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What's the difference between wallets?

Wallets are one of the most essansial factors of owning and managing cryptocurrencies of any sort. Wallets for digital currencies are very similar to your physical wallets  just a digitized version of your bank account. They are used to store your cryptocurrency and send it to others

Although it is considered that storing your assets on an exchange is vulnurable, we've managed to solve the problem and it's almost the same as storing your crypto in any wallet. While you can store your assets on Nominex, there are still other ways of doing so.

Types of Wallets

There are many different types of wallets, and the one that will best suit your needs depends on what you need from a wallet and the purpose of your cryptocurrency holdings.

Each wallet type has different pros and cons. You should weigh the risks of each type depending on what you need from it (i.e. security, easy access, long-term holding, etc.)

Cold Wallets & Hot Wallets

To understand the different types of wallets, you must understand the difference between cold storage and hot wallets.

Hot wallets: just like holing cash at your purse.

Cold storage wallets: like any savings account, so that means it's harder to access, but is more secure. 

Hardware wallets

Hot wallets are wallets that easily plug into the internet and are accessible through a web portal. They are considered ‘hot’ because of the greater ability for activity and accessibility. This creates an easy and quick to use environment, which is better for frequent transactions, trading, and frequent access. Although, this can be hazardous because they are more susceptible to hacks because they are often online (they do not always have to be online). Hot wallets are stored online and can be hacked easier than cold storage wallets.

Cold wallets are the more secure of the two. Cold storage wallets are held offline, which makes them much harder to hack or steal because they are not always accessible. These types of wallets are best for cryptocurrency that you are not using frequently, you are sitting on for longer-periods of time, or hold a lot of coins. If you have a lot of crypto, you want your tokens in a cold storage wallet. It is much more secure, and although it is harder to access for trading or buying and selling, it ensures your security and prevents loss or theft of your funds.

Software wallets

Software wallets have different types. These are wallets that are typically ‘hot’ and are frequently connected to the internet. These wallets can be on your computer, laptop, or phone.  You download the software client and then create a wallet. The three types of software wallets there are:

  • Desktop wallets: For laptops and computers; where the software is installed on your device. You can use a lot of these wallets without being connected to the internet.
  • Mobile wallets: Wallets for mobile devices (i.e. cellphones); you download an application for your device. These have pretty decent security, and have easy functionality by using QR codes, allowing  quick transactions.
  • Online web wallets: Online web wallets are wallets you use online, and need an internet connection for. A third party allows you to use their software through the cloud. These are sometimes referred to as “cloud wallets.”

Physical Wallets

Paper wallets are a wallet form which can hold crypto completely hard copy and undigitized. These are ultimate cold storage wallets for cryptocurrencies. You pretty much just print out your generated paper wallet ( your public and private keys), and lock it up in a safe or safety deposit box. Placing it on the front of your refrigerator is not the best idea ;)

Web interfaces for generating wallets

There are certain web interfaces, like MyEtherWallet, that allow you to generate a wallet for your cryptocurrencies. These services typically allow you to create a wallet, backup your keys, and send your tokens to them for storage online or offline. Wallet generators can be compatible with other wallets . Sometimes these services are apart of a greater platform, and by creating a wallet, you are doing so to be able to use their platform for launching, distributing, and trading tokens or creating smart contracts, etc.

But, as usual, although this type of wallets is very handy and easy to access, the security is wasy lower than other options.

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