A crypto wallet is software or hardware that enables users to store and use digital currencies. With digital currency, there is no paper money to put in a physical wallet.
In other words, a digital currency wallet is a software program that stores private and public keys and interacts with different blockchains. The most important decision you have to make in the process of buying or selling crypto is to store and keep them in a safe and reliable wallet. These wallets have different types, the choice of which should be based on your needs and don’t forget that each person can have several wallets. ما در این مقاله سعی کردیم تا توضیحات کاملی در مورد کیف پول ارز دیجیتال، انواع آن و نحوه‌ی عملکرد هر کدام، بیان کنیم.
What is digital currency?
Digital currency is a monetary unit or medium of exchange that does not have a physical nature. These currencies are created from zero and one codes and they can be accessed through internet connection. Digital currencies perform the processes of international money transfers and payment transactions instantly. These currencies can be divided into two main categories, centralized and decentralized. Centralized type of digital currencies are produced and controlled by governments or organizations and groups. But in the decentralized type of these assets, no person, institution or group is responsible for the production and control of currencies.
What is a digital currency wallet or wallet?
والت Wallet یا کیف پول ارز دیجیتال cryptocurrency wallet برای نگهداری ارزهای دیجیتال استفاده می‌شود. CryptoVault stores the public and private key for cryptocurrency transactions. These keys allow users to receive or send digital currency such as virtual tokens. The private key is like a bank card password that ensures the user’s security, and the public key is like an account number that allows receiving cryptocurrency from other users.
There are different types of digital currency wallets, which are generally divided into three categories: software, hardware, and paper.
In fact, the digital currency wallet is used like a real wallet to store, pay and receive assets. Of course, in addition to storing keys, cryptocurrency wallets often offer their users the ability to encrypt or sign information.
Types of cryptocurrency wallets
There are different types of digital currency wallets that can be custodial or non-custodial. In a custodial wallet the server holds the private key of the wallet, for example an exchange wallet is a custodial wallet as it holds the user’s assets in trust. But in non-custodial wallets, users have full control of the asset and can access it whenever they want. In general, each user chooses one of them according to their needs.
Each wallet has many features and functions. User interface, level of security, access method and conditions, support for different currencies, capabilities related to intra-system exchanges and many other features are the points that distinguish wallets from each other. In general, digital currency wallets can be divided into the following categories:
Warm wallet or software
Hot Wallet digital currency wallets are installed on personal computer systems and mobile phones. These wallets store all user information online. Due to the online storage of information and assets, these systems are not free from the risk of attack. When choosing a software wallet, do your research on the company that made it. Different models of warm wallets are:
Desktop wallet
These digital currency wallets are installed on PC systems and can only be accessed from these devices. Of course, recently some of these wallets have also provided the possibility of access from mobile phones for users. Overall, desktop wallets offer a good combination of security and convenience. But it’s important to remember that if a hacker can remotely break into your device, they can also access your wallet.
Desktop wallets quickly became a popular wallet for Bitcoin and other cryptocurrencies. One of the reasons for the popularity of digital currency desktop wallets is their easy and quick access. Most desktop wallets have a simple and user-friendly environment, and even novice users can easily use them. Also, desktop wallets allow users to have full control over their digital currencies through public or private keys.
مزایا: استفاده آسان ـ دسترسی سریع ـ نسبتاً امن
معایب: زمانی که دستگاه شما به اینترنت متصل می‌شود، ممکن است کیف پول شما هک شود.
Mobile wallet
A mobile wallet is very similar to a desktop wallet in that the cryptocurrency wallet is installed directly on one’s mobile device. You can access this wallet by installing the wallet app on your mobile phone. As the name suggests, mobile wallets allow users to store cryptocurrencies on their mobile phones. This dynamic means that in addition to easily storing digital currencies, users can also use these currencies to pay for daily purchases in places that support cryptocurrencies.
مزایا: استفاده و دسترسی بسیار آسان و سریع ـ انجام خریدهای روزانه با بیت کوین به آسانی
معایب: به دلیل آنلاین بودن ایمنی پایینی دارند و ممکن است نتوانید کلیدهای خصوصی را کنترل کنید. A potential weakness of mobile wallets compared to other types of wallets is the reliance on constant updates by the app developer. Your wallet is at risk if your mobile phone is lost or stolen.
