Dear reader, where do you hold your money? In your wallet, in a bank, under your bed, or you go for all three options? Well, there are valid reasons for keeping the money in different places – the way we keep them. We want to buy flowers and chocolates for our significant other on Valentine #39;s day paying cash to a seller right away, we are saving money to buy an apartment – we keep money in a bank. Anyhow, you are the only person that has access to your funds: you know where is your wallet and you know pin code for your banking card. The story is no different in the crypto world, except the wallets are a bit more complicated.
It’s hot and it’s cold
Digital crypto wallets are of 2 main types. First, there are hardware wallets – physical devices that usually look like flash drives. Second, there are software wallets, where the closest analogy is an online app that gives you access to your funds.
The main difference is the location of the private key – a magical key that can open any door. It was a joke, the private key opens only the door to user’s money, and if he/she has 0.001 BTC then not many doors can be opened. This is how they look like – E9873D79C6D87DC0FB6A5778633389F4453213303DA61F20BD67FC233AA33262. Basically, it’s the crypto world’s analogy to passwords and PIN codes. Let’s see what kind of “doors” (wallets) these keys can open.
Hardware wallets, which are also called cold storage, act as a safe where you put money that you are not going to spend any time soon.
These wallets are the easiest to distinguish – as mentioned before, they are physical devices resembling an external drive, they operate independently from online platforms.
Hardware wallets have an increased level of security. Private keys are stored in a protected area of the device’s microcontroller, and cannot be transferred out of it in plaintext. To date, there have been no verifiable incidents of Bitcoins stolen from hardware wallets. Your crypto holdings are kept offline, and you don’t have to worry about hackers at all. These wallets are also immune to computer viruses that steal from software wallets.
Additionally, if you do happen to lose it, you can always restore your coins to a new wallet via recovery methods provided by a manufacturer. Cold storage allows users to enjoy comprehensive decentralization and full control over private keys.
To get access to your money, you just need to plug into your device or a personal computer. Once you transfer your cryptocurrencies to one of those devices, they no longer exist on online servers.
There’s a number of hardware wallets manufacturers, all wallets look different in design, and here are examples of 2 most popular ones. Gadgets from the future, right?
Trezor Model T. Approximate price is 180 USD(on the left). Ledger Nano S. Approximate price is 90 USD(on the right).
Remember the option of keeping money under your bed? Digital world also gives you the same choice – paper wallet! It is simply a public and private key printed together. It is an offline wallet, and is regarded as a type of “cold storage”.
Software wallets are, unsurprisingly, based on computer software and available in three formats: desktop, mobile and online. They share more similarities to your online bank account than the wallet in your back pocket and are much more convenient for everyday use. There are 2 variations of software wallets – hot and hosted. The main difference is in the location of the private key.
You store your funds on the blockchain and use hot wallets to access your money via your private key. Unlike when dealing with a bank account, you are not linked to any establishment. You can enter your funds via one wallet, say Jaxx, and then access them again via completely different one, like Exodus. Think of this kind of wallets as an Internet browser: it doesn’t matter whether you type crypterium.com in Chrome or FireFox, the result will be no different.
Hot wallets also give access to the dApps, like decentralized exchanges or CryptoKitties, and allow you to take part in airdrops and ICOs. On the other hand, hot wallets usually don’t have such useful features as buying or selling crypto, all the more so using it as a payment method.
There’re a lot of examples of hot wallets, and the main difference is usually the number of currencies you can keep on a platform, design and user-friendliness. Additionally, some hot wallets like Jaxx offer 2-factor authentication, and implement some external services, like ShapeShift, to let user exchange currencies without leaving their platforms.
Having a hosted wallet is most similar to using regular banking apps: you are trusting your private keys to a 3rd party. In exchange, the service provider will take care of the security of your cryptocurrencies, and can offer you faster transactions (due to these transactions going off-chain, as they interact with blockchain only when funds are sent externally), lower fees, and better functionality.
In other words, we can name the absence of hassle with complicated private keys as one of the main advantages. There’s no need to worry about remembering or losing your keys, the platform will have you covered, and you’ll be able to access the money by entering a PIN code, or confirming your phone number or email. Biggest and most popular exchanges, like Binance or Kraken, can be classified as hosted as they hold user’s private keys and provide them access to their digital currencies.
On top of the simplicity of use, the user has more possibilities, like being able to buy cryptocurrencies and sell cryptocurrencies, as well as using them as a payment method. Crypterium, for example, lets you top up your phone with crypto, buy Viber vouchers, send money directly to bank accounts, or even getting things on eBay. And the number of features is constantly growing.
Hosted Wallet companies also might offer faster and cheaper internal transactions, because they don’t necessarily register each and every transaction on the blockchain. And while sending Bitcoin in Jaxx might take hours, if the blockchain is overloaded, in the Crypterium App internal transactions takes just seconds. And you can forget about the complicated wallet addresses too, sending money by entering just the recipient’s phone number.
Crypterium is one of the most promising fintech companies, according to KPMG and H2Ventures. We are building a mobile app that meets the banking needs of the digital assets era.
Our goal is clear: with Crypterium, whatever you can do with traditional money you will able to do with digital assets. This idea is supported, among others, by the co-founder of TechCrunch Keith Teare and over 400,000 registered users, and the number is growing by day.
The team is led by former General Manager of Visa Central amp; Eastern Europe Steven Parker, and C-level executives from global financial institutions, like Renaissance Insurance, London Derivatives Exchange, American Express etc.