Types of Crypto Wallets

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Hello Astronauts! 

In this article, I will talk about digital wallets where you can hold your cryptocurrencies. You will find answers to many questions that come to your mind. 

Let’s start.

Bitcoin (BTC), Ethereum (ETH), TETHER (USDT), Monnos (MNS), etc. You need to have a crypto wallet before you can store your cryptocurrencies such as digital media. There are many kinds of digital wallets that you can store the crypto coins you have.

The topics I will tell you are the following; What is Crypto Wallet? What Does Digital Wallet Do For Us? How To Have A Crypto Wallet? Which crypto wallet is more secure? What are the differences between Custodial and Non-Custodial wallets? I researched all these questions for you and told them all in my article.

What is a crypto wallet?

Before starting any trading, trading or investment with any cryptocurrency, a space is needed to store it. The software, where you can legally prove the existence of your cryptocurrencies and easily learn your crypto or balance, is called a crypto wallet or digital wallet.

Bitcoin wallets or crypto wallets consist of private keys and public keys. The wallet stores data that proves the existence of these coins, not digital coins. These special keys are used to transfer money to a different account or for transactions on the blockchain network. So what are these special keys?

What is the private key and public key?

As you know, cryptocurrencies are not tangible. All cryptocurrencies and transactions made on them consist of digital records on the blockchain network. So a kind of password is needed to prove the existence of cryptocurrencies on the blockchain network. This works well for private and public keys.

Each wallet account has an address. We can compare this to the IBAN number in the banking system. When you give this address information to your contact person, they can send you money without needing any other information. Private and public keys are required to access deposits within the account or to send money to a different account. No transactions can be made without any of the public and private keys. The blockchain system does not allow this. Public and private keys are linked by special encryption standards. The public key information can be accessed with the private key, but it is not possible to access the private key with the public key.

In the cryptocurrency world, the private key can be considered as the most important password of the owned deposit. If this data is captured by anyone other than the account holder, all deposits may be lost and it will not be possible to get it back. Therefore, it is extremely important to keep the private key and prevent anyone else from accessing it.

Types of crypto money wallets

Before switching to the wallet types used to store digital assets in transactions where they are stored or transferred, it should be known that they are divided into two classes according to their working logic. 

Cryptocurrency wallets; They are divided into two classes: key custody and non-custody.

What is a Custodial wallet?

The “Custodial” wallets that offer key storage service keep their own private key of the account, which means that the funds belonging to the account are controlled by 3rd party software.

Banks also retain full control of money during unused time. The money always belongs to its owner, but it is under the auspices of the bank when the money is not used. 

Of course, this service has its advantages and disadvantages

If we talk about its advantages, it is possible to easily access your funds from any device with an internet connection, and to lose access to your private key or account. A problem can include a person or organization that can be helped.

The disadvantage is that as we mentioned at the beginning, the “control of money” is left to individuals or institutions. Also, if the service provider is exposed to hacking, your balance will not be refunded to you. However, if your money is involved in crime, the crypto wallet that is in charge of saving your money cannot prevent the money from being confiscated.

Examples of key storage services (Custodial) wallets:

Crypto exchanges: The exchanges used in cryptocurrency trading also offer crypto wallet service to their customers, because we can easily access our wallet and make our transactions quickly. But it should not be forgotten that our private key is located in the database of the stock market. This provides users with insecurity.

Online wallet: Online wallets using cloud storage technology are preferred because they can be accessed on any device with internet. They are easy to use, the installation process is very simple. However, your private key is also located in the system. Your money is vulnerable to attacks and theft. At this point, you must have absolute trust in the other party. however, in this period, it is almost impossible to trust a person or institution 100%, so you should take risks.

What is a non-custodial wallet?

Contrary to what I mentioned in our previous examples, the control of money in the “non-custodial” wallets is in the hands of the user. All of the digital wallet address, private key and public key information are kept by the user. Therefore, there is more defense against cyber attacks and hacking incidents.

Although these options have a high level of security, they may not be able to access the account if the user loses any key. So it is very important to know the Technical information about these wallets.

Non-custodial wallet examples

Desktop Wallet:

It is a crypto wallet that can be downloaded and used directly from the internet. It is very easy to set up and use. They work only on computers where the installation is made. If the computer is using on a daily basis, it should be ensured that the internet connection and the security of the computer. The virus or spyware that will infect the computer may cause your wallet information to work. You may also lose your access to the entire wallet as a result of a hardware failure in the computer.