Web wallet
The web or online wallet has the lowest level of security, but it has the highest level of convenience for sending digital currency to another person. You can easily access online wallets from any device or web browser. The remarkable thing about the web wallet is that the provider of this type of digital currency wallet has full control over it, and the exchanged digital currencies are stored in the central server of these collections; If a hacker can access these servers, he will also have access to users’ wallets and their assets and information. Keep in mind that exchange wallets are also considered a type of this category of wallets.
مزایا: دسترسی آسان ـ رابط کاربری با طراحی بصری خوب و ساده
معایب: داشتن حداقل سطح امنیتی ـ حتی ممکن است نتوانید کلیدهای خصوصی خودتان را کنترل کنید.
Cold wallet or hardware
Unlike warm wallets, hardware wallets store users’ assets and information offline and do not require an internet connection for storage. This device connects to the Internet only if you need to transfer money. Hardware wallets are physical tools in the form of flash memory that are considered the safest and most secure way to store cryptocurrencies. These non-trusted wallets are devices that are specially designed for offline and safe storage of digital currencies. Of course, all security measures must be observed to prevent hacking of the digital currency wallet. The important point about the hardware wallet is that this type of digital currency wallet is not free and you need to pay a fee to use them.
مزایا: مطمئن‌ترین گزینه برای نگهداری ارزهای دیجیتال
معایب: گران بودن، پویایی پایین
Paper wallet
A paper wallet is less valuable than other types of digital currency wallets. In this type of wallet, the private code of each coin can be printed and stored on paper because in this way, the keys are not connected to any server. This process is managed by software. When you need to transfer money, you can simply enter the keys into an app or web wallet, or even easier, just scan the printed QR code.
Due to the risks involved in this method, storing digital currency in a paper wallet is considered almost obsolete. But this wallet is not completely perfect. Papers containing private and public keys may be damaged and inaccessible due to their physical nature. Also, these wallets are more difficult to access and operate than digital versions, and many users prefer to use digital wallets for easier access and functionality.
مزایا: غیر قابل هک بودن کاغذ
معایب: گم شدن، احتمال سرقت و تخریب فیزیکی ـ دسترسی و کارایی دشوار
Multi-signature wallet
In general, “multi-sponsorship” is a digital scheme that allows a group of users to sign a document. Usually, a multi-signature algorithm produces a common signature. This shared signature is much denser than a collection of individual signatures from all users. “Multimedia” gives additional security to the process of transferring cryptocurrencies. Hence the digital multi-signature scheme is generally used for digital currency wallets.
Multi-signature wallets have an interesting mechanism. They require all users involved in the creation of this digital currency wallet to agree to the transaction before any transfer takes place. In other words, multi-signature wallets are a type of cryptocurrency wallets that require two or more private keys to enter and send a transaction. In the storage method, several cryptographic signatures are required to access the wallet.
Decentralized wallet
To know the decentralized wallet, we must first know the centralized wallet. In centralized wallets, the private key is not only in the possession of the individual, but also in the possession of a third party! It means that other than the owner of the account, someone else has access to the account as an intermediary. This type of wallet is mostly used in exchanges. Exchanges like Binance have centralized wallets that allow users to manage their funds. In addition to third-party access to the wallet, she also monitors all commands you give to the system, such as transferring or receiving assets.
A centralized wallet is no different from a banking system. This cryptocurrency wallet is easy to use. Since the nature of the cryptocurrency market is decentralized, these wallets do not fit well with the market.
The functionality of a decentralized digital currency wallet is completely the opposite of a centralized wallet. In these wallets, exchanges, Volt servers, etc. are not allowed to enter Volt or use users’ private keys. Of course, there are methods to recover the private key. People using decentralized wallets prevent middlemen and third parties from accessing the wallet. These wallets work on a P2P basis and allow sending, receiving or any transaction only to the account owner.
Decentralized wallets are a bit difficult to work with, that’s why newcomers to the cryptocurrency world should use a centralized wallet at the beginning. Coinbase Wallet is a decentralized crypto wallet that is also a popular NFT wallet option.
Even now, some exchanges operate under the name of centralized exchange and decentralized exchange, which centralized exchanges have permission to access users’ private keys, and decentralized exchanges do not have this permission. The transaction method in decentralized exchanges is also P2P.
Exchange wallet
Exchange wallets are a temporary way to store digital currency. Most major exchanges in the world have provided an online wallet for their users. The features of these wallets are usually limited to buying and selling or transferring cryptocurrency. The important thing is how to keep customers’ currency in their wallets. Many exchanges store users’ assets cold or offline.
