A wallet is offline or online software where a crypto owner stores their cryptocurrency. A crypto wallet can also be seen as an address or bank account on the blockchain.

‍

How Do Crypto Wallets Work?

A cryptocurrency wallet consists of two elements: a private key and a public key.

• The private key A wallet is the “password” used to access it and consists of a long, complex combination of letters and numbers. This private key is only available to the wallet owner. Just like a bank account password.
• One public key is the public address of a cryptocurrency wallet and is used to receive or send cryptocurrency. The public key is available to everyone and can be compared to an IBAN number.

‍

Different types of wallets

There are 3 types of wallets

1. Hot wallet
2. Cold wallet
3. Paper wallet

‍

Hot wallets

A hot wallet is a wallet that is connected to the internet. Exchanges often offer hot wallets. Hot Wallets are the least secure wallets. Hackers can easily gain access by hacking the accounts that the hot wallet is connected to.

‍

Cold wallets

One of the most secure ways to store crypto is to store it on a Cold Wallet such as Ledger or Trezor. Here, the private keys are stored offline. This prevents hackers from gaining access to the wallet. Cold wallets are often secured with a numerical code.

‍

Paper wallets

With a paper wallet, the private key is written on a piece of paper. This is safe because there is no link to a computer but unsafe because paper is fragile. For that reason, it is sometimes decided to keep a paper wallet in a safe or by engraving the code on a piece of metal.