You need a wallet to keep your cash and cards in one place. Similarly, you need a wallet to keep your cryptocurrency. Yes, crypto is a digital asset, but you must keep your pass keys and related stuff safe and secure, so your information doesn’t get stolen or lost. As there is no bitcoin bank, a crypto wallet is your only solution to storing your currency and its related information.

The first wallet was made by Bitcoin’s founder(s), Satoshi Nakamoto. Hal Finney followed him and developed a client software wallet; he was the first person to accomplish this task. As a test, Nakamoto transferred 10 BTC to him, and upon its success, the technology is still used to store and transfer all kinds of cryptocurrency.

Through modern crypto wallets, blockchain is within everyone’s reach. When first introduced, sending crypto was tedious as you had to enter lengthy keys. Since the advent of the software, transactions have become easy and swift.

Functionalities of Crypto Wallets

Just like applications on computers and mobile devices, which you can download from iOS or Google Play stores, crypto wallets are software applications that can easily be downloaded on any device. You will require a stable internet connection to gain access to the blockchain network of the respective cryptocurrency you are using.

Cryptocurrency is not like physical cash; it is near to being software or a computer program with bits of data stored in a database. The data is distributed all over the blockchain network. The wallet’s capability is to find the bits connected with your information and gather the amount to show it in your application’s interface.

Cryptocurrency transactions are quite easy through these applications. You can collect or give away crypto through your wallet using various methods. You will have to enter the receiver’s wallet address, type in your amount, authenticate the transaction through your unique key, enter the amount of the transaction fee, and your transaction is complete.

Types of Wallets

The following are the primary wallet types:

Custodial Wallets

These are operated via a third party that holds your personal information and keys for you. This might be a firm that produces enterprise-level online security services that organizations utilize to retain and protect data. To make things more secure and reliable, some cryptocurrency exchanges provide custodial wallets for their users.

Non Custodial Wallets

You hold the responsibility of keeping secure your personal information and security keys. Most cryptocurrency wallets that are operated by devices run on this system.

If we categorize further, these wallets are branched down to two more subcategories: hot and cold. A hot wallet is operated by an internet connection, while a cold wallet is stored on computer hardware and does not require any internet connection. 

Security of the Wallets

The wallet’s safety is essential as it keeps your digital assets, keys, and personal information. Some companies disguise themselves as crypto wallet providers though they are just malicious software that will hack your data.

Here is an example of a security measure that will ensure your wallet’s safety:

Seed Words

The most common way of securing your modern wallet is through seed words. The wallet generates a twelve-word code like a seed phrase that is random but is linked to your keys through your wallet. 

It can be something like “keyboard notebook will keep the store together on a rainy day dump.” It does not make sense, yet you must remember to restore the wallet if it is lost or stolen. You should note these words in a safe place because if someone gains access to this code, they will easily get into your wallet.

Conclusion

Are crypto wallets safe? Yes, they are, but it comes down to your chosen software or application. Always do a background check of the application you will use as your crypto wallet. Read the reviews, go through the customer’s comments if available, and ensure that it is a safe application.