Why do you need a cryptocurrency wallet and what are its main conveniences?
We made this special article in the form of small theses (cards). This is to help you easily understand the features and purpose of cryptocurrency wallets.
What is a cryptocurrency wallet and how does it work?
A cryptocurrency wallet (also known as a bitcoin wallet or cryptocurrency wallet) has the meaning of a regular wallet, but instead of paper currency, it contains proof of your digital money.
When you buy or exchange cryptocurrency, you send the other party to the transaction a unique cryptographic address, which the wallet gives away. The address only indicates the fact that your money is located in a blockchain (a public record of transactions) that records and authenticates all transactions for the cryptocurrency.
A cryptocurrency wallet stores public and private keys. You use it to buy bitcoins or other cryptocurrencies, representing digital signatures to authorize each transaction. Digital wallets can be a device, a program in an app or online site, or a service offered by cryptocurrency exchanges.
Why do I need a cryptocurrency wallet if I’m already trading on the exchange?
Even active traders need a personal crypto wallet. It is controlled by you and authorized to your identity. Many exchanges provide crypto wallets for trading bitcoins or other cryptocurrencies, but the address of such wallets is controlled by the exchanges that provide them.
If access to a cryptocurrency wallet is completely under your control, then the digital currency is available at any time. Most digital wallets are password-protected and offer other security features such as encryption, two-factor authentication, and other security features.
Active crypto traders care about interest rates and transaction speed. For this reason, it is important to have a separate wallet without being linked to an exchange. Cratos can provide you with this, thanks to competitive market rates for private and corporate clients and high transaction speeds.
When trading different cryptocurrencies, you need different crypto wallets. Many services provide options for creating different cryptocurrency wallets. For example, Cratos provides you an opportunity to create up to 50 wallets to store different cryptocurrencies. The service is completely free.
It is worth noting the usability. Cratos cryptocurrency wallets have a user-friendly interface. Using them is simple and clear; deposits, withdrawals, etc. are available.
I know that there are different types of crypto wallets. Which one is the most reliable?
There are two storage options for cryptocurrencies: hot wallets and cold wallets.
Cryptocurrency hot storage wallets are directly connected to the Internet. For example, they are connected to a phone app, desktop program, or online provider. This is convenient at the expense of being free. The downside is the security threat because they are connected to the Internet and are potentially vulnerable to online theft.
Cold storage crypto wallets are small, encrypted, portable device that allows you to download and carry bitcoins and other cryptocurrencies.
Cold wallets cost about $100, but digital money is stored offline. They are considered much more secure than hot wallets. For example, the Cratos cryptocurrency wallet is of the cold storage type. It will take some time and communication with the operator to deposit or transfer funds, but you can rest assured that your funds are safe and insulated from Internet hacks and threats.
Cratos cryptocurrency wallet service uses Multi-Sig technology. It allows you to safely store most of your assets offline in cold storage systems, but there is quick access to the wallet similar to hot storage type access.
What else should I pay attention to when choosing a cryptocurrency wallet?
- Security. Blockchain wallets are considered the safest. They are most often used for investing and storing cryptocurrencies.
- Legality. For example, the cryptocurrency exchange service Cratos is licensed and approved in the European Union.
- Liquidity. The cryptocurrency exchange and storage service must provide a high speed of sale of the asset and maximum proximity of its price to the market. Cratos has high liquidity provided by large partners such as Bitstamp, Kraken, Exmo, etc.
Which crypto wallet is best for me?
When choosing, you have to assess your risk tolerance and user goals. It is important to be aware of your level of knowledge when it comes to cryptocurrency.
For cryptocurrency traders with multiple cryptocurrency assets, a combination of hot and cold wallets is recommended.
If you want to store your coins long-term and don’t plan to trade, cold storage is ideal. But if you trade a lot and actively, a hot storage type wallet will work for you.