The popularity of crypto has exploded over the last few years. India alone has more than 20 million people who invest in crypto. It has gone from being something only a select few invest in, to being a major part of most smart investors’ portfolios. 

Like with most of your assets, you need a safe space to store your cryptos, too. That’s exactly what a crypto wallet is. But crypto being a new-age asset, crypto wallets had to be different, too.

What is a crypto wallet?

A crypto wallet is a device you use to access your crypto investments. It doesn’t exactly store your crypto assets. Instead, it stores the public and private keys you use to access it. Public keys are used to send cryptos to someone. A private key is what the receiver uses to access their crypto assets. 

When you sign up on a crypto exchange, you have the option to use their in-built wallet or link your account to a third-party wallet of your choice. Depending on what you’re most comfortable with, you can pick which one to use.

Crypto wallets are mainly classified into two types.

A hot wallet and a cold wallet.

Any wallet that is connected to the internet and crypto networks is a hot wallet. This is an online wallet used to enable transactions. It also lets you keep track of your tokens.

A cold wallet, on the other hand, is a wallet that is not connected to the internet. It is a physical, offline wallet. Since data stored on a cold wallet is not online, it cannot be hacked.

The most common types of hot wallets are - Desktop Wallet, Web Wallet, and Mobile Wallet.

A desktop wallet is usually an application that’s downloaded on your computer. 

A web wallet is one that you access online, using your web browser. 

And a mobile wallet is an application you install on your mobile.

Cold wallets are classified into two types. Paper wallet and hardware wallet.

A paper wallet, exactly like the name suggests, is a piece of paper containing the private key that you need to access your crypto account. This is similar to a key that you’d need to access a physical locker.

A hardware wallet is a device that can be attached to a computer. It has all the data ie. a private key that you need to access your crypto investments stored in it.

To strengthen security, exchanges use geographically distributed cold wallets. This way, no one has access to multiple wallets at the same time. Nor can one person remove funds from any wallet.

How to pick the right crypto wallet

Both hot and cold wallets have their pros and cons. Hot wallets are considered to be more convenient. Soft wallets are thought to be more secure. Whether or not you’ve picked the ‘right one’ is something only you can decide based on your asset requirements. Understand what each type of wallet does. Educate yourself about the pros and cons. And pick the one you’re most confident about.