Digital Currency Wallets A quick guide

What is a Digital Currency Wallet?

A Digital Wallet is a secure location to house your cryptocurrency whether online or offline. Wallets are required when buying or selling digital tokens such as Bitcoin and are usually safe. We say ‘usually’ because there have been occasions when ‘online’ wallets have been compromised.

How secure is my Wallet?

An online wallet is usually provided by an exchange to house any cryptocurrency you have bought or sold and is normally integrated within the exchange or service provider itself.

This form is not recommended by Altcoinium as you don’t have control of how the wallet has been implemented or your private key. Your keys live on the exchange or service provider's server. This is not great if the exchange is compromised or not up-to-date with their security implementation as it renders your cryptocurrency vulnerable to theft. There are, however, other online wallets which have a greater degree of control, such as Green Address, which Altcoinium does recommend.

What type of Wallet should I use?

The type of wallet you require really depends on your security needs, the general rule is the more money the greater the security.

Broadly speaking there are three types of wallet, online as we have previously mentioned, software and hardware. Within these three categories there is a further distinction. There are advanced wallets which require user input and sometimes complex configuration and should only be implemented by more experienced users. There are also more simplistic wallets ideal for beginners so before you go get one spend some time deciding whether it’s going to be online, hardware, software, advanced or basic. Use our wallet menu to help you decide.

Software Wallets

Software wallets are installed on your desktop or mobile device. These wallets retain your private key on the physical computer/device so offer a far safer alternative to online wallets. Security is as good as the computer/device they are installed on so, for example, a keystroke recorder installed on your desktop can compromise the security of your software wallet. As long as you follow safe practices and your computer/device is up-to-date it should be sufficiently safe. Some software wallets require the user to download the entire blockchain before interaction can begin. These are heavyweight software wallets which require substantial space on your system, more suited to desktop computers and more experienced users. Others are more lightweight and remotely query the blockchain without having to download it to your local computer/device. Software wallets are normally free and offer a far safer alternative to online wallets.

Hardware Wallets

Hardware wallets, also referred to as Cold Storage, are very secure due to their security design and can be used to store Bitcoins or any other cryptocurrency. It is a self sufficient physical device retaining your private key onboard rather than storing it on your computer or mobile device. Most hardware wallets use an integrated display to verify transactions.

Maximum security is achieved by storing your and signing your cryptocurrency transactions offline. Attempts to “hack” your wallet remotely is virtually impossible. If your computer were hacked, your cryptocurrency would still be safe as they would need to further hack the physical hardware wallet connected to your computers usb.

Hardware wallets allow you to send and receive digital tokens on any device with an internet connection, even one that is compromised with malware. Even under such undesirable circumstances the transaction will still go through as intended. Pretty impressive right? Clearly, it is obvious that the hardware wallet offers the greatest degree of protection but they cost money. You have to pay for the physical device.

So whether rich, poor, advanced or beginner there is a wallet out there for you. Why not check out our Wallet section? Look at ‘What We Think’ are some of the best wallets and why.