A crypto wallet is an integral part of a crypto exchange. Or I can say, a crypto exchange is nothing without a crypto wallet. Yes, it is very important for a crypto exchange, where every crypto user will look for this feature in a crypto exchange. You would think, without explaining what is a crypto wallet, I’m just saying about its importance. I will never omit any point about the crypto wallet, I will explain everything clearly. In prior to starting from the beginning point, I thought of saying crypto wallet’s importance which will help you to understand its worthiness still better.
Ok, let me give a brief introduction about what a crypto wallet is? Unlike the wallet that we use for storing and spending out of fiat currencies, the same concept implies a crypto wallet. But the same crypto trait will apply here for a crypto wallet that you cannot see and touch a crypto wallet. It is an additional feature that every crypto exchange should provide a crypto wallet for its users for storing and transacting the cryptos easily without any hassles. Most of the cryptocurrency exchanges will have their wallet which means the wallet is built with the exchange. The main advantage of opting for a crypto exchange that provides their crypto wallet because they are more secure.
The exchange will have complete control of the wallet. Also, the exchange development team will know the build format i.e code structure written for building the wallet during the development phase. This will help the crypto exchange company to know the out and out functionality of the wallet. If there is any issue raised in the wallet, the exchange dev team will immediately figure it out and the issue will immediately be resolved by the developer team of the exchange.
There are some handpicks of exchanges that provide wallet services by tying up with third-party wallet providers. In simpler terms, the wallet has not been developed by the exchange development team, instead, the exchange seeks help from a crypto wallet service provider for providing a wallet service to their exchange. Are you curious to know what are the advantages of having a third-party wallet instead of having their wallet? I’m sorry to say this, there is no single advantage I could mention for this. Because there are so many disadvantages of having a third-party wallet. Yes, you will be shocked by knowing those.
The crypto wallet provided by a third-party is completely built by some third-party developers who are not part of the crypto exchange. By integrating a third-party wallet to a crypto exchange, the exchange does not know the complete functionality of the wallet as the original developers have developed. There are some chances of fooling the exchange and negotiating with them to tie up with the exchange by uttering the superficial working function by hiding the actual function of the wallet. Also, the complete source code will be with the third-party’s hand, at any time they can rewrite the code to swindle the assets stored in the wallet without the knowledge of the exchange and the users. If any issue arises in the wallet, the exchange has to seek the help of the provider and the exchange has to wait patiently till the issue gets resolved.
These are the major and intimidating disadvantages of the exchange that has a third-party wallet service. This would have given you an in-depth idea about the wallet owned by the exchanges. With the same let us know about the types of wallets that exist in the crypto market.
Do crypto wallets have types? Yes, of course, the crypto wallet has five types which means five different wallet systems. Before we discuss the five crypto wallets, we can discuss the two major classifications that crypto wallets have. The classifications are based on storage types.
- Hot storage
- Cold storage
Hot storage wallet functions need the internet to access. The whole working mechanism of this kind of wallet needs internet connectivity to work. Hot wallets act as the online storage where the checking of wallet balance, transaction, tradings can be done online. It uses a Private key and Public Key for transactions which conceals the personal information for providing complete security for the transaction.
Keep in mind that like I said earlier, this type of wallet storage needs the internet, so there will be some possibilities of malicious attacks and other cyber attacks.
Cold storage wallets do not require internet connectivity. Most crypto investors and business people prefer cold wallets to hot wallets. Because the cold wallets are very secure when compared to the hold wallet. The reason is, a cold wallet does not require the internet to function, this will ease them to feel secure from threats and vulnerabilities from hackers.
These two storages that you must know before knowing the types of crypto wallet. Ok, without delaying let us go with the crypto wallet types. Here are the five types of crypto wallet.
- Desktop wallet
- Mobile Wallet
- Web wallet
- Hardware wallet
- Paper wallet
It is a software application that can be installed on either a personal computer or laptop. This wallet performs peer-to-peer transactions with the help of the internet. The wallet application will support cross-function platforms like Windows, Mac, Linux operating systems. As a prerequisite, you must have or install an Antivirus, Anti-malware software that will serve as a protector of your assets as well as wallet information from any hackers.
Mobile Wallet is an application that you can have on your mobile. It completely relies on the internet for transactions, monitoring balances, tradings, etc. Also, the wallet will have security features in addition to biometric authentication, fingerprint scanner, 2FA, etc. The wallets are based on the cross-functional platforms that support mobile operating systems like Android, iOS which are widely used across the world.
Web Wallet which obviously needs internet access to the wallet. It has the same functionalities, unlike other electronic wallets. This type of wallet also has security features like two-step verifications, auto-generation of authentic security code to your registered email id or mobile number, etc. The user interface of your web wallet will be very intuitive and elegant. The web wallets will be supported in all browsers like Chrome, Firefox, Internet Explorer, Opera, etc.
This type of wallet is the most secure wallet which will be in the form of a pen drive or a calculator that has USB connectivity. So that you can connect your wallet to the supported devices. This is an offline wallet where the money is stored in offline storage. This type of wallet provides high-end security to your account as well as currencies. This is one of the high-security wallets where business people and investors prefer this kind of wallet which is safe.
The paper wallet is an offline storage wallet. This type of wallet is in the form of a sheet more like a cash certificate. The credentials and the details about your Public key and Private key that are encrypted in the QR code in the paper (the wallet form). You have to be very cautious in maintaining the paper. Make sure you are not using the paper wallet in public places which might get stolen easily because it resembles paper. Also, people may tend to see your credential when you open the paper in the public.
These are the types of wallets. Each and every wallet is having the same feature except the paper wallet. Those features are the amalgamation of security and user experience. Here are the features of a crypto wallet:
The wallet will have different digital signatures once after each and every transaction you do from your wallet. This prevents others from viewing your personal info and other credentials of transactions.
Biometric is said to be a trusted security feature as of now. Integrating this feature in the wallet helps users to feel more secure. You will be asked to imprint your biometric during your entry and also during when you transact your asset.
The wallet has to support fiat-to-crypto and crypto-to-crypto currencies. This will help users to withdraw or store in their desired currencies.
When you are signing in to a new device, during your transaction, there will be a 2F verification which will be sent to your registered email ID. After entering the code, you will be proceeding with the transactions.
The QR scanner in the wallet acts as the wallet address. A crypto wallet changes its wallet address once after the completion of each and every transaction. This is because it protects your wallet information and transaction details from the third-parties without viewing it.
Auto-generation of public key
The public key will be auto-generated for every transaction. This is because of ensuring security. And this will be insusceptible for the hackers to trace you.
Your session will be logged out from the wallet if there is no action performed for a while. This helps to prevent or deny the access of randomers to use your wallet.
These are the features that a crypto wallet will have. Using a crypto wallet will be one of the best and efficient ways for the transaction and storing of the cryptos. Have the fullest experience of crypto trading by having a crypto wallet.