A cryptocurrency wallet can be thought of as your digital bank account. Access to the wallet gives you control over tokens through which you have total and private control over the underlying asset. Without any third party intermediary, your tokens are dependent on the security of your wallet. This means you should consider a careful deliberation over the computer you store it on, passwords you use and the storage of seed words and other security elements. This should be taken seriously and protected the same way or more than you would with your banking details.
Although the imagery of a ‘wallet’ suggests that they contain the tokens you have purchased, it is more accurate to say that the wallet gives you rights to tokens, controlling the private key that the tokens require to be moved or accessed as well as storing public keys. When you move tokens, the private key in your wallet is matched with the public key so that the asset can change hands.
There are a couple of different types of cryptocurrency wallets, from software, hardware and paper wallet on your desktop, mobile or online.
A desktop wallet is downloaded and installed onto a desktop computer and are built into the machine itself, limiting access from anywhere else. Desktop wallets are highly secure, although viruses, trojans and computer hacking are risks of potential compromise in desktop wallets.
Online wallets exist on the cloud and are available on computers from remote locations. Although they are convenient an online wallet holds your private keys and so there is a high level of trust for users choosing this method of storage.
A mobile wallet is appealing because of its transportability and usability for actual use. Mobile cryptocurrency wallets are light-weight versions of the desktop wallet.
Hardware wallets are different from software wallets as they hold users private keys in a hardware device, such as a USB. A hardware wallet is essentially offline and so is highly secure and connection to the token network is only necessary when transacting. Most hardware wallets have devised quick and easy ways to perform transactions and they are considered sophisticated solutions for users.
Paper wallets are also highly secure, being more or less offline. A paper wallet is printed on paper, which may also be printed by the paper wallet. Transferring tokens to or from this is accomplished by manually entering your private key or using a QR code to facilitate the transaction.
How to choose a wallet?
Most cryptocurrencies have wallets that are highly regarded by the community that they have come from. Wallets created by lead developers of tokens as well as wallets with verified history are more likely to be secure options for storing your tokens.
Finally, and again always be careful with your wallet security, as in digital assets, possession is 10/10th’s of the law.