A cryptocurrency wallet is a file that houses private and public keys. It usually contains a software client that allows sending and receiving digital currency as well as monitoring the balance on the wallet’s specific blockchain.
How many types of wallets do exist? There are five main types. Moreover, each comes with varying levels of security to ensure the safety of your private keys: online (web), mobile, desktop, hardware, and paper wallets.
How does a cryptocurrency wallet work? Wallets are used to store private keys: long hexadecimal codes known only to you. They must match with a public key so you can spend your money.
- Hot wallets are less secure cryptocurrency wallets, however, they are much more user-friendly.
Cold wallets are a crypto wallet type used for the “cold storage” of cryptocurrencies and are stored offline for improved security.
- Some wallets only hold one type of cryptocurrency. While others will allow you to store multiple types of cryptocurrencies in one place.
- Currently, there are almost 51 million bitcoin wallets according to data compiled by Statista as of August 2020.