Top 5 Best Cryptocurrency Wallets

What are the different types of Cryptocurrency wallets?

There are several types of wallets that provide different ways to store and access your digital currency. Cryptocurrency Wallets can be broken down into three distinct categories: software, hardware, and paper. Software wallets can be a desktop, mobile or online.

Desktop Wallets are downloaded and installed on a PC or laptop. They are only accessible from the single computer in which they are downloaded. Desktop wallets offer one of the highest levels of security however if your computer is hacked or gets a virus there is the possibility that you may lose all your funds.

Online Wallets run on the cloud and are accessible from any computing device in any location. While they are more convenient to access, online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.

Mobile Wallets run on an app on your phone and are useful because they can be used anywhere including retail stores. Mobile wallets are usually much smaller and simpler than desktop wallets because of the limited space available on a mobile.

Hardware Wallets differ from software wallets in that they store a user’s private keys on a hardware device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security. Hardware wallets can be compatible with several web interfaces and can support different currencies; it just depends on which one you decide to use. What’s more, making a transaction is easy. Users simply plug in their device to any internet enabled computer or device, enter a pin, send currency and confirm. Hardware wallets make it possible to easily transact while also keeping your money offline and away from danger.

Paper Wallets are easy to use and provide a very high level of security. While the term paper wallet can simply refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software that is used to securely generate a pair of keys which are then printed. Using a paper wallet is relatively straightforward. Transferring Bitcoin or any other currency to your paper wallet is accomplished by the transfer of funds from your software wallet to the public address shown on your paper wallet. Alternatively, if you want to withdraw or spend currency, all you need to do is transfer funds from your paper wallet to your software wallet. This process, often referred to as ‘sweeping,’ can either be done manually by entering your private keys or by scanning the QR code on the paper wallet.

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Brief Introduction to Cryptocurrencies

 
Cryptocurrencies, sometimes called virtual currencies, digital money/cash, or tokens, are not really like U.S. dollars or British pounds. They live online and are not backed by a government. They’re backed by their respective networks.

Technically speaking, cryptocurrencies are restricted entries in a database. Specific conditions must be met to change these entries. Created with cryptography, the entries are secured with math, not people.

Restricted entries are published into a database, but it’s a special type of database that is shared by a peer-to-peer network. For example, when you send some Bitcoin to your friend Cara, you’re creating and sending a restricted entry into the Bitcoin network.

The network makes sure that you haven’t not the same entry twice; it does this with no central server or authority. Following the same example, the network is making sure that you didn’t try to send your friend Cara and your other friend Alice the same Bitcoin.

The peer-to-peer network solves the “double-spend” problem (you sending the same Bitcoin to two people) in most cases by having every peer have a complete record of the history of all the entries made within the network.

The entire history gives the balance of every account including yours. The innovation of cryptocurrency is to achieve agreement on what the history is without a central server or authority.

Entries are the Representation of Cryptocurrency

Cryptocurrencies are generated by the network in most cases to incentivize the peers, also known as nodes and miners, to work to secure the network and check entries. Each network has a unique way of generating them and distributing them to the peers.

Bitcoin, for example, rewards peers (known as miners on the Bitcoin network) for “solving the next block.” A block is a group or entries. The solving is finding a hash that connects the new block with the old one. This is where the term blockchain came from.

The block is the group of entries, and the chain is the hash. Hashes are a type of cryptologic puzzle. Think of them as Sudoku puzzles that the peers compete to connect the blocks.

Traditional Cryptocurrencies Characteristics:

  • They’re irreversible. You cannot retrieve Cryptocurrency once sent and confirmed by the network.
  • Cryptocurrencies are one way, no chargebacks.
  • They’re anonymous. Anyone can open a wallet, no ID required, and have varying stages of anonymity depending on which token you utilize.
  • They’re fast and globally accessible. Entries are broadcast across the network immediately and are confirmed in a couple of minutes.
  • They’re built to be very secure. Cryptocurrencies use the latest cryptographic techniques, but they’re in early development.
  • They have a controlled supply limited by the network.

 

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