Web Wallet: It is called wallets that can work through any internet browser. It is mandatory to write your private key in order to perform a transaction in these wallets. Otherwise, your transaction will not take place is called wallets that can work through any internet browser. Besides having a very practical use, it is mandatory to write your private key in order to perform a transaction in these wallets. Otherwise, your transaction will not take place

Mobile wallet:

Just like desktop wallets, they are easy to use crypto wallets that can be accessed from anywhere. Since your wallet information is stored in your phone’s memory, you may lose access to your account information when you are subjected to any hacking process.

Paper Wallet:

It is a primitive but extremely secure crypto wallet type. They are simply a piece of paper with certain codes on the paper. The biggest advantage of paper wallets is that they are not connected to the internet in any way and should provide 100% protection against cyber attacks. The information written on the paper wallet includes the wallet address, private and public keys, and a QR code for ease of operation. The biggest disadvantage of paper wallets is that they are quite delicate. When problems such as wiping some of the text, pouring water on it, tearing the paper, you cannot access the wallet. Also, do not forget that the paper is likely to be captured by bad people.

Hardware Wallet:

Hardware wallets, known as cold storage, are the ultimate security crypto wallet. Hardware wallets similar to USB sticks can be plugged into any computer. Since it does not have an internet connection, it protects against cyber attacks. Typically hardware wallets offer increased security options with backup, two-step verification, and PIN password. 

Let’s Come How Hardware Wallets Are Installed:  When the hardware wallets are first opened, the user is given a “seed” code consisting of a lot of words, and the user is asked to keep it. Because if you have to change your Hardware wallet due to the wrong entering of the PIN code 3 times and a hardware failure, you can access your data again thanks to this “seed” code.

What to Consider When Choosing a Crypto Wallet?

The most important point is to determine your need and security, I want to state that you are not the owner of your crypto money in a stock exchange account, leaving your crypto money on the stock exchanges means to entrust your existence to them. In case of any situation occurring on the stock exchange, you may encounter serious problems. You may even lose your digital assets.

If you are going to use cryptocurrencies daily, a mobile wallet will work.

If you want to invest in a digital currency for a long time, of course, paper wallet will do your job. Of course, you should not forget that you do not lose the paper wallet and you will be online when you restore the wallet.

Again, if you want to invest in crypto money from time to time, buy and sell and always be safe, the right address is hardware wallet.

Hot Wallet VS Cold Wallet

Hot wallets are wallets where we can instantly check the value of our crypto money, which we download to the computer and our phones, to be connected to the internet, and trade easily.

As you guessed, cold wallets are devices in the USB memory view where we store our crypto assets on any device without being connected to the internet.

Security:  The main reason people keep most of their money in cold wallets is security. Because cyber pirates cannot attack wallets that are not connected to the internet.

The features of hot wallet depend entirely on 3rd party software companies. These wallets have a disadvantage to theft because they are always connected to the internet. So the most logical thing to do in hot wallets is to keep small amounts of balances.

Which one is easier to use?

The use of the cold wallet is very troublesome, after each operation, it is necessary to take control of the security of the wallet again. In this regard, the cold wallet seems to be very useful for you to save money.

The situation in the hot wallet is quite different. Your cryptocurrencies are designed in such a way that you can display the instant value and make your trading transactions quickly.

As a result, the methods that people will use according to their usage habits vary. I personally find it difficult to use cold wallets, but if I had a large amount of crypto assets, I would have had to confront the difficulties of using cold wallets and secure myself.

I also store my MNS tokens in the application of Monnos because Monnos company has developed a software called Monnos Shield, considering the security of us, so that we can be a contact person in any problem. Therefore, investors’ trust in Monnos is increasing.

Let me talk a little bit about my views for the future with you. Even if both Monnos and other companies have developed very secure systems to hide our crypto assets, hackers do not forgive even the slightest vulnerability in the firewall. So if your crypto asset is high, you should definitely keep it in the cold wallet. If your crypto asset is a small amount, you can use it on the hot wallet and perform your transactions easily. But remember, Risk is always there.

Dear members of the Monnos community, I hope that after reading this article, you have decided which crypto wallet to use. Take care of yourself until my next post.

Crypto Money Works For Us 💙

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By community member Doğukan Kose