Recently, digital currencies have become an important component of our news and our economy.
Even a news bulletin was hardly devoid of a comment on the rise in the prices of some currencies, or the decline in the prices of others, or on the global change that is being led by these currencies and their owners every day.
These are the reasons that led us to research and write about different topics in the world of Blockchain and Bitcoin which we know are the future of the economy and life.
After we wrote many articles on simplifying the blockchain and digital currencies, especially Bitcoin; It's time to talk about one of the topics in this world which is the holding of cryptocurrencies.
What are digital currencies? And why do we need cryptocurrency wallets?
In a nutshell, digital currencies are currencies such as the pound, riyal, dirham and dollar, but they are non-governmental and non-institutional and their value is not linked to assets such as gold or oil.
Rather, their values are entirely determined by supply and demand.
They are also often decentralized; That is, no state, institution, or even a bank can see the details of your transactions or take any commission from them.
The biggest advantage - or the biggest disadvantage in the view of some - is that cryptocurrencies do not have any real existence.
Rather, they are numerical, i.e. codes and ciphers, which makes their operations instant and easy.
You can transfer any amount of money, and it will arrive instantly no matter how much and wherever the person you are transferring to.
Like traditional currencies, you need to put your cryptocurrency somewhere to keep it.
But because it is digital and does not have a physical presence, you certainly will not be able to put it in your regular wallet, nor put it in any of the shelves of the cupboard, or even put it in a closet!
But you need a digital wallet like it in order to keep it in it, and these cryptocurrency wallets are the focus of our conversation today.
Cryptocurrency wallets are the means of communication between the user or owner of digital currencies and the blockchain, through which all transactions.
These cryptocurrency wallets have evolved and diversified since the inception of cryptocurrencies.
There are many types, and within each type there are many alternatives, each with its own advantages and disadvantages.
So we have seen that we shorten this great effort for you from reading dozens of articles, watching many different clips on YouTube, and summarizing all this for you in one comprehensive and detailed article.
But first before we get to this point; We have to remind you of some important terms related to cryptocurrency wallets, as well as show all the types that exist today.
Important terms about cryptocurrency wallets
Cryptocurrency wallets are not a simple topic at all, but it is not impossible either.
In order to understand it and know what the experts mean when they discuss the best cryptocurrency wallets, you need to be familiar with some technical terms:
Private Key
Private keys are the most important thing in cryptocurrency wallets, and many comparisons are based on them, as we will know later.
These numbers should only be known to you, as they are the key to your account and digital currencies, and if any hacker or thief accesses them, he will be able to easily steal your money and dispose of it as he pleases.
You can think of private keys as the secret numbers of your bank account that only you know.
Note that private keys are codes, and cannot in any way be inferred from public keys.
This is despite the fact that the public keys are generated from the private keys by very complex algorithms, which cannot be reversed.
Public Key
Public keys are codes that you send to people who transfer cryptocurrency to you, and you can give them to others without any worries.
It is not possible for your digital money or anything to be stolen from it.
You can think of it as your bank account number that you can share with anyone to send you a wire transfer.
Wallet Address
A digital wallet address is a code that is generated by running Hashing Algorithms twice.
It is like the process of converting the private key to the public key...it is a one-way process, meaning that no one can get the public key from the wallet address.
You can send this wallet address to other people to transfer cryptocurrency to you through it.
Seed Phrase
Seed Phrase is like a backup for your crypto wallet, or a safety measure in case you forget your private key or your wallet gets corrupted in any way.
It is a set of 12 or 14 words with which you can somehow access your cryptocurrency.
They usually provide your own Seed Phrase cryptocurrency wallets, asking you to hold, store and keep them in a safe place.
Although Seed Phrase is a safeguard, anyone accessing it will put you at risk of losing your cryptocurrency, and forfeiting all your savings.
Hot Wallets
Hot wallets are cryptocurrency wallets that connect to the internet in any form.
This is what makes these wallets practical, as the operations through them are easy, simple and fast, and cold wallets are two important classifications of cryptocurrency wallets and we will talk about them a lot.
Cold Wallets
Cold wallets, unlike hot wallets, are offline wallets, and their advantage is that they are more secure, and they are almost immune to hackers, and this is because they are not connected to the Internet, that is, they are not digital.
It depends on its physical existence as we will see when we talk about the types of cryptocurrency wallets in detail, and it is worth noting that cold wallets are the best choice for long-term investors.
Types of Cryptocurrency Wallets
1. Software wallets
Cryptocurrency Software wallets are one of the most widely used types of wallets, as they are suitable for heavy and frequent use.
