Cryptocurrencies have firmly established themselves in our lives and are being used 3 times more often than back in the 2017 boom. People freely convert fiat money into bitcoins for the safekeeping of capital, as well as regular transfers and payments around the world. Bitcoins are, in fact, securely stored on the blockchain, however, conducting transactions is not always safe. It is possible to protect and to make the transaction process easier with proven crypto wallets.
Definition of a wallet
In the crypto community, a wallet refers to a program, application, online service, or hardware device for cryptocurrency operations. The majority of crypto projects that have their own blockchain and coins offer the users official client software. In this case, it will only support transactions of a certain kind of coin.
However, many people find it more convenient to use multi-currency wallets from independent developers. One multi-currency wallet may support various blockchains, coins, and tokens. Usually, there is no compatibility between blockchains, therefore, it is impossible to transfer coins from one blockchain to another because there is a different kind of coin used there. Exceptions are multi wallets that support gateways, overlays, sidechains, which can be used to cross-chain — transactions with coin conversion.
A wallet also refers to an address in a P2P payment system. Let’s take a look at a bitcoin wallet: it can be the official software client Bitcoin Core, any third-party application or service for storing BTC as well as a unique address like 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa. By the way, this exact address is called the genesis address since it was the first one to appear and belongs to Satoshi Nakamoto.
Technically speaking, all these addresses are public keys that are available to the public in the blockchain explorer (if it is public, like Bitcoin). It’s just that everyone is used to calling them addresses. So, when somebody says that they’ve transferred some amount of BTC to your bitcoin wallet, they mean that they have transferred it to your address from theirs.
Types of bitcoin wallets
After understanding two meanings of the term, let’s see what types of wallets are out there for conducting transactions and storing bitcoins (more precisely, keys). Generally, they are split into hot and cold wallets depending on whether they need to be connected to the internet or not.
There are 4 types of wallets: web, exchange, desktop, and mobile.
This is the simplest one to use for BTC transactions. In order to use it, you don’t need to install any program or download any blockchain. The access can be gained through the browser from any device that’s connected to the internet.
Web wallets are best for frequent transfers and payments. For example, if you trade on crypto exchanges or other marketplaces where BTC is accepted, you need to deposit and withdraw coins there from time to time.
These wallets are generated on any exchange for each user for every kind of cryptocurrency that is deposited. Consequently, it’s something like a multi-currency web wallet.
The Polyx platform also creates for its users these types of wallets where bitcoins can be stored, as well as altcoins—ETH, LTC, BCH—and USDT tokens.
This application or program is for PCs running on Windows, Linux, or macOS operating systems. Depending on the size of the blockchain that is necessary for the functioning, desktop wallets come in the form of:
- Heavy (or thick) clients. They store all the transaction information, and therefore it is necessary to download the whole blockchain and update it regularly. For example: the Bitcoin blockchain takes up 376 GB (as of November 2021), and its first synchronisation with the network takes 17 hours (if the internet speed is 50 Mbps).
- Light (or thin) clients. They use only part of the information, about the transactions from the required block. And the full copy of the blockchain remains on the wallet developer’s server, who deployed the full node there.
Either of them allows generating both public and private keys. Private security keys are intended only for its user, they must not be shown to anyone. They are needed to sign transactions in order to send coins to someone else’s address (also known as public key).
This is a smartphone application similar to a desktop one, only in one possible available variant — in the form of a light client. Or rather, more like a web wallet because mobile apps are the front end of web apps.
The Polyx platform also offers its users a mobile crypto wallet. It is multi-currency, therefore it supports the transactions for BTC, ETH, LTC, BCH, and USDT.
There are 2 types of wallets: hardware and paper.
It is a device that looks like a USB flash drive. It autonomously generates private keys and digital signatures, and stores them without access to the internet. Unlike web, desktop, and mobile wallets, a hardware wallet also requires entry of a PIN to use the keys. This greatly increases the level of security.
It is worth mentioning that some white hackers did hack into certain hardware models for pen testing. After these cases, the developers update their firmware. Nevertheless, so far this is the safest way to store large sums of BTC. Especially if the device is also stored in a private place and nobody is aware of it.
It is a printed document that contains two QR codes: one has a private key (to send BTC), and the other has a public key (to receive BTC). These codes can be generated on trusted websites or on some web wallets and then printed. But if there is a chance it is better to download the QR code generator to a PC and make the keys while disconnected from the internet.
Just like a hardware one, a paper wallet also needs to be stored in a private place away from light and moisture in order not to damage the printout.