Why is a Crypto Wallet Good for Beginners?

If you are planning to get into crypto, before deciding which currencies to invest in, you should definitely create a crypto wallet.

A crypto wallet is where your digital crypto assets are stored and where your transactions are verified on the blockchain. Their goal is to simplify the management, trading, and exchange of digital cryptocurrency assets.

Read on to find out everything you need to know about cryptocurrency wallets, such as what a cryptocurrency wallet is, what types of wallets exist, why you need them, and how to choose the best cryptocurrency wallet for you.

Let's get started!

What Is a Crypto Wallet?

A crypto wallet is a piece of hardware or software that interacts with blockchains and allows you to store or trade different types of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) . Every time you make a purchase, digital currency comes in or out of your wallet. When you are not trading, it is securely stored there. Many crypto wallets also offer oversight of your investments and the market through dashboards with important monitoring and reporting tools.

A crypto wallet does not actually store your coins. Instead, it contains the key to your coins, which are actually stored on public blockchain networks. Wallets store two types of keys with which you can send or receive crypto: public and private crypto keys. The public key is like your wallet address, which you share with others so they can send you money. Private keys are required to sign cryptocurrency transactions. Accordingly, anyone who knows the private key can control the coins associated with that address.

Types of Crypto Wallets

There are many different crypto wallets. Two main types are hot wallets and cold wallets.

Hot wallets are connected to the Internet and are therefore less secure and riskier, but at the same time, they are highly user-friendly and offer better accessibility. The most common types of hot wallets are desktop wallets, web wallets, and mobile wallets.

• Desktop Wallets

These wallets require you to download an application to your desktop or laptop that will help in generating a data file for holding users’ keys. They offer the advantage of owning your key, albeit at the risk of physical damage or malware/virus infection.

• Web Wallets

You can access web wallets through a web browser without having to download any special software or application. They provide access to crypto assets from anywhere using your password, device, and web browser, and the website stores the keys to your crypto assets.

• Mobile Wallets

Here you need to install a mobile application on your phone that will serve as a hot wallet. Mobile wallets provide more flexibility for exchanging funds but come with some security risks.

Cold wallets are not connected to the internet and are therefore at much less risk of being hacked. There are two common variants of cold wallets such as paper wallets and hardware wallets.

• Paper Wallets

They are nothing but physical pieces of paper. The paper must contain all the data necessary to access the cryptocurrency. If you lose a paper document, you risk losing crypto assets in your wallet. A huge drawback to using them is the time-consuming nature of paper wallet transactions.

• Hardware Wallets

These wallets store private keys on a physical device in an offline environment and work just like a flash drive. They provide security by completely avoiding the disclosure of private keys on the Internet. Since you can easily connect them to computers or any other device with a USB stick, they are very easy to use.

Both hot and cold wallets have their pros and cons, and there is not necessarily a right or wrong answer when it comes to figuring out which crypto wallet is best for you. Your choice should depend on your general trading habits and the security you need.

Why You Need a Crypto Wallet?

Your cryptocurrency is only as secure as the method you use to store it. You can technically store it directly on the crypto exchange, in which case you have no control over the private and public keys. Having control over your keys means having control over your coins. Exchanges operate like a bank and are third-party service providers you trust to keep your coins safe. Considering the lack of a regulatory framework for exchanges and cryptocurrencies in general, as well as the infancy of the industry, the best way to secure your coins is to fully control your coins. You can only have that absolute control by having your own wallet.

So, if you have a large number of cryptocurrencies that you do not plan to trade often, crypto wallets are highly desirable. By withdrawing the majority of your cryptocurrency to a crypto wallet, whether hot or cold, you retain ownership of your private keys and gain full power and control over your finances.

Which Crypto Wallet Works Best For You?

With so many wallet options to choose from, there is no direct answer as to which wallet is best for you. To narrow down your options, take a closer look at your risk tolerance, crypto goals, and level of expertise, and then ask yourself the following questions:

• Do you need cryptocurrency to spend or just to save? If your intention is to spend, then go for hot wallets, but if you’re going to save, then choose cold wallets.
• Are you going to invest in multiple cryptocurrencies or just one type of cryptocurrency? If you have multiple cryptocurrencies, use a combination of hot and cold wallets, but if you only have one type of crypto coin, use a crypto wallet such as a Bitcoin wallet.
• Are you ready to spend money on your wallet? If not, then use the hot wallets provided by the trading platform. If yes, then look for the best type of cold wallet with high-security features.

Answering these questions will help you to narrow down your options so you don't get confused when making your choice.

With the security of your crypto in mind, you might also want to consider the CoinStats Wallet suitable for both newbies and professional traders, as it allows you to manage all your DeFi and crypto in one place and is very user-friendly.

Closing Thoughts

A crypto wallet is the first step for anyone who wants to participate in the blockchain ecosystem. Its purpose is to save, store, and receive crypto coins anywhere in the world, without a bank.

Since there is no better way to protect your crypto investments than the right wallet, you should definitely spend some time researching them and choosing the right ones based on your own needs.

However, if you are new to cryptocurrencies, choosing a wallet can be a new experience. Therefore, we hope that the basics presented in this article will help you better understand cryptocurrency wallets and guide you on your cryptocurrency journey.