There are different cryptocurrency wallet types. If you plan to build a digital product that uses crypto, understanding the different types of crypto wallets is a must.
This becomes especially true if you are undergoing an app development process that uses crypto. You need to offer your app users different alternatives to access their preferred type of crypto wallet.
FinTech users may find different cryptocurrency wallets more or less attractive depending on their preferences. How the wallet manages private keys is one of the most important aspects, but it isn’t the only one. Some users make their decision based on the device or software type. In this sense, some prefer a hardware wallet, while others prefer a mobile wallet or web wallet, and sometimes even a desktop wallet.
By identifying the particularities of the different crypto wallets, you will offer your users a better experience and help them engage with your app. In this post, we discuss the different types of crypto wallets and their characteristics.
The Importance of Understanding Cryptocurrency Wallet Types
Understanding the different types of crypto wallets is very important for your app development project. Digital money based on technologies like Blockchain is on the rise.
Unlike conventional money, which can be stored in a regular wallet, HiTech cryptocurrencies cannot be stored in traditional bank accounts or physically as bills and coins. To manage them, it is necessary to use one of many different types of crypto wallets. To many, the concept sounds pretty cryptic, but it is very easy to understand.
A crypto wallet is basically hardware or software used to transfer and store cryptocurrencies. This means it can either be a physical device or a program. Different crypto wallets have different characteristics, each of which may serve users for various purposes.
When it comes to crypto wallets, one of the main aspects to consider is security.
The Security of Crypto Wallets
Different currencies are stored in a secure format in a ‘block’ of an open-source Blockchain made of distributed ledgers. A crypto wallet is used so that only the owner of a wallet can access it. Thus, security is a major aspect to keep in mind when using one.
To access a crypto wallet securely, users need special tools for accessing them, known as digital keys. There are two types of digital keys: private keys and public keys. Let’s take a look at what these are.
Crypto wallets, also known as cryptocurrency wallets, use something called a private key. This is the most critical part of any crypto wallet to many users and experts on the topic. As their name suggests, they are the keys to crypto wallets.
Private keys allow users to access their crypto wallets, just like a regular key opens a locked door. To many, private keys are the hard part of managing a crypto wallet. However, many private keys are specially built to be friendly, even if they seem difficult to manage at first. Like every new technology, they just need some time before people get used to them.
Private keys allow users to manage their wallets directly in an accessible way. Private keys are exclusive to each user, and they should not be shared with anyone else.
Contrary to private keys, public keys are shared between users. These last are derived from private keys and are used for transfers between wallets.
This means that users can share their public keys with others to perform transactions on the Blockchain.
The Different Types of Crypto Wallets
These are the main types of crypto wallets that exist.
Software Wallets Vs. Hardware Wallets
When it comes to cryptocurrency wallet types, there are two main categories: software wallets and hardware wallets.
A hardware wallet is one in which a physical device is connected to a computer, enabling a specific crypto wallet. If a hardware wallet is lost, users can lose all their cryptocurrency stored in their private key. There are many stories of people who have lost their physical wallets, making them lose valuable crypto.
Contrary to a hardware wallet, a software one does not need any additional device to be connected to use a crypto wallet. A software wallet is a program, usually an app, that can be used for specific cryptocurrencies.
The software category of crypto wallets considers web wallets, mobile wallets, and desktop wallets.
A mobile wallet is similar to a desktop wallet, but it is specially designed for a mobile device. This gives users one of the best possible crypto wallet experiences.
A mobile wallet has to undergo a rigorous mobile app development process to keep its users engaged and offer them a secure experience.
There are many mobile wallets to choose from. To stand out, it is necessary to offer a clear value to users.
A web wallet works like a browser extension that can easily perform various crypto wallet operations. When it comes to security, web wallets are not the best alternative, as they are most likely susceptible to different types of attacks.
A web wallet is a great alternative for users looking to perform transactions using decentralized apps or DeFi solutions.
A desktop wallet can be used directly from a desktop or laptop to perform transactions with cryptocurrencies.
Like mobile wallets, desktop wallets are susceptible to various forms of malware. Users who prefer this alternative need to constantly make sure that their devices are free of any threat.
The desktop wallet alternative is becoming more secure with time, making it an excellent choice for everyday users and investors alike.
A paper wallet consists of a printed QR code that can be used for transactions. Paper wallets have many disadvantages, so many users prefer not to use them.
We recommend using other more secure alternatives.
Hot Wallets Vs. Cold Wallets
When discerning between the different types of crypto wallets, distinguishing between a hot wallet and a cold wallet becomes very relevant.
The main difference between these two is their form of Internet connectivity. In other words, what distinguishes a hot wallet from a cold wallet is whether it can connect to the Internet or not.
A hot wallet needs to be connected to the Internet. Hot wallets have a faster learning curve and can be set up faster. For the user, this means a friendlier experience.
Because of this, hot wallets are often used more frequently. Users who need to perform daily transactions tend to choose hot wallets as their preference.
One thing about hot wallets is that, when compared to cold wallets, they tend to be a bit more insecure because of their Internet connection. In other words, they pose a greater risk to users. However, this ultimately depends on the security of the wallet.
Cold wallets do not require users to be connected to the Internet, making them less susceptible to certain risks. Cold wallets are considered to be hack-resistant. Because of this, a cold wallet is usually more secure, although it usually takes longer for a user to learn how to use it.
In general, cold wallets tend to be used less frequently than hot wallets, making them an excellent alternative for casual users or long-term investors who do not perform many transactions.
Building the Right Crypto Wallet
Whether you want to develop hardware wallets or web wallets, you will always need to find a reliable development partner. No matter what type of wallet you choose, cryptocurrency wallets require a rigorous software development process, just like any other app.
Find a trusted development partner who can give you honest advice on what’s best for you and your users. A partner can help build a quality product and understand the different cryptocurrency wallet types, allowing you to choose the best alternative for your business and users.