Why Do You Need a Cryptocurrency Wallet?

Cryptocurrencies have been gaining adoption and trading it requires a digital wallet. In this quick guide, we will cover the essentials about cryptocurrency wallet. Let’s get into it!

What is a Cryptocurrency Wallet?

A cryptocurrency wallet is basically a software that enables you to track, send and receive coins through the blockchain like a bank account. It stores pairs of private keys and public keys, aka addresses. How does it work?

When you receive or spend any cryptocurrencies, the private key in your wallet must match the public address matched to the assigned currency. Then, the transaction is recorded on the coin’s blockchain with a balance change in your wallet.

Private keys are similar to your PIN needed to access to your bank account while public keys are like your bank account number. If someone knows your private keys, he/she will have the full access to your funds. Therefore, it is critical to ensure control of your private keys and have back-up.

Now that you know what a cryptocurrency wallet is and its use, let’s go through the terms “hot wallet” and “cold wallet/storage”.

Differences you need to know

Types of Cryptocurrency Wallet

Various types of wallets offer different uses, coins and level of security.

  • Desktop Wallets is installed on PC or laptop. Security on these wallets are comparatively higher as the private keys are stored in your computer but beware of viruses or hacks that may cause you to lose your funds.
  • Hardware Wallets are dedicated for cryptocurrency use and offer stronger security as the private keys are stored in the device. These enable you to make transactions online and go offline for security and transportation. As per any electronics though, they are vulnerable to malfunctioning and software failures.
  • Mobile Wallets run from smartphone apps. These wallets offer great accessibility compared to carrying your computer around, but the security level is not high. You may consider using security features like two-factor authentication and PIN code to increase security of your digital assets.
  • Online Wallets are web-based wallets which you can access from any device quickly. However, the security level is not high as your private keys are stored online and controlled by a third party who may be susceptible to hacking.
  • Paper Wallets involve printing out a QR code for both a public and private key. You can avoid storing digital data through this method but don’t lose or damage those papers!

Do note that none of the wallets store every coin and could charge transaction fees. Thus, research about the different wallets first before deciding on those based on your needs*.

How About Leaving Cryptocurrency on Exchanges?

Different service providers use different security protocols and encryptions so its always better to read their reviews and history before signing up and keeping your cryptocurrencies on exchanges for trading. For instance, ecxx.com is a SG-based digital asset exchange designed for both professional traders and retail investors. With a strong focus on security, we partnered with Ledger to be the first digital asset exchange in Asia to use the Ledger Vault solution. You may like to read all the news coverage here.

You can also practice diligent security precautions such as not clicking any suspicious links, not downloading suspicious software or from unofficial sources. Update your software regularly, and remember to have backup of your private keys and funds too. Do think about storing varying amounts of coins in different wallets to diversify your exposure and add security layers. If you enjoyed the guide, please feel free to share it! Also, check out our blog for more useful articles.

*Risk Warning

Digital asset trading comes with high risk. ecxx.com only provide users with an online exchange platform and do not provide investment, tax or legal advice. ecxx.com is not responsible for any review of the assets and your trading strategies. There is also no guarantee against losses. Should you choose to trade, you need to be aware of and accept three important considerations: 1. Liquidity 2. Diversification 3. Loss of Capital. Please consult with your financial advisor before trading.

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