Types of cryptocurrency wallets and their features: 3 main classifications

There are probably no difficulties in understanding the concept of virtual coins, but the next logical question arises – how and where to store cryptocurrency? The features of decentralized money show their uniqueness and a completely different operating principle.

This is not a fiat currency that needs to be kept in a regular wallet to keep things organized and not lose bills or change.

Let’s consider the general points of the important topic of storing bitcoin, ethereum, ripple, dash, NEO and other altcoins.

Options for where to store cryptocurrency

Special crypto wallets are used to store virtual currencies and carry out transactions with them. These electronic wallets are specialized programs that have different uses. They are also presented in different forms, but the minimum functionality and purpose are always identical.

Let’s briefly consider the types and types of cryptocurrency wallets used today by coin holders or active users of virtual money. Each type of crypto wallet should be studied separately in more detail. You need to look for such information in separate thematic articles.

Classification by species

Cryptocurrency wallets available today:

– browser-based – the simplest, but most vulnerable way to store digital coins. All actions with such a browser-based crypto wallet are performed in your favorite web browser, which greatly simplifies operations. It is recommended to keep small amounts of coins here, due to the weak security of such applications;

– desktop cryptocurrency storage (local) – an option similar to the previous one, but characterized by greater reliability. There are “thick” and “thin” ones – the first has the blockchain network loaded on the PC, and the second only has an algorithm for accessing reliable crypto-services.

The program is installed on a PC or laptop, which provides additional difficulties for hackers who specialize in stealing other people’s cryptocoins. It’s convenient to use, but requires a stable Internet connection;

– mobile crypto wallets – a group of decentralized money storage facilities, the programs of which are designed for use from mobile devices (iPhones, iPads, etc.). The undoubted advantage is that it is convenient to use in any place, so to speak, to spend cryptocurrency on the spot. Like all mobile phones, these electronic wallets are easy for attackers to hack;

– online crypto wallets – a large category of virtual wallets for coins, built into some services or portals. For example, traders on cryptocurrency exchanges hold their own assets in accounts that are online wallets.

Another example is cryptocurrency exchangers, which also provide users with a place in their accounts to accumulate or temporarily hold coins. This is the most risky method due to minimal protection from hackers and full accessibility for website owners;

– hardware crypto wallets – a compact device resembling a flash drive, with a special program and additional security mechanisms. It is safe and convenient to store cryptocurrency on them, but the price of the devices is very steep – from 220 euros;

– paper – the most optimal method of storing cryptocurrency savings, although difficult and somewhat inconvenient for inexperienced users. The fact of electronic vulnerabilities (viruses, hacks, failures, breakdowns) is excluded; it is easy to reproduce and protect funds.

The QR code, public address, seed phrase and private key are printed on thick paper, so using a paper crypto wallet is easy. There is only one drawback, but it is fatal – the loss of a sheet of data means the complete loss of digital coins – irretrievable loss or falling into the complete possession of another person.

Specification of crypto wallets

You should understand one more gradation, where the types are presented:

– single-currency storages are highly specialized models, the functionality of which is optimized for working with one virtual currency and its soft and hard forks. For example, Bitcoin wallets can be hardware, browser, desktop or mobile. Suitable exclusively for saving bitcoin, bitcoin sv, bitcoin cash and other forks. They cannot host Ethereum, Ripple, Monero or other altcoins;

– multi-currency versions are the largest category of crypto storage, where it is possible to simultaneously hold more than 2 different coins. Due to their versatility, they are convenient, but less secure.

Wallets by method of storing coins

The third approach to determining the types of cryptocurrency wallets is the storage type. There are 2 modifications possible:

– cold – all storage methods where long-term and reliable preservation of digital coins is possible without frequent operations with them. This usually includes paper wallets for coins, desktop, hardware options;

– hot – a group of methods for storing cryptocurrencies, providing for the frequent use of virtual money – conversions, transfers, replenishing the balance. The hot type includes mobile, browser, online, as well as a number of desktop wallets.

There are attempts to divide crypto wallets into thin and thick, however, this is only appropriate for a symbolic designation. It was mentioned above that thin crypto wallets are any storage options that do not have an up-to-date copy of the blockchain of a specific coin. Thick cryptocurrency wallets, on the other hand, contain a distributed ledger of the coin being used.

Conclusion

One can see a wide variety of options for obtaining, maintaining and using digital currencies. Each crypto storage has specific advantages and unique disadvantages. There are similar properties that overlap between different types of electronic wallets for coins.

The considered aspects regarding where and how to store cryptocurrency have been studied superficially, but in sufficient detail. More detailed characteristics and instructions for use are described in more specialized articles or instructions.