The Four Essential Types of Crypto Wallets
When you initially get some Bitcoin, or any other coin, asset, or token, you will need to keep it in a wallet. As a rule of thumb, wallets are designed for specific coins. For example, you keep Bitcoin in a Bitcoin wallet. You keep Ethereum in an Ethereum wallet. Essentially, there is at least one wallet for each and every coin. But increasingly there are more options for the more popular coins and there are also multi-coin and multi-asset wallets.
To help keep things as simple as possible for you, we are recommending a multi-asset wallet that can hold several of the most popular coins and assets. I’ll walk you through setting up that wallet in just a bit.
It’s going to seem like there a lot of different kinds of wallets and at first, you might find it a little confusing. Don’t worry. I’m going to break down the different kinds of wallets into simple categories. It’s important to know these distinctions, so don’t let it overwhelm you.
Keep in mind that different kinds of wallets provide different levels of security and that each wallet can serve a different purpose. It’s actually common for someone to have several different wallets, even if you only had one coin such as Bitcoin.
Hot and Cold Wallets
One basic distinction is the difference between a “hot wallet” and a “cold wallet.” A hot wallet is one that you expect to access often, using it to send money or buy things. It is used on a device that has easy internet access. Hot wallets are more vulnerable because they are more accessible, and because you tend to use them more often and in different environments.
Think of your hot wallet like the cash you might keep in your pocket. For security reasons, it is best not to keep a lot of money in this kind of wallet.
A cold wallet is generally kept offline. Cold wallets are therefore more secure. It follows that it is best to keep most of your coins in a cold wallet rather than a hot wallet. When you know you will need to access those coins, you can move them to a hot wallet or make the transaction directly. But generally, cold wallets are less accessible by design.
In summary, if the hot wallet is used to store the cash in your pocket, then, by analogy, a cold wallet is akin to storing large amounts of cash in a safe in your house. You can still get at it relatively quickly, but you don’t take it shopping with you.
Desktop, Online or Web, Mobile, Hardware
This is simply a wallet installed on a computer. You will need access to the internet, but you can also manage your coins offline. Generally speaking, a desktop wallet is the best compromise between security and practical use. The Exodus wallet that we will be using is a desktop wallet.
An online or web wallet keeps your coins stored in the cloud with a third party provider. It is convenient, as you can access them from any device. But, of course, it is less secure depending on how you access it and the fact that you must rely on a third party to secure your money.
A mobile wallet is one that you keep on your smartphone, tablet, or other mobile device. They often use QR codes to make transactions. Mobile wallets are convenient but not recommended for long-term storage. It is less secure to keep coins on a mobile device.
This is the most secure option. But they are more expensive while most other wallets are free. This is like putting your coins in a safe and burying the safe in the backyard. Ok, that’s an exaggeration. But as far as security goes, this is about as good as you can get.
They’re great for storage and easy to take with you. You can connect this wallet to a computer and transact online, then disconnect it again to keep it secure. The Trezor is the hardware wallet that we are recommending.
I mentioned earlier that people commonly use several different wallets depending on their needs. We recommend a desktop wallet, an online hot wallet, and a hardware wallet as a basic suite of wallets that can cover all your needs.
If you do not intend to keep a large amount of money in coins, the cost of a hardware wallet like the Trezor may make acquiring that kind of a wallet unnecessary. You will have to determine how much you will be investing in cryptocurrencies and how you will keep them.
Charlie Shrem is a Bitcoin pioneer. A social economist. A digital currency trader who has made millions. His work in this field is legendary. In 2011, at the dawn of the crypto era, he founded BitInstant, the first and largest Bitcoin company.
In 2013, he founded the Bitcoin Foundation and serve as its Vice Chairman. Since then, Charlie has advised more than a dozen digital currency companies, launched and managed numerous partnerships between crypto and non-crypto companies, and is the go-to guy for some of the world’s wealthiest entrepreneurs. In short, he is the ultimate insider at the epicenter of the crypto universe. Charlie holds a BS in Finance and Economics from City University of New York and studied at Florence University of the Arts.
Charlie Shrem isn’t the only legendary trader on the CryptoIQ team. Randall Oser founded TRK Group in 1999 leading the company as its Head Trader until its sale to E*Trade in 2003. He grew TRK to 150 employees while deploying over $100 Million in trading capital. He trained dozens of Wall Street traders on not only how to make millions of dollars but more importantly how to preserve their newfound wealth.
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