A Cryptocurrency Wallet is a device that may be a physical medium or a program or a service that stores public or private keys. It can also store and receive digital coins. Apart from this, the crypto wallet also offers the functionality of encrypting or signing information. The latter results in executing a number of things namely, a smart contract, a crypto transaction, identification, and even legally signing of an electronic document.
A basic cryptocurrency wallet contains pairs of public and private cryptographic keys. These keys bear the function of tracking ownership, receiving, and spending cryptocurrencies. This being said, it is apparent that the public key allows others in the cryptocurrency network to make payments through the address, while the private keys allow for the spending of cryptos.
Cryptocurrency wallets are classified in two:
1. Hot Wallet
Digital in nature, these wallets come in two forms: the online and desktop wallets. Mobile wallets are also categorized as digital, but in light of its mobility, it can also be considered a “Hybrid Wallet”. Hot wallets are free and can hold any cryptocurrency.
2. Cold Wallets
These pertain to specifically designed devices that are meant as physical cryptocurrency storage. These are usually small and compact; these may come in the form of USB, CD, hard drive, paper, or offline computer. If one’s Cold Wallet is in an offline computer, it is digitally signed prior to transmission to the online network.