According to report more then 1000 American adult, 56% know what is cryptocurrency. However more than 78% don't know where and how to buy & sell it ,even how to store it securely. So I decide to give brief on Types Of Cryptocurrency Wallet.
What Is Cryptowallet?
As you store your money in bank similarly to store your cryptocurrency, you need a cryptowallet. Basically, a cryptowallet is a program that stores your private and public cryptographic keys, which you need to access the blockchain for any transaction with your cryptocurrency.
Private key is used to unlock your wallet where as the public key is like an address of your wallet. If someone want to send you money, they send it from their own address to your. To unlock and spend new fund, you must enter the private key which belongs to your public key.
Lets get back to the cryptowallet. There are different types of cryptocurrency wallet each have their own pros and cons.
Types Of Cryptocurrency Wallets
1.Paper Wallet
As the name suggest paper wallet it mean your information will be store in paper by you. Your cryptocurrency is just your private and public key. If you want to store them then write down on a small piece of paper. This is called Paper Wallet and people actually use this is their life.
But the use of paper wallets is only store cryptocurrency, to pay for something, you’ll have to create another type of wallet, and transfer your money from the paper wallet to the new wallet. Entering these long keys manually can be tricky and complicated therefore QR codes were introduced. A special type of software is use to generate the keys and then turn them into QR codes.
Pro : Security is in your hand
Cons : Limited access, Inconvenience
2.Hot Wallets
One of the easiest type of wallet is Hot wallet. The best part of hot wallet is that you can reach your asset from wherever you want and using whatever device you want, you just need only an internet connection. Therefore it is called hot. It also provide online buy service. To get an access of hot wallet you need to register on their website or install some software.
Hot wallet are really convenient. But to use them you have to first trust on their services provider with all your money in the account. Let's understand with example that cryptocurrency exchanges provide hot wallet to all their user for each cryptocurrency that is traded on the exchanges. From the previous report it is found that keeping a lot of coin on this wallet is not good, because exchanges are valuable target of hackers.
Some of hot wallet service provider gives you your key, but some provider never gives. If provider gives your key then you can control or store it. If service provider not gives key and something happened with him so the chance of your loosing money is increased. So hot wallet are good for storing small amount of cryptocurrency.
Pro : Convenient, Accessible
Cons : Third party required, Security is low
3. Software or Mobile Wallet
As hot wallets are based on cloud, whereas mobile or software wallet are based locally but required internet connection. You can install Software or mobile wallet in your computer or mobile otherwise any other device that will handle your private and public keys also handle your transaction. These type of wallet can be use for storing cryptocurrency as well as for payment method.
As hot wallet, these type of wallet are also have two main type. You have a choice of full node or light. In full node wallet you can store whole blockchain in your memory. But practically it is found that full node wallet would not work in mobile. Lets understand with example that Bitcoin blockchain currently occupies 360 GB, which is more than the mobile capacity. But full node wallet don't trust on third party therefore it is more secure than the light wallet. Utilizing full local wallets is the first way of putting away cryptocurrency, yet they are currently giving way of light and hot wallets.
Pro : More secure then hot wallets
Cons : But still not very secure due to device bound
4.Cold Wallet
These are like actual piece of hardware. Generally cold wallet are look like flash drive and are require to connect to computer or mobile phones.
Cold wallet are more secure than the software wallet because they store keys in an offline devices. Actually a USB stick is use as cold wallet. Cold wallet are more secure to storing your crypto and also use for transaction. The only problem with these type of wallet is that they are not free. But good point is that they do not required to charge.
Pro : Greatest security for any cryptocurrency.
Cons : Cost