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The digital currency craze is not stopping. More and more individuals and businesses are adopting Bitcoin and altcoins. While buying and selling virtual currency is fairly easy, there is a lot of ambiguity regarding cryptocurrency wallets.
There are many questions – what exactly is a blockchain wallet? Are cryptocurrency wallets secure? Are they anonymous? Which cryptocurrency wallet is the best, etc.?
This blog provides a detailed guide to build blockchain wallets, where you will be introduced to cryptocurrency wallets with no-version accounts, their benefits and much more.
As explained in our Entrepreneur’s Guide to Blockchain, the simplest answer to a blockchain wallet is one of the three pillars of the blockchain industry, which creates the private and public keys of all the bitcoins you have. They are not physical pocket wallets and do not hold any actual coins or currency. They are software programs that keep the unique ID of your digital currency.
They not only shop your cryptocurrency but also transact it using blockchain transactions. It is almost like a Paytm wallet, except there is no physical currency. It allows you to interface with different blockchains and hold your Bitcoin balance. You’ll need a bitcoin or multi-currency wallet if you want to buy or spend bitcoins.
Now that cryptocurrency wallets have been explained let’s move on to the next part of this guide, namely how they work.
A cryptocurrency wallet reflects your account balance – your digital currency, your ICO tokens and any other digital assets you own. These wallets act like bank lockers for cryptocurrencies. We do not share our lockers with others and keep our locker keys secure. We follow the same principles in Crypto Wallet.
When you create a blockchain wallet, a private key is generated. It should be kept safe and not shared with untrusted entities. A public key is also generated. It has to be shared with whoever wants to transfer your crypto. When someone sends you crypto, they will include the private key of their bitcoins and your wallet’s public key. After this, the transaction can be completed, and the new currency can reach your account.
When you spend some digital currency from your wallet, you essentially sign over ownership to another person. The entire transaction is encrypted and added to the respective blockchain and shows the change in the wallet balances of the two parties involved. Your Bitcoin private key must match the recipient’s public address to do this. Only then are the bitcoins transferred, and your wallet balance is reduced.
With that covered, let us move on to understanding the benefits of blockchain wallets.
There are valid reasons for an established brand like Rakuten to launch a crypto wallet app. The following are the reasons why blockchain wallets are different ways to solve traditional payment problems.
Now that we have seen the benefits of cryptocurrency wallets let us look ahead to highlight the uses of blockchain wallets in the business world.
The blockchain and cryptocurrencies are undeniably more than a trend. Blockchain applications are widely used and leveraged in all major industry sectors including FinTech, Finance, e-Health, ed-Tech Investing in blockchain app development can provide exponential returns and wider visibility in this expanding domain. And for any blockchain or bitcoin transaction, a cryptocurrency wallet must be set up.
Knowing this, if you are interested in building a cryptocurrency wallet app, you must familiarize yourself with the various types of wallets available in the market before hiring a reputable blockchain app development company.
So, with that in mind, let’s look at the types of blockchain wallets.
The blockchain wallet apps can be divided into software, hardware and paper. Software wallets can be for desktop or mobile. A proper blockchain wallet is essentially an app or software program that can be installed through a web browser. Hardware wallets can be purchased at computer accessory stores. A paper wallet can be printed or written on a piece of paper. It contains your wallet’s public key in QR form.
Here is a complete breakdown of all types of cryptocurrency wallets –
These are apps that can be downloaded onto a laptop or PC. This wallet works even when not connected to the net. Different variants are available for other operating systems. Some recommended desktop wallets are Armory and Multibit.
Since handheld mobile devices are so popular, compatible mobile wallets are available. In addition to their obvious portability, they have QR code compatibility that facilitates instant digital payments. Blockchain and Mycelium are trusted mobile wallets for iOS and Android users. A good alternative for BlackBerry mobile devices is Bitcoin Wallet.
All wallets can be classified into two categories: cold and hot wallets. A cold wallet is ‘offline’ and very secure. It should be used for large bitcoin holdings. They are generally uncheckable and can be used even without a net connection. Hot wallets are ‘online’ and can only be used when net access is present.
Online web wallets are organized on the cloud by third parties. Since the private keys of these wallets can be accessed through the cloud, blockchain wallet apps are the least secure option. But large organizations with multiple co-signers for wallets prefer this type of wallet—Coinbase, BitGo, and CoinKite top the list of online wallets.
As discussed, paper wallets store private keys and public addresses in QR form. This information may be printed out and sealed for added security. Paper wallets, while safe, are often vulnerable to moisture and fire hazards.
A hardware wallet looks like a smaller version of a flash drive. They are safe and easy to use. Unlike paper wallets, these cold storage gadgets are great for transferring private keys. Treasure and Ledger HW.1 are popular hardware wallets these days.
Although not open for public use, Bitcoin wallets were used by pioneers of the blockchain system. They have access to all transactions of the blockchain ecosystem. Some believe that these wallets were used by Satoshi Nakamoto, who developed Bitcoin and its core blockchain technology.
Although Bitcoin is the oldest and arguably the most popular cryptocurrency in town, other coins like Ripple are also moving fast. The good news is that you don’t need a separate wallet to store each of your cryptocurrencies. Many blockchain wallets can keep your multiple currencies neatly organized and completely secure.
Maintaining a multi-currency wallet is more convenient. For one, you don’t need to remember each wallet’s seed phrase (private key). Second, you can quickly view account balances across your different cryptocurrency accounts at a glance.
Finally, the security provided by multi-currency wallets is unbeatable. Holding altcoins in crypto exchanges is not a smart move. Because crypto coins are not insurance-proof, they are highly vulnerable to hack attacks. Trusting a third-party exchange with your accounts will have consequences. Therefore, investing in setting up a multi-currency crypto wallet will bring immense peace of mind.