If you’re new to cryptocurrency it can be confusing, but there are 4 main solutions for storing your cryptocurrency using a crypto wallet. On an exchange, on a wallet on your computer, on a paper wallet and on a hardware wallet. This video will explain the pro’s and cons of each plus how cryptocurrency wallets, in general work.
For more information on the question “What is a Wallet?”, Bitcoin technology and cryptocurrency check out the text-version of Bitpanda Academy Lesson 6:
Video Chapters:
00:00 – Intro
00:22 – Main types of wallets
01:46 – What is a wallet?
02:55 – Which wallet do I get?
03:10 – Hot Wallet
04:05 – Software Wallet
05:03 – Paper Wallet
05:55 – Hardware Wallet
#wallet #crypto #bitpanda #cryptowallet
▬ Definition of a Wallet ▬▬▬▬▬▬▬▬▬▬▬▬
A cryptocurrency wallet is not a physical item like the leather wallet in your back pocket, but more of a safety deposit box or a vault. To access your assets AND to withdraw them, you need a dedicated key or, in other words, a password.
You have to think of a wallet address, like a bank account number. In the world of cryptocurrency, if somebody wants to transfer your coins, you simply give them your wallet address. No two wallet addresses are the same.
▬ Hot Wallet ▬▬▬▬▬▬▬▬▬▬▬▬
The most basic and easiest option you have is to store your cryptocurrencies on the platform or exchange through which you bought them and keep them there.
Hot Wallets are crypto wallets that are actively connected to the internet. While it is easy to transact using these wallets, they are vulnerable to hacks. Exchange wallets, mobile wallets, and desktop wallets are examples of hot wallets. Once you purchase your crypto it’s automatically stored on a hot wallet, but it is recommended to keep only a small percentage of your funds on an exchange and store the vast majority of your funds in a cold storage wallet. A lot of new users tent to store their cryptocurrency on a hot wallet, as it’s the most basic way to get started, although you are then relying on the security of that exchange.
▬ Software Wallet ▬▬▬▬▬▬▬▬▬▬▬▬
A software wallet means storing your funds on your computer, desktop or mobile device. The benefits to this are that you have immediate access to your crypto and complete control over your private keys. This solution creates a single wallet file, where private keys are stored. For added security, this file is also encrypted, which means that a customised passphrase can be used to access it.
Your funds are “hot” when your computer or mobile device is connected to the internet so public wifi use isn’t recommended. But, it is a popular option, it’s easy to set up and use and has good security.
▬ Paper Wallet ▬▬▬▬▬▬▬▬▬▬▬▬
A paper wallet is a great example of a cold wallet, cold wallets are crypto wallets that are not connected to the internet and hence safe from hack attempts. The idea is that if you want to store away and hold on to your cryptocurrencies safely, then you can use a cold wallet to keep them safe. As your keys aren’t connected to any servers you just need to print your private and public keys on one piece of paper.
▬ Hardware Wallet ▬▬▬▬▬▬▬▬▬▬▬▬
Hardware wallets combine the safety of cold wallets, along with the ease of transactions of hot wallets.. They’re kept offline so they can’t be hacked, and even if a hacker gets hold of your computer, they won’t be able to steal private keys and access your assets with a hardware wallet. Your private keys are stored on a cryptographically-secured hardware device. Because keys are stored directly on the device and can’t be read in plaintext, it is almost impossible for attackers to obtain them, even if your computer is infected by a virus.
▬ About Bitpanda ▬▬▬▬▬▬▬▬▬▬▬▬
Bitpanda is a fintech based in Vienna, Austria and was founded in 2014 by Eric Demuth, Paul Klanschek and Christian Trummer. Bitpanda has 2 million users and more than 400 team members. With a PSD2 payment service provider licence, state-of-the-art security and streamlined user experience, Bitpanda has grown into a popular trading platform for newbies and experts alike. The goal is to tear down the barriers to investing and personal finance through digital assets and blockchain technology like cryptocurrencies, precious metals, fractional stocks and ETFs and to bring traditional financial products into the 21st century
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