How cryptocurrency wallets work

Many people do not decide to buy bitcoins or other cryptocurrencies because they do not know how to store them safely. For this reason, in this article we want to review with you what they are, what they are for and how they work. crypto wallets, wallets for digital currencies.

An exchange is not a wallet

There is a widespread phrase in the crypto community, which states that “exchange is not wallet”, and that reminds us that it is very important do not leave large values ​​in bitcoins or altcoins stored in exchanges.

The first reason is that these companies and web platforms are susceptible to failure and attacks, like any other online service.

What a security breach would allow access to large values in cryptocurrencies, attacks occur often, and in fact some lone hackers, or in groups, put a lot time, work, structure and money in trying to breach security of the exchanges.

The second issue with using exchanges to store large amounts of cryptocurrency indefinitely is that it is contrary to one of the great advantages of these digital assets: that they do not need intermediaries. It is possible to take care of our cryptocurrencies without the need of third parties.

What are wallets for digital currencies

what do you think about withdraw all your money from the bank, put it in your pocket or your wallet and go for a walk? Doesn’t sound like a very good idea, does it? Nor is it to store all our valuables in one place, much less leave them in places where they can be stolen or lost.

Similarly, we shouldn’t store all our digital currencies on the same device or web service, let alone use hardware that may be exposed to careless browsing or software downloaded from unsafe sources.

Just as we do by keeping some money for the day in our wallets, pockets, purses and backpacks, we can also separate our frequently used cryptocurrencies from the ones we treasure for the long term.

What is a hot wallet

They are wallets to which accessed directly on the internet. They are generally from easy access and use, so they are chosen by many people who are just starting out in the crypto world, or who only operate with small funds, to better understand the technology.

But that ease of use has a counterweight: “hot” wallets are generally less secure than “cold” wallets.

What is a cold wallet

It is thus called the devices that store cryptocurrencies offline. Being disconnected from the internet, they are more secure, since they are only exposed to local attacks.

In general, they look like flash drives that plug into the USB port from a computer and only take the internet connection when receiving a transaction or making a shipment. These gadgets can be bought online and in specialized stores, and they have Ledger and Trezor as the leading brands in the sector.

What is the best wallet for cryptocurrencies

A good and simple strategy of use is keep a small value stored in a hot wallet, to operate at the times that are necessary, and save the highest values ​​in a cold wallet, as well as the digital assets that we want to maintain in the long term.