Cryptocurrencies are typically stored in a cryptocurrency wallet. This is a complicated topic, particularly since there are so many wallets available. But we’ll try to boil it down to the basic facts.
A cryptocurrency wallet is a software program that stores the private and public keys that connect you to the blockchain where your cryptocurrency exists. Wallets don’t actually store your cryptocurrency but enable you to access it on the blockchain with your public key (your “cryptocurrency address” that the other party in the transaction sees) and private key (known only to you). You must have both in order to complete a transaction. They’re called “keys” because they’re used to unlock your cryptocurrency on the blockchain.
In addition to enabling you to access, send and receive cryptocurrency, a digital wallet also provides a record of transactions that are stored on the blockchain, as well as your current balance.
Types of Cryptocurrency Wallets
There are several different types of digital wallets:
- • Desktop wallets are installed on your personal computer. Since storage is on your own computer, the information is safer than with online wallets.
- • Online wallets are on the cloud and can be accessed from any computer. They’re more convenient to use, but your private key is stored online and controlled by a third party. This makes them less secure.
- • Mobile wallets. As the name implies, this type of wallet is an app on your smart device. They have the advantage of being able to be used to make purchases where various cryptocurrencies are accepted.
- • Hardware wallets. These store your private key on a hardware device, such as a USB device. They’re more secure because the private key isn’t stored online, where it could be accessed by unauthorized parties. They also let you access your cryptocurrency from multiple devices.
Which digital wallet you choose will depend on your own desire for a balance between security and convenience. Some cryptocurrency exchanges also offer digital wallets for your cryptos.