Valex wallet
Valex exchange, like most digital currency exchanges, uses two methods of cold and hot storage to store digital currencies and users’ assets. Most of the digital currencies are kept cold in Valex wallet. You can see the list of supported digital currencies in the markets section on the main page of Valex.
When you buy bitcoins on Valax, this currency is transferred to your bitcoin digital currency wallet, which is a type of cold wallet. These wallets provide you with the highest level of security. Also, Valex exchange uses two-step authentication to increase the security of transactions. In two-step authentication, after entering your email and password, a two-step verification code (2FA) will be sent to your email.
Is a hot wallet better or a cold wallet?
Choosing the best cryptocurrency wallet can be overwhelming for most people. Because both hot wallet and cold wallet have pros and cons. Which wallet you use depends entirely on your goals. But don’t forget that the main criterion for categorizing and evaluating digital wallets is their level of safety. In fact, the most decisive security feature of the wallet is its custodial or non-custodial trust. That is, if the wallet you are using provides you with recovery words (backup in general) or private key, it is safe, otherwise it is considered non-safe.
To read more, you can read the article What is Memo?
Security of digital wallets
It doesn’t matter which wallet you use; If your private key is available to someone else, they have access to all your digital currencies. Wallets such as mobile wallets, desktop wallets, or web wallets that deal with the Internet will always be at risk. Hackers use methods such as malware and viruses, remote access to the user’s device, and phishing (a cyber attack that is carried out by an unknown person in the form of a business or legitimate entity to deceive people and gain access to their valuable information such as username and password), can access your information. What measures can we take to prevent these risks or minimize them?
To deal with possible threats, it is recommended to take the following actions:
Use the latest version of the wallet
You should always make sure that you are using the most up-to-date version of the software on the device in question. To deal with possible threats, it is recommended to take the following actions:
Creating more layers of security
There are many cryptocurrency wallets that use two-factor authentication. The meaning of two-step authentication is that the user must confirm the code sent to her mobile phone or email to access her wallet.
Using multi-step signatures
Multi-step signatures are also one of the measures that can be taken to create more security. This means that the user must separately confirm the transaction using two or more devices. In this case, if one of the devices is lost, stolen or hacked, the hacker will not be able to access your wallet. Note that for this purpose you must choose a wallet that supports this feature.
Backup
Be sure to make a backup copy of your cryptocurrency wallet so that you can restore it if you lose access to it.
Introducing the best digital currency wallets
As you know, the variety of digital currency wallets in the market is huge and this can make it difficult for us to choose. The guide for choosing a digital currency wallet has been posted on many blogs, but some wallets have the highest scores among users and have proven themselves well in terms of security over the years. Trust Wallet is one of them. TrustVault digital wallet has the highest security factor among software wallets on the market. TrustVault is also the number one software wallet with support for many digital currencies. Also, this wallet is considered the best DiFi wallet for asset selection.
But in the section of hardware wallets, the first rank is undoubtedly held by the Ledger wallet. Ledger hardware wallet, like TrustVault, has the highest security factor among hardware wallets. Ledger has a very high variety of coins, so if you choose this wallet, you will not have a problem to store your digital currencies.
Exodus is a hot wallet and software that allows you to store various types of coins including Bitcoin, Litecoin, Dash and various ERC-20 tokens. But keep in mind that unfortunately, Exodus does not have two-step verification and multi-signature capability, which are considered important and essential features in the security of any wallet. This means that your wallet is no more secure than your mobile phone or wallet, and you will lose your assets if they are stolen or cyber-attacked.
Should we store digital currencies in an exchange wallet or a personal wallet?
You can keep your digital currencies in 2 ways:
- Exchange wallet
- Personal wallet
If you buy from the best cryptocurrency exchanges, keep your currencies safely in the same digital currency exchange. Storing and maintaining digital currencies in exchanges does not cost you, but to transfer purchased digital currencies such as Bitcoin to your personal wallet, you need to pay a fee for this transfer to the network. The movement of Bitcoin on the network is known as a transaction; You have to pay the cost of this transaction and this cost has nothing to do with the exchange. If you intend to buy and sell digital currency daily; It will be more economical for you to use exchange wallets. But if you intend to make a long-term investment, you can also use other types of digital currency wallets to store your assets.