Everything Wondered About Crypto Wallets

Everything Wondered About Crypto Wallets

What is crypto wallet?

To trade with cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Tether (USDT), a digital wallet is primarily required. Cryptocurrencies and transactions made through them consist of digital records on the blockchain network. In other words, the currencies mentioned are not material assets. So this wallet is not used to store cryptocurrencies, but to prove its existence and check balance. The most important thing to consider when choosing a crypto wallet is undoubtedly reliable. Digital wallets; The address of the account consists of the private key and public key information. In transactions such as money transfer, the blockchain network is interacted with, and the proof of the asset is realized through private and public keys defined to the wallet. These keys are also needed to send money to another account and access the asset in the wallet. Both key information must be available for these transactions. These two keys are interconnected by a special encryption system. Private key information can be obtained with public key information, but the opposite is not possible. In the world of cryptocurrencies, the private key password is the most important point of account security. If this password is taken over by someone else, all the assets owned may be lost and this will not be compensated. Therefore, it is very important to be careful while keeping this password, at this point it is also important to choose a reliable digital wallet. The address mentioned can be compared to the IBAN number in bank accounts, when you give this address information to your correspondent, it can send you money without needing any other information.

What are their types?

Digital wallets are divided into two classes: custody and non-custody. Wallet types are included in these two categories depending on their features.

1.Custodial Wallet

Custodial wallets are wallets that offer key storage and keep the account's private key in its own storage space. Therefore, key information can be checked by the third party provider. Although it sounds scary, it is actually the same as traditional banking approach. Benefits It provides ease of use. It is very easy to operate and access the internet via phone, tablet, computer or any device with internet connection. There is no risk of losing a password. If any problem is encountered, there is a contact person to help. Drawbacks Money control belongs to an intermediary institution. Access to money can be blocked by the legislator. If the intermediary institution is exposed to cyber attack, the account may be lost.

Key Storage Service (Custodial) Wallets Crypto Exchanges

Exchanges that offer trading with cryptocurrencies also offer their own wallet service. Using these wallets is very useful for ease of operation. However, the above mentioned disadvantages should not be forgotten. In other words, private key passwords of these wallets are kept in the stock market database and are open to any attack.

Online Wallets

These wallets use cloud storage technology, which means they can be easily accessed through devices with internet access. It has the advantages and disadvantages mentioned in general. Trusting the institution is very important when wallets that offer key storage services will be used.

2. Non-custodial Wallet

Non-custodial wallets are wallets that do not provide key storage service, any control belongs to the user. Benefits All kinds of control belong to the user. Since the information is kept by the user, it is safer against cyber attacks. Drawbacks More technical information is needed. No private key password is lost and / or no user error is encountered. All responsibility belongs to the user, together with the control.

Non-custodial wallets that do not provide key storage service

Desktop Wallet

It is downloaded to the computer via the Internet and used. It is easy to use, but if a computer is used daily, security should be considered. Any virus that can infect the computer can cause access to account information. Again, in case of a problem with the computer, all information about the account may be lost.

Web Wallet

Access is available via the internet browser and the information is not stored by service providers. It is possible to perform an operation by verifying the user information on any device that offers internet service.

Mobile Wallet

The only difference in this system, which is the same as the desktop wallet, is access via mobile device. It is used thanks to a software installed on the user's smartphone.

Paper Wallet

These wallets, which consist of a piece of paper on which certain codes are written, are the most reliable wallets. They are not affiliated with any internet provider, so there can be no cyber attack, but the paper needs to be physically protected. Access to the account may be lost if fluid is spilled, lost, or taken over by undesirable people. This wallet, created through software that supports the cryptocurrency, is printed on paper via the printer. In addition to the wallet's address, private and public key information, there is also a QR code on the paper for ease of operation. With the information on the paper, transfer can be made easily.

Hardware Wallet

They are similar to USB sticks and can be easily used on any device. In this wallet example, no internet is needed and private key information is never shared on the internet. It is much more durable than paper wallets that provide high level of security. In addition, they offer enhanced security options with wallet backup, two-step verification, and PIN password. In addition to being the safest type of wallet, the most technical information is also required for this wallet sample. A “seed” code consisting of random words must be created during its installation. This code is applied in case the user enters the PIN code incorrectly 3 times, loses / steals his wallet or any malfunction occurs.