28 Feb
How Crypto Wallet Works: Types And Cryptocurrency Transactions

Blockchain and cryptocurrency have become one of the crucial aspects of today's technology. And cryptocurrency wallets or crypto wallets are used for transferring the cryptocurrencies. It not only empowers the cryptocurrency but puts the concepts of Blockchain in practice to provide a highly secure interface for currency exchange.

However, there are many types of crypto wallets available in the market. To understand how cryptocurrency exchanges work, it is crucial first to clear the concept of the kinds of wallets and how the process.


Types Of Crypto Wallets

Crypto wallets can be divided into different types based on the process, and the approach followed. A user can select a wallet based on their requirements and specifications. Different wallets support multiple cryptocurrencies, and hence, they must be chosen after considering every necessary criterion in mind.

Crypto wallets can be basically divided into two different types:


1. Cold Wallets

These wallets do not require an active internet connection. Cold Wallet stores the data and information in hardware storage rather than the cloud. These wallets are comparatively safer than the hot wallets as they highly depend on cloud storage and store data over it, which increases the risk of information stealing. However, to execute processes using these wallets, they require internet connectivity.

They can be further divided into different types:


Desktop Wallets

These wallets do not store the information over the cloud and rather store them in the computer system. A crypto wallet does not contain user information. 

Instead, it stores the keys that are required to execute a transaction. Therefore, the desktop wallet can be a simple text file that has saved the information about the key, or a key generator software that generates the keys for each transaction.


Mobile Wallets

As technology is proceeding further, many mobile wallets support payment facilities without needing to access the bank information. Users can add balance to these wallets from their bank accounts and can pay later with e-services. One can check out the E-services by Elluminati Inc for creating such apps with amazing features.


Hardware Wallets

These wallets are entirely different from the above mentioned. Hardware wallets provide storage in the form of a separate hardware device, e.g., a pen drive. A user has to connect this device to any computer system that has an active internet connection. And hence, it remains the same from any cybersecurity attacks as it is disconnected from the entire computer system.


Paper Wallets

Paper wallets are incredibly lightweight and highly secure to use in any system. It was used primarily during the introduction of cryptocurrencies, but now users are inclined towards other wallets than this one. 

A paper wallet is nothing but a piece of paper that has the information of the QR code used during the transaction, or the keys to be used. This wallet is secure in every term as only the user has access to it.


2. Hot Wallet

Unlike cold wallets, hot wallets require active internet connection throughout the time. This is an online wallet that uses cloud storage and uses the same to perform transactions. They essentially depend on cloud technology and hence, retain a third-party during the transaction to author a controlling individual.

An online wallet gets the information stored over the cloud that only the user and the third-party authenticator can access. However, this can lead to highly insecure data if there are any problems between these two entities.


Conclusion

Based on your cryptocurrency transaction needs, you can choose anyone from these types. Many companies are providing these services through their wallets that can easily integrate the requirements you have specified. As Blockchain and cryptocurrency are increasingly becoming popular concepts, the scope of technical development is higher, which supports excellent service delivery.

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