March 10, 2018 Cryptocurrency

The boom of the cryptocurrency industry in 2017 has been nothing short of breathtaking, which has seen the whole industry increase in value in leaps and bounds. Being stateless and borderless currencies that are not issued by any central bank in the world, keeping cryptocurrencies safe is a very key issue for its holders and investors. Online criminals are growing in sophistication with every passing day and as such it is vital for the investor to know their options when it comes to safely storing their cryptocurrencies.


Definition of a Cryptocurrency Wallet

A cryptocurrency wallet can simply be defined as a dedicated facility either in the form of hardware or software that is created specifically as a storage unit for cryptocurrencies from Bitcoin to all other altcoins. A cryptocurrency wallet serves several purposes, as it is the bank, receiving, and sending unit for a cryptocurrency holder. Given the fact that no commercial bank will accept your cryptocurrency holdings for safekeeping, Wallets serve that purpose of being our vaults in which we can keep our digital assets for either long-term, simply serve as our purse from which we conduct our day-to-day transactions


Type of Cryptocurrency Wallets

There are over 1300 distinct cryptocurrency and tokens online and in circulation as of the time of writing this, and as such categorizing cryptocurrency wallets based on the particular coin or token they serve will be a total nightmare. However, cryptocurrency wallets are easily categorized by how they work and the nature of their make:


Hosted Wallets

A hosted wallet is a category of cryptocurrency wallet which is not held directly under the purview of the cryptocurrency owner but is hosted elsewhere, mainly at cryptocurrency exchanges. Hosted Wallets are the closest thing we have in the cryptocurrency universe to a bank account, as the user only logs in to access their wallet at their exchange and does not actually hold it in his/her custody. The use of hosted wallets are greatly discouraged as the main facility for which any cryptocurrency owner stores their main holdings, due to several terrible antecedents like the famous Mt. Gox crash. Setting up your hosted wallet is as easy as setting up your exchange account, as you will be assigned one with its address as soon as your complete your registration



Software Wallets

A Software Wallet as the name implies is a dedicated software on which a person stores their particular cryptocurrency, which are designed with high encryption and security at the fore of considerations. A software wallet is an entity in itself because when a user store their cryptocurrencies in them, the whole savings are directly under their purview, and as such whether they are online or offline, their bank is right there with them to access without needing to log into any exchange, or other centralized body. A software wallet can either be installed on a Personal Computer or MacBook, or on a mobile device like a phone or tablet. A classic example of a software wallet is Electrum, which is one of the most reputable ones around. All you need to do to set up your Electrum wallet is to download it from the wallet’s official site and install like any other app on your computer. Electrum supports Bitcoin, Ethereum and a number of other altcoins, so be sure that it supports the currency of your choice before installing


Hardware Wallet

A Hardware Wallet unlike the two above is not resident in the virtual realm, as it is a dedicated hardware device (mostly designed like a USB stick) which is used as a vault storage facility for cryptocurrencies. Hardware Wallets are often used by those with a considerable amount of cryptocurrency holdings due to their high security features that make them resemble vaults. Hardware Wallets also come at a considerable cost as a typical wallet could cost as much as $100 or more. Classic examples of Hardware Wallets include Trezor, Jaxx, and Nano S. Setting up your hardware wallet is quite straightforward, as you only need to plug it in your computer, follow the prompt t set up your 4-digit PIN, and copy down the recovery phrase that displays on its LED panel. Make sure your recovery seed is kept written and safe at all times as it is your only hope of getting back your assets should your physical device ever get lost


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