Different types of e-wallet that are currently on the market and their defining characteristics will be compared in this article. We will also examine the criteria to follow so we can choose the most suitable e-wallet for our needs.
An e-wallet has the functionality to store and manage our cryptocurrencies. It is the technological equivalent of a traditional current bank account but designed to operate with cryptocurrencies.
On a conceptual level, it is important to be bear clearly in mind that our digital e-wallet is a tool to save and make use of our cryptocurrencies. It is not identified by our identity using ID such as our name and surname. Instead, it is identified by using an address which comprises from 27 to 34 random alphanumeric digits. This address becomes the equivalent of “username” and is a public key.
There are no two digital wallets with the same address. Having a public key means you are the owner of an address that can receive cryptocurrency funds. There is also a private key, with an alphanumeric structure similar to the address. The combination of the public and private key is what allows cryptocurrency funds to be sent to a wallet.
Therefore, a wallet of this digital type is identified with an address. This is anonymous, but like any transaction in cryptocurrencies, once said transaction has been validated between two users, it is recorded in the account book. The balance in cryptocurrencies associated with an address is public. Thus, you can check the cryptocurrencies managed in a wallet.
The wallets interact in a market or Stock Exchange. This financial market allows trading between different currencies as well as assigning economic value to cryptocurrencies, according to supply and demand. The control of our keys defines the security of the wallet in the market. However, who generates our keys? Where are they stored?
There are different types of wallet such as desktop wallets, web wallets, mobile wallets and hardware wallets.
Desktop wallets are applications that are downloaded to a computer, compatible with most of the cryptocurrencies on the market. We have full control over our private digital key. Therefore, the user is solely responsible for the control and security of their currencies. You must have the software equipment with a minimum of security measures installed. Updated antivirus, anti-malware and a firewall are indispensable. Many of the desktop wallets allow you to encrypt the file that contains the private key to offer more security. The most commonly used desktop wallets are Exodus, Jaxx, Electrum, Multbit or Bitcoin Core. Each one of these has its own peculiarities, such as the download, complete or partial, of the account book.
Web wallets are accessible from Firefox or Google Chrome browsers. It is important to note that some allow the user to control their private key, thus offering more security and the ability to change wallets quickly. Coinbase, BitGo or Blockchain.info are some of the most commonly used web wallets. Some exchanges also offer the wallet function, so we can buy cryptocurrencies and operate with them on the same platform.
Mobile wallets are the most commonly used type of wallet. A simple app that is downloaded to the smartphone. The enormous usability reduces your security. The loss or theft of the smartphone could allow access to the user’s private key. Therefore, it is necessary to make a copy of the private keys on another device. It would also be advisable as a feature of the wallet to have a quick and efficient way to block the funds at the user’s request. Without these precautions, with the loss or theft of the smartphone, all funds deposited in the wallet could be lost. Many users use this type of mobile wallet as a secondary wallet, with cryptocurrencies transferred from another main wallet, with less usability but much more security. It is used for payments of small amounts as with some web wallets, we do not have the management of our digital key, but it is the platform that takes care of it.
Hardware wallets allow you to store the file that contains the private key in external hardware or device and not be permanently connected to the wallet software. They are the safest. It is hardware similar to a pen drive. They connect to devices such as a PC through a USB. They isolate our private key from external access as well as protecting it from software. Its cost is usually around €.70 – €.150 The most commonly used are Ledger, Coolwallet, KeepKey and Trezor. Only the device is connected at the time of the transaction.
Therefore, depending on the volume of cryptocurrencies to be managed, the appropriate security criteria must be defined accordingly, as well as the usability that this system will offer us.
At Martí & Associats we can counsel you so that you have all the necessary information and professional advice to take the best decision for investments in cryptocurrencies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.