
- The user interface of the SoFi wallet is designed to appeal to young crypto investors.
- The SoFi mobile app also includes advanced features.
- SoFi Wallet is only available to residents living in the US.
- It only supports limited cryptocurrencies.
- Transactions on SoFi Wallet only support USD fiat currency.
- It does not allow the cryptocurrencies transfer (digital assets) to other personal wallets.
SoFi Wallet is one of the cheapest wallets but is only available to US residents
8.8 Robinhood Wallet Robinhood
Robinhood is an established trading platform that gained global popularity in 2021 after GameStop stock skyrocketed. Currently, Robinhood has a cryptocurrency wallet that provides storage and trading capabilities.
Robinhood Wallet allows cryptocurrency investors to learn cryptocurrency trading and become professional crypto traders.
- The Robinhood mobile wallet has advanced features, including trading cryptocurrencies.
- The wallet supports Bitcoin and other leading cryptocurrencies.
- The wallet also has a simple interface to help novice investors with cryptocurrency trading.
- A wallet is only available to crypto investors in the US.
- There are some hidden fees when the wallet is linked to the platform.
8.9 Atomic Wallet
Atomic Wallet is a private cryptocurrency wallet for a decentralized exchange called Atomic Swap. It supports storing more than 500 altcoins and stable coins. The wallet also holds platform native tokens globally.
- It can store more than 500 different cryptocurrencies and tokens.
- It is designed for beginners in the field of cryptography.
- Atomic Wallet is free to use without any hidden fees.
- It's not as secure as other hardware wallets.
- In some cases, some tokens were "automatically swapped" due to a technical glitch.
8.10 Trust Wallet
Simply put, Trust Wallet is for investors who are just starting to use the trading platform. It is easy and has a simple operation procedure. In addition, the Trust wallet is also a trusted wallet that can efficiently store private keys on the device.
Investors love Trust Wallet because of its user-friendly interface
- It can be downloaded for free on iOS and Android platforms.
- It supports multiple cryptocurrencies.
- Very handy for new coding adopters.
- Trusted wallet users can also stake their crypto assets for huge profits.
- Trust wallets will never be as secure as hardware wallets
9. Is it safe to store on crypto wallets?
Cryptocurrency wallets are protected to varying degrees. The level of security depends on the type of wallet you use (desktop, mobile, online, paper, hardware) and the service provider.
Web hosting is indeed a risky environment to keep your currency rather than offline. Online wallets can expose users to vulnerabilities in the platform, putting them at risk of being exploited by hackers to steal their funds.
On the other hand, offline wallets cannot be hacked because they are not connected to an online network and rely on third parties for security.
While online wallets have proven to be vulnerable, security precautions still need to be taken and followed when using any wallet.
Remember, no matter which wallet you use, losing your private key means losing money. Likewise, if your wallet is hacked or you send money to scammers, there is no way to get your lost funds back or reverse the transaction. You have to take precautions and be very careful!
Whether using an online or offline wallet, taking precautions and being on high alert is necessary
10. Some security measures Safe use of crypto wallets
Here are some ways to help you stay safe when storing your assets in your wallet:
- You should keep your public keys in a cold wallet, preferably a hardware wallet.
- Enhance your internet security and avoid public Wifi networks.
- It is recommended to use a VPN for added security. A VPN changes your IP address and current location, so your browsing is always safe and private from malicious actors.
- Using multiple wallets simultaneously is considered a way of dividing assets to minimize losses in case of mishaps.
- Always keep your devices (laptop, PC, smartphone, USB...) virus free and up to date.
- You should be cautious when checking that you are logged into the correct address of the exchange or online wallet website, or fake website.
- Some malicious program will change the address of the exchange wallet you just copied, causing you to send money to the wrong address.
Above are all the answers to the question "What is a crypto wallet?" that BHO Network synthesizes. Hopefully, with the knowledge from this article, you can choose a Crypto wallet for easier transactions. Please keep visiting our website https://bho.network to update more information about the Cryptocurrency market.
Published on January 12, 2022
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