( pixabay )
How do you carry money when you go out? You probably have a wallet everywhere you go. It keeps your coins and notes in one place. Similarly, you need a digital wallet to carry your cryptocurrencies. Suppose you buy Bitcoins, Ethereum, Ripple, and Litecoin. Your digital wallet will keep them safe so that you can use them for any crypto transactions.
A digital wallet is a web-based platform with which you can send or receive cryptocurrencies from any address. The transaction involving these currencies depends on digital signatures, addresses, and digital keys.
Types of digital wallets
Before buying different types of cryptocurrencies, you should check whether your digital wallet supports the coins you want to invest in.
There are two types of digital wallets that you can use for crypto trading: hot wallet and cold wallet.
1. Hot wallet
A hot wallet works only when you connect it to the internet. It allows quick and instant access to your cryptocurrencies. But there is a drawback. Since it requires an internet connection, there are risks of hackers finding out your digital wallet password and stealing your digital currencies. Hot wallets are useful if you trade in cryptocurrencies every day. It is also helpful when you need high liquidity. You should not only use a hot wallet password but also opt for a 2-layer authentication system to keep prying eyes away from your wallet.
2. Cold wallet
A cold wallet doesn’t require you to connect it to the internet. They are created using computers that were never connected to any network. That is why cold wallets come with a high level of security for your digital assets. If you want to store a significant amount of cryptocurrencies, make sure you use a cold wallet. The only drawback to this system is it isn’t flexible like hot wallets when it comes to liquidity. It is ideal for those who can play the waiting game while investing in cryptocurrencies.
Cold wallets have different categories, such as brain wallets, hardware wallets, and paper wallets. Trezor and Ledger are two of the most popular hardware wallets used for cryptocurrencies.
Features to keep in mind while selecting a digital wallet
The best way to invest in cryptocurrencies is to stay updated with the latest news. News sites like Bitreporter not only talk about the trends in cryptocurrencies but also about different digital wallets and their pros and cons. Here are a few features that you should keep in mind while selecting a digital wallet:
It should be an open-source platform with a PIN protection facility. The wallet must have a user-friendly UI and a built-in address book. It should generate a new address every time you send or receive cryptocurrencies.
The wallet should allow you to use it as both an app and a web wallet. Most importantly, it should support a range of currencies.
The security model should generate keys locally on your device and encrypt them together with your username and password.
A digital wallet is like a haven for your cryptocurrencies. Without it, you are risking your digital assets as hackers wait for people to make one mistake so that they can rip them off in no time.