It is most likely the only option for speculators or traders who deal in digital currencies, but despite this, the fact that these wallets are connected to the Internet makes them one of the hot wallets, that is, they are the least secure.
Hackers can steal your cryptocurrency in many ways.
Therefore, when choosing a wallet such as these wallets, you have to be confident in their various security procedures and applications.
This type of wallet in itself is divided into three types depending on the nature of the device used or the means of accessing the wallet, and their three types are:
Web wallets
Web wallets are wallets that are accessed through Internet browsers, and do not need any kind of installation on your computer or on your mobile phone.
But it is considered the most risky among the various cryptocurrency wallets, despite the auxiliary protections that these wallets provide.
Another big problem with web wallets: that you usually do not own the keys to your wallet, but the platform or wallet owns them, which puts you at great risk.
Although there are protections like two-factor authentication, you have to be very confident in this wallet or the company you are dealing with.
Desktop or computer wallets
Desktop or computer wallets are wallets in the form of software that you download and install on your computer.
They are a bit more secure than web wallets, but they still have a risk of being online.
These wallets work by opening a wallet, allowing you to have complete control over its private keys.
As soon as you create your wallet, a file called “wallet.dat” is saved in the computer’s memory that contains the keys to the wallet, so you must make a copy of it in a safe place while protecting it with a strong password that only you know.
Password and backup are essential for protection, but if you lose this file or forget your password you will have lost your coins for good, which you definitely don't want.
Another thing I should mention to you is that with this type of wallet you have to make sure that your computer is safe and virus-free.
1. Mobile wallets
Mobile wallets are similar to desktop wallets in that they are software that is downloaded and installed.
But this process is done on a mobile phone, and it also carries some risk as you connect to the Internet in order to access your cryptocurrencies on the Blockchain.
In addition to being hot wallets, the fact that the wallet is located on the mobile phone makes it vulnerable if the mobile phone is damaged, lost or even stolen.
This makes it the worst security among the three types of wallets.
2. Hardware wallets
Hard wallets are cold wallets - that is, they don't connect to the internet - and they are small, limited devices that have no function other than signing your transactions. What does this mean?
Instead of authenticating your transactions with a software wallet connected to the Internet, which can be hacked or the private key stolen from the third party that holds it, you buy a small tool that keeps your key and goes offline.
All you do is confirm and sign your unsigned transactions and then output them to your computer.
The private key is generated through a technology called the Random Number Generator (RNG) of the wallet.
The public key is then generated from this private key, after which these two keys are only stored in the device, and are in no way shared with another device.
This makes hard wallets one of the most secure.
The way these devices work is that they connect to software called The Bridge on your computer.
Which acts as an intermediary party to take the transaction that you want to perform, and transfer it to the hard wallet so that this wallet can certify the transaction and return it to this bridge.
This way your private key is never exposed, this hard wallet doesn't connect to the internet, it doesn't receive any data other than the unsigned transaction and doesn't output any data other than the signed transaction.
These Hard devices come with a protection method we talked about, which is Seed Phrase; Where the device gives you these sentences in order to be a backup door for your currencies in the event of any problem with these devices, which by entering them in a certain way you will be able to access your digital currencies and keep all your savings without losing.
Also, don't worry about your hard wallet being stolen, it needs a code to get in before it can do its job.
It is also possible for you to add another security phrase to it to increase security.
Common problems with hard wallets can be bypassed very easily.
For example, the problem of your wallet being tampered with before handing it over… Here it can be solved by buying wallets from their own factory and not through any seller or store on Amazon or AliExpress, and this will ensure the safety of your device and that it is intact and has not been hacked manually.
There are many hard wallets today, which differ in few properties and range in price and we will discuss them in detail when talking about the best cryptocurrency wallets.
3. Paper wallets
Paper wallets are another type of cold wallet that does not connect to the Internet, and in fact its idea is very easy and clear.
That is, you register on the wallet's key paper in the form of a QR code, or you register a Seed Phrase on it, and therefore access to your coins is only available by holding this paper in a real physical form.
Although these wallets are the most secure, since it is virtually impossible for someone to hack a paper, they have a large list of issues that you should consider.
For example, the fact that this wallet is paper can contribute to its destruction or loss in any way.
So you have to make several copies of it, the other problem is that you have to keep this wallet in a safe place so that it does not fall into the wrong hands.
Paper wallets are becoming more and more untrustworthy because of the many problems they cause despite the relative security they provide.
What helped this is that any transfer made on the value of the entire portfolio.
For example, if you assume that your paper wallet has 25 coins, and you want to send only 5 to your friend, you must send the 25 coins to a wallet belonging to you, and then transfer the 5 coins to your friend, and then create a new paper wallet for the remaining 20 coins.
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