BUY NANO LEDGER NOW AND GET $10 IN BTC

What Is a Cryptocurrency Wallet?

Simply put, a cryptocurrency wallet is an interface that allows you to access and manage your funds on a blockchain. It acts as a sort of dashboard, showing you exactly how much cryptocurrency you own. Furthermore, it allows you to communicate with the blockchain, sending and receiving valuable digital assets. You can say that your cryptocurrency wallet is the bridge between you and your cryptocurrency funds on the blockchain.

However, despite the name, a cryptocurrency wallet does not contain your coins or tokens - these remain on the blockchain itself. Instead, its purpose is to protect the very important private keys that allow you to access your blockchain address and everything stored there. To understand how this works, let's first look at what the purpose of a cryptocurrency wallet is.

What is a Cryptocurrency Wallet for?

Your cryptocurrency wallet exists purely to protect your private keys while giving you access to them. These private keys allow you to access an address to send and receive cryptocurrencies. They also provide the interface you'll use to verify your identity, access specific tools, communities, and more. If you want to participate in cryptocurrency trading, DeFi platforms or even NFTs, you will need a cryptocurrency wallet.

But, Why Do We Need Cryptocurrency Wallets?

To explain, a private key in its raw form is a daunting sequence of 256 binary digits (1s and 0s). For a cryptocurrency user, storing this private key is risky and impractical. To give you an idea, anyone with access to your private key can access all of your funds.

For example, writing down your private key is an insecure way of storing it. All it takes is for one person to see that number, and all your cryptocurrencies disappear. What if you have multiple cryptocurrency accounts? You would have to write down and save the private key for each of them, increasing the chances of someone seeing this valuable information and understanding what it means.
Even storing the private key on your computer poses a risk. Remember: any device connected to the internet is at risk from hackers and malware. This means that storing your private key on your device also makes it vulnerable to attacks.

Therefore, to interact with the blockchain safely and easily, you need to manage several keys at the same time, and these must allow you to carry out transactions without ever revealing the keys to other parties. And that is precisely what a cryptocurrency wallet is for.

What Types of Cryptocurrency Wallets Are There?

There are different types of cryptocurrency wallets: software, hardware. Some of them, like exchange wallets, are custodial. But what exactly does this mean?

Let's explore each of them in more detail:

Custodial Wallets: Explained

A custodial wallet is typically issued by a centralized exchange and does not give you full control over your funds. In short, the exchange holds the private key that gives true ownership of your assets.

Exchange wallets are custodial, meaning that instead of trusting you with your own private key, the exchange holds it on your behalf. What you will get are platform access credentials, and this is how you will access your wallet. These platforms allow you to recover your account easily, but this comes at a price - the cost of true ownership.

Storing your cryptocurrencies in a custodial cryptocurrency wallet is like parking your car in someone else's garage. Even if you own the car, the garage key is with the garage owner. If the garage owner does not share the key with you, you will not be able to drive your car, even if you are the owner. This is a pretty accurate analogy for exchange wallets.

Software Portfolios: Explained

Hot wallets (or software wallets) are a type of software that exists digitally and protects your private keys within its interface. Most of the time, these wallets are non-custodial, meaning they give you custody of your keys. However, they store your private keys in an internet-connected application on your cell phone or computer, and that is a risk.

These devices are always automatically connected to the internet, which makes them very convenient. You just need to log in to start interacting with online applications through the wallet interface on your computer. However, this also means that your cryptocurrency keys are always online - meaning a hacker can use your personal device and connection as a vector to access your private keys remotely. The most common way cryptocurrency users are scammed is through a hacked device. So having a hot wallet may be easy, but it doesn't offer the security you might want.

So, with that in mind - how can you keep those keys away from online hackers?

Hardware Wallets: Cryptocurrency Wallets You Can Trust
A hardware wallet is a physical device that stores the private keys to your cryptocurrency funds away from the internet. Even if you carry out transactions with it, the wallet confirms transactions in an offline environment. This process helps keep your private keys away from internet risks at all times.

Furthermore, hardware wallets are non-custodial wallets. You are the only one who has access to your private keys and funds. So, when you use one, you own the private keys associated with your cryptocurrencies. If you take cryptocurrency security seriously and understand the unique risks faced by this type of asset, you will know that this type of storage is the only truly secure option.

Hardware wallets are often called cold wallets, but this is not exactly accurate. A cold wallet may not be hardware (there are other varieties) and not every hardware wallet is "cold". Instead, a cold wallet, in addition to keeping your private keys offline, avoids interacting with smart contracts or Web3 platforms. Avoiding signing smart contracts eliminates the risk of your wallet signing a malicious transaction, which puts your wallet's contents at risk even if your keys are offline. The purpose of a cold wallet is purely to “hold” assets.

The cold wallet keeps the keys offline, in physical form, where any transaction must be authorized by you. Meanwhile, the hot wallet keeps the keys online, more exposed to risks.

What Is the Safest Cryptocurrency Wallet?

If you are looking to protect your cryptocurrencies, the only real option is to purchase a hardware wallet. This way, you can maintain custody of your assets and keep your private keys safe - and offline.

Ledger devices are among the most secure cryptocurrency wallets out there, protecting your private keys with a secure element chip. This component is used in various secure environments, such as credit cards, passports and payment systems. It is known for bringing the highest level of security to any system where sensitive data is managed. This means that, in addition to keeping your private key offline and away from hackers, the Ledger device itself is also completely impervious to external threats, thanks to the state-of-the-art components inside.

• USB-C Connectivity: Connect to your smartphone or tablet to manage your crypto from anywhere.
• Large Capacity: Store over 100 different crypto assets in each Nano X.
• Broad Currency Compatibility: Ledger Live app supports over 5,000 cryptocurrencies.
• Peace of mind: Rest assured that your crypto is always safe and in your control, wherever you go.
• Advanced security: Multiple layers of security, including a Secure Element chip and PIN code.
• Easy setup: With the Ledger Live app, you can start managing your crypto in minutes.
• Device Compatibility: Works with Windows, Mac, Linux, iOS and Android

Buy now

If you are an active cryptocurrency user, Ledger is your best choice. Not only because of its incredibly secure hardware wallets like the Ledger Nano and Ledger Stax, but also because of its companion app Ledger Live, a software that allows you to easily manage your assets from your computer or mobile device. Ledger is the gateway to all your cryptocurrency needs, securely.