The Right Wallet for Cryptocurrencies

How Wallets Work for Cryptocurrencies

A wallet always consists of a pair of addresses:

•     A public key you pass on to get payments

•     A private key that belongs to this address and is needed to transfer coins from the public address further

Meanwhile, there are also more complex wallets, which, for example, generate a lot of different public keys from a 24-word recovery key. In this way, despite a single private key, a large number of public addresses can be used.

So if you own the private key, this essentially means that you are the owner of the cryptocurrency that holds the address. A wallet usually handles the generation of these key pairs. Therefore you should choose your wallet carefully and take the protection of your private keys very seriously.

Different Types of Wallets

In principle, two types of wallets for crytocurrencies are distinguished: Hot wallets and cold wallets.

 

Hot Wallets

Hot wallets are all those wallets that are connected to the internet or run on a device that has internet access. For example, these include the following wallets:

    Software wallets like Electrum

    Wallet apps for your smartphone like GreenBits

    Online wallets like MyEtherWallet or blockchain.info

    Exchanges that stores cryptocurrencies for you, such as bitstamp or coinbase

These wallets are a high risk for your coins. This is because you are either not in possession of the private keys yourself or they could end up in the hands of hackers. For example, they can access the computers or severs over the Internet and exploit a vulnerability to get to the private keys.

So large amounts of cryptocurrencies should never be store in hot wallets, this would be a fundamental security risk. Much more likely to think of hot wallets as a purse, where you usually keep a maximum of a few hundred euros.

 

Cold Wallets

On the other hand, there are the Cold Wallets. These are the opposite of the hot wallet, as in this form of storage, the private keys are kept offline and generated without an internet connection.

This means that you can be sure in the best case that no one but you know the private key and is therefore in possession of his cryptocurrencies.

Examples of cold wallets include:

•     Paper wallets where an address pair is written or printed on a piece of paper. The generation of the address should be generated on an offline device which is free of malware.

•  Physical backup products that can store both private keys and entire recovery keys in the long term and safely. Metal is often used for this purpose.

•  Hardware Wallets

For larger amounts of cryptocurrencies , a cold wallet should always be the first choice.

But if you want to make regular transactions here, you quickly reach your limits with a paper wallet. After all, once the private key has been used to make a transaction, it must be assumed that it has already entered the hands of a stranger through a keylogger or other malware. So a new paper wallet would have to be created.

So the best wallet for cryptocurrencies right now is a hardware wallet. On this page you will find all the information and hints about current hardware wallets. Just browse through the reviews and read more guides.

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