Cryptocurrency wallet is a special hardware or a software program that is used to send, receive and store cryptocurrencies. All forms of wallets have two main components: public key and a private key. Public key is a string of numbers and letters that represents a location of your cryptocurrency on the blockchain. Moreover, it acts as a proof of your ownership over specific cryptocurrency and, hence, it is crucial to keep public key in secret from anyone. In contrast, public key, acts as an address to your wallet. In this way, if someone is willing to send you a cryptocurrency, one should know your public key. Overall, there are two main types of wallets: hot and cold wallets.
- Hot wallet denotes to any wallet that requires constant Internet connection. Such wallet could be either mobile application (e.g. Copay, Blockchain, Jaxx), desktop program (e. g. Bitcoin Core, MultiBit) or website (e. g. Coinbase). In contrast to cold ones, hot wallets are usually considered less secure as they could be possibly hacked through the Internet. Thus, one should not store big amounts in the hot wallets.
- Cold wallet is the wallet that does not require permanent Internet connection. Therefore, it is not vulnerable to hackers attack. The main forms of cold wallets are paper wallets (they store public and private key on the piece of paper), brain wallets (which represent public key by set of words that the owner of wallet should memorize), and, at last, hardware wallets. Hardware wallets are physical devices that store your public keys and usually provide a back-up option, in case if the device was lost. The most popular hardware wallet is considered to be Ledger Nano S. Even though, cold wallets does not require the Internet connection to store the cryptocurrencies, it might be required in order to send or receive one. Overall, cold wallets, specifically hardware one is the most secure option.
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