If you’re a bitcoin trader or are an inspiring crypto-user, it's essential for you to have an online wallet. Crypto wallets enable users to transfer and receive digital funds and monitor their balance. This wallet uses private and public keys to record transactions on blockchain. So what’s a crypto wallet, exactly, and how it operates? Let’s dive in and find out!

Types of crypto wallets

In today’s digital currency market there are five types of crypto wallets: hardware, paper, desktop, mobile, and web.

Hardware wallets use a USB-like device to store users’ private keys. These wallets are considered to be more secure than others. For instance, they give users the luxury of keeping their money offline when they aren’t trading.

In many cases, paper wallets provide a higher level of security as well. As indicated by its name, “paper wallet” records digital transactions by way of print. For instance, users can scan a QR code to begin trading or present documentation of their public and private keys.

Desktop, mobile & online

These types of wallets generally pose a higher risk of hackers stealing your information and crypto funds. For example, mobile wallets use an application to allow users to send and receive crypto. Any mobile app, same as a phone itself, can be easily hacked, and that is the downside of using a mobile wallet.

Desktop wallets are available through downloadable computer software that offers a certain limited space on the computer. They can only be accessed from the original computer that downloaded the application. However, if that computer falls victim to a hack attack, so does the crypto wallet.

Online wallets operate on a cloud-based server that is governed by a third-party, and are subject to a certain insecurity, too. While online wallets are certainly easier to operate due to their accessibility, they also store your private keys online, which makes this type of crypto storage especially vulnerable.