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In this walk-through, U.today will explain what is cryptocurrency wallet, which types of crypto wallets are most popular nowadays and how to keep your wallet secure.
This guide is prepared in collaboration with VEXEL. VEXEL is a cutting-edge cryptocurrency ecosystem designed for storage and cross-chain exchange of cryptocurrencies.
How does a cryptocurrency wallet work
To understand what a cryptocurrency wallet is, we need to understand what is blockchain. Blockchain is a distributed ledger or decentralized data storage. Because the data stored in the blockchain is used to validate the transactions of native blockchain assets (Ether for Ethereum blockchain, Bitcoin for Bitcoin blockchain, etc.) between different addresses, the blockchain also can be compared to the decentralized payment processor.
Any address of blockchain represents a cryptocurrency wallet. Cryptocurrency wallet thus is an instrument to deposit, access, store, exchange and withdraw digital assets (cryptocurrency or tokens).
Three steps are inevitable for every cryptocurrency wallet:
To create a wallet, i.e. to receive a key pair of private and public keys.
To access the wallet by entering the private key which is associated with a certain public key (address).
To authorize the transaction via the authentication tools, i.e to send tokens or to receive it.
Different types of cryptocurrency wallets
Mainly, the owners of cryptocurrency store their assets in two types of wallets, dubbed ‘cold’ and ‘hot’. Hot wallet requires permanent access to the network while cold storage can be used both offline and online. Cold wallets may be subdivided into paper wallets and hardware wallets. Hot wallets may be subdivided into cloud wallets and software wallets.
Cold cryptocurrency wallets
A paper wallet is just a sheet of paper with your private and public address printed in the form of numbers, letters or QR-code.
Hardware crypto wallet is a sophisticated electronic device that looks like a USB-flash drive. To confirm your transaction you need to plug it into USB-port and open through special software or application.
Hot cryptocurrency wallets
Cloud cryptocurrency wallets represent software that requires no downloading or installation. It can act as a plugin for your browser or as a web interface for cryptocurrency operations. To launch the cloud-based wallet, you need to import your keys into a plugin or interface. MetaMask for Ethereum (ETH) and ERC-20 (Ethereum-like) tokens is the most popular cloud wallet.
Software cryptocurrency wallets are programs (applications) downloaded and installed on mobile or desktop computers. Being one of the most widespread classes of crypto wallets, software wallets suit perfectly for newbies.
Best cryptocurrency wallets
To avoid getting lost in a plethora of modern cryptocurrency wallets, let’s name some features of the so-called ‘golden standard’ of your crypto storage and exchange instrument. So, here is a basic check-list for cryptocurrency wallets in 2020:
It should support numerous types of crypto assets as well as one-click swaps between them. Gone are the days when ‘Bitcoin wallet’ or ‘Ethereum wallet’ was enough for crypto traders. Today only a diversified portfolio is a reasonable one, so, avoid the one-currency options. For example, VEXEL supports all major cryptocurrencies including Bitcoin (BTC), Litecoin (LTC), Bitcoin Cash (BCH), Ethereum (ETH) and Dash (DASH).
Stablecoins are a must-have in 2020. Since the crypto market is very volatile, don’t forget to find out whether it is possible to exchange your assets to stablecoins, the digital assets with the value pegged to the major world currencies. VEXEL supports the U.S. Dollar Tether which is the USD-pegged cryptocurrency issued atop Bitcoin (BTC) blockchain. Stay safe in times of market rollercoaster ride!
How would you get your money out of your wallet? A good wallet should always have comfortable deposit/withdrawal options. VEXEL team considered this moment as their wallet has an EU-issued license for fiat-to-crypto remittances. Feel free to cash your assets out promptly using the U.S. Dollars, Euros, etc.
Does your wallet offer buying crypto with credit cards? This is the simplest way to buy crypto. You need to integrate your credit card into your wallet and validate the transaction. With VEXEL you can do it in a one-click manner. VISA and MasterCard payment systems are supported by their wallet. All card withdrawals are instant: just select the amount of crypto you need to buy, confirm the purchasing and receive the details of the transaction.
And finally, what about anonymity? Unfortunately, numerous wallets today require cumbersome registration and verification proceedings. These checks are intended to stop terrorism and money laundering but you never know how your personal data would be processed and by whom. VEXEL allows you to store and exchange crypto with no extra questions asked. It even requires no registration as its system identifies you via the randomly generated code which means the unmatched level of anonymity.
VEXEL.IS state-of-the-art crypto storage and exchange wallet: more exciting features
As you may have noticed, VEXEL ecosystem meets all functionality and anonymity requirements of the modern crypto wallets sector. By the way, there are three ‘killing features’ that allow it to be one step ahead of the industry.
Issue your multi-purpose crypto vexel
Cryptocurrencies vexel issuance option is among very own novelties of VEXEL. Crypto vexel is a kind of receipt or invoice that can be used to refund your bill, to get paid for your services, etc. In a matter of clicks, you can replace your bank with a cutting-edge ecosystem fueled by cryptocurrencies.
Operate your crypto with Telegram bot
Any user of Telegram Messenger can manage his or her assets via Telegram bot. Just click /start and enjoy its usability, speed and performance.
Manage your assets being off-chain
Even without the connection to the blockchain, you can enjoy the rich toolkit of VEXEL wallet due to its game-changing off-chain solutions. Thus it merges the benefits of cold and hot crypto storages. It is very useful for daily traders and within the areas with a poor quality Internet connection.
Cryptocurrency wallets: Highlights
A cryptocurrency wallet is a service used to store and exchange blockchain-based assets.
The crypto wallets are identified by blockchains via their private and public keys.
Cloud and software wallets are two main categories of hot crypto wallets while paper and hardware solutions represent the cold crypto wallets category.
Good cryptocurrency wallet works with different currencies including stablecoins, has a rich deposit/withdrawal toolkit, supports credit cards and cares about your anonymity. VEXEL is a textbook example of how to meet all these requirements.
Moreover, VEXEL offers its clients the option to issue invoices (vexels), to use native Telegram bot and to operate their funds being off-chain.