What is the crypto market?

Although the crypto market is still a mystery to many traders who consider it extremely complicated, in reality, there are certain features that are familiar to anyone. For instance, speculators can open a crypto wallet.

How does a cryptocurrency wallet work?

A cryptocurrency wallet is an online software that allows the owner of virtual money to store, receive, and send it through blockchain networks. In other words, a cryptocurrency wallet is similar to a bank account that is used to work with digital assets and does not require intermediaries.

Importantly, a cryptocurrency wallet is not an exact virtual copy of our usual wallet for storing fiat money.The crypto wallet stores encrypted password keys that open access to the owner's assets. In turn, cryptographic keys can be public and private.

The difference between them is that public keys recognize an account on the network. They can be safely shared with other users to get virtual assets to your account.

Private keys provide the wallet owner with access and control over cryptocurrencies located in the blockchain. It means that for security reasons, you should never disclose your private key to anyone.

Types of crypto wallets

There are two types of crypto wallets: hot and cold.

A hot wallet is an online vault that is connected to the internet. It can work on different blockchains. They are quite easy to handle. In order to make an instant transaction, users just need to log in to the account and perform the operation. This is why many people use such online wallets to quickly pay bills and buy goods in stores. They are easy to configure and provide quick access to the balance.

However, there is a big downside to these wallets: they are vulnerable to cyberattacks. Therefore, only a small amount of digital assets necessary for everyday needs should be stored in hot wallets.

Cold wallets are cryptocurrency wallets that store private keys on something that is not connected to the Internet. They are used offline for storing cryptocurrencies, which makes them more resistant to hacking. Nevertheless, keep in mind that cold wallets also cannot guarantee their owner complete security. They are prone to stealing, deterioration, and damage.

In addition, users of such wallets should not expect instant transactions. Cold wallets are more suitable for those who plan to store virtual coins for a long time.

Despite all the above peculiarities, cold wallets are used today by the largest cryptocurrency exchanges and investors with large amounts of digital assets.