How do the crypto wallets work? How does that differ from the traditional, physical wallet? Can it be secure, ever? What happens to money when wallets go out of business? STOP. This is way too many questions at once. Give this a read to find satisfy all your questions curious head!
A crypto wallet is digital. Thus, intangible. Sometimes, they come in hardware options. All Bitcoins or say alt-coins stored are stored digitally. This means that whether the wallet is hard or soft, it contains electronic money.
The coins are a soft copy version of an agreement on the value given to them, similar to fiat currency. Only fiat is printed on notes and metal coins, where as digital is only virtual. It buys things and fluctuates in prices just the same.
Traditional wallets store paper money. Anybody who holds the money owns the right to spend it. This means theft is highly possible. Especially petty theft, which is usually so small that it is unworthy of resolving. Theft is a problem with crypto wallets too. However, crypto wallets ensure that theft is highly problematic. It is highly difficult or complicated to breach into the good ones. They allow layers and layers of software security that prevents unwanted and unlawful access.
This means that smaller theft will not take place. The bigger ones might be. If they are worthwhile for the breaching parties or hackers, the bigger ones will cause big bad publicity for the wallet providers. Making the wallet self regulating and responsible for excellent security itself. Any wallet that fails to perform will and should fail.
1. The Hardware Wallets
The most expensive crypto wallets are the ones that look like mini devices. So much for the show, no? They are reportedly, the most safest too. It is a USB-like device with an OLED screen and side buttons to navigate through the interface of the wallet.
These come with a native desktop apps the cryptocurrency. It is a battery-less device. It needs to be connected to an electronic medium such as a laptop, tablet or computer to operate, sometimes requires internet access. The internet makes it prone to hacking. Cold storages, the ones without the internet are thus, preferred. This kind of a wallet is a magnum opus of all crypto wallets, in terms of look and feel.
2. Paper Wallets
These are printable wallets. This means your ledger can be printed, just like an ATM slip. The idea behind this is that it keeps your private keys offline, it is a secure way of storing your cryptos but not all cryptocurrencies offer paper wallets.
3. Mobile Wallets
Slightly risky but, always connected to the internet (hot wallets). These can be faulty, irritating and may even crash sometimes, but really, which app does not. As if, we are already not trained to take this.
4. Desktop Wallets
Known as the best kind. Every cryptocurrency is linked with one. These work as a software installed on your personal computer, your desktop or laptop is then connected to the internet. For this, you need to follow the basic security measures such as antivirus and anti-malware software and obtain a strong firewall. Wherever you hear these names, you should know desktop wallets are being talked about: Exodus, Bitcoin Core, Electrum, Jaxx’s Chrome Extension among others.
5. Web Wallets
These are accessed via different internet browsers such as Google Chrome, Firefox, and IE etc by going to URLs. Similar to your email account, only blockchain based and containing money.
Wallets are not as complicated as you thought right? Give or take, it is similar to the kind in your pocket or on your work table.