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Which Wallet to Choose

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Difficulty
Intermediate
Duration
22m
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Description

This course delves into the subject of cryptocurrency wallets and covers what they are, how to choose the right one for you, and how to buy and sell cryptocurrency.

Transcript

In this lecture specifically, I want to go over wallet types. Then, we'll move on to the more advanced areas of this section in the following lectures. So, let's jump into learning all about wallet types. Now, to begin with, I just want to clear up what wallets actually are if you are unaware. And as we mentioned, the easiest way to look at them are as bank accounts in the cryptocurrency world, but one which you have a lot more control over and isn't riddled with endless paperwork in regards to setting one up. Your cryptocurrency wallet, whichever provider you choose to go with, allows you to do the free functions: store, receive, and send cryptocurrency wallets. Some wallets now also have functions where you can purchase as well as sell your cryptocurrencies from within the wallet. Hence, making them the complete solution. There are various types of cryptocurrency wallets out there. I'll now go over the variety of wallets with you, because even though they generally have the same purpose, they're created in different ways which makes them more safe than others. The first type of wallet we have are web-based wallets. The most popular web wallet out there is Coinbase. As you can guess by the name, it's a type of wallet that you access via the web. Perhaps, not the safest way to store large amounts of Bitcoin. But for those who are getting started with the cryptocurrencies, it is often the easiest way to get started. Following on from web wallets, we have paper-based wallets. Once again, as it says, it's pretty straightforward. These cryptocurrency wallets are paper-based and contain all the data required on them to generate any number of Bitcoin private keys. This type of wallet is often used by those who wish to keep cryptocurrency safe and offline in the most physical form possible. In fact, if you have a Blockchain cryptocurrency wallet, you can create a paper wallet from there. Next up, we have brain wallets. So, these are wallets where you're essentially given a random string of words to memorize for your wallet. Many write this down. But if you do, remember, it's in your mind that it's a true brain wallet so it's written on paper, so it doesn't serve the real essence of a brain wallet. But there are issues when it comes to, if you pass away that your wallet is gone forever. If you didn't write down those words that back up your private key. A few wallets use a part of brain wallets, like the Armory wallet and others. Let's now move on to hardware wallets. So, a well-known example of a hardware wallet is Trezor. These are really secure and they are a great way to store large numbers of Bitcoins. So, these types of wallets store your private keys in the hardware device. They have major advantages over standard software wallets. One being private keys are often stored in a protected area of a microcontroller. And two, they cannot be transferred out of the device in plain text. So, super secure. And then, we have multi-sig wallets. This is simply where wallets require more than one key to authorize a cryptocurrency transaction. You'll generally find many other wallets incorporate aspects of multi-sig within them. It's just the way to keep things even more secure. Now, just to round up on this lecture, I want to go over hot and cold wallets with you and what they mean. So, there are wallets that are referred to as hot wallets. Now, hot wallets, as we mentioned, are wallets which are in some way connected to the Internet. And you could class Coinbase as a hot wallet as it is connected to the Internet. It's important to understand this term. So remember, a hot wallet is simply a wallet that is connected to the Internet. Then, on the opposite side, we have cold wallets, or as some refer to it as cold storage. These are wallets where your cryptocurrencies are not present on a web server or computer. It's otherwise offline. These wallets are great for storing large amounts of cryptocurrencies, as they are less vulnerable to hackers who maybe out to steal your tokens. We look forward to seeing you in the next lecture where we'll show you how to set up a wallet of your very own.

 

About the Author
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Ravinder is an expert instructor in the field of cryptocurrencies and blockchain, having helped thousands of people learn about the subject. He's also the founder of B21 Block, an online cryptocurrency and blockchain school.