A lot of people think of their cryptocurrency wallet as merely a digitized version of a real wallet that is used for storing funds.
However, it doesn’t actually store cryptocurrencies. Rather, it saves a pair of public and private keys that grant access to one’s digital belongings. In a nutshell, a public key is a string of alphanumeric characters that serves as an address that others can use to send you cryptocurrencies. Likewise, your private key is what allows you to send money to others. You basically use these two keys to sign off ownership of your coins. There isn’t a physical exchange, mind you. The transfer of funds is simply recorded on the blockchain ledger with the difference of the balance in the sender’s and recipient’s wallet.
Ever since Bitcoin came into the limelight, a number of cryptocurrencies have sprouted up. Instead of using different wallets for different coins, many wallets support a multi-coin/ multi-currency option. They can therefore store a variety of altcoins, mitigating the need to hold separate wallets for each one. (No single wallet stores all cryptocurrencies).
There has also been a surge in the number of wallet services being offered today. Each comes with its own level of security and convenience of access. The best wallet for you depends on your requirements and your practices.
At its simplest, hot storage refers to wallets that are connected to the Internet.
This is a web-based wallet and is often hosted by exchanges themselves. Since you have instant access to your wallet.
Desktop wallets are software programs installed on a computer/laptop and accessed directly from that device.
These wallets run as an app on both Android and iOS devices.
Multi-signature (or multisig) wallet, as the name suggests, requires more than one signature to authorize and complete a transaction.
The term ‘cold storage’ denotes storing cryptocurrencies on wallets not connected to the internet, and these are comprised of hardware and paper wallets.
Hardware wallets are dedicated wallet devices, often in the form of a USB stick. Just plug it in to an internet-enabled device to transfer assets.
A paper wallet is one of the easiest and safest types of wallets, and is basically a QR-coded printout of the access keys.
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