Deep Dive Into Cryptocurrency Wallets

So, we have decided that it is a good time to revise Crypto 101. Relax, make yourself some tea and remember about the heroes keeping your cryptocurrency safe — the wallets.

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It seems like everything people keep talking about right now is Bitcoin Halving. Also, the money machine going brrr. Also, Corona. Also, other, well… Stuff. The world is a crazy place. Don’t you just wish life was simple and basic? Going back to the roots, to what is truly important. Guarda does! So, we have decided that it is a good time to revise Crypto 101. Relax, make yourself some tea and remember about the heroes keeping your cryptocurrency safe — the wallets. Here, we will break down the important bits, help you choose in the time of need and have a little bit of fun. Together.

Ok Google, what is a crypto wallet?

We talk about wallets all the time. Literally every day — going grocery shopping (not anymore!), checking how your cryptos are doing, arguing with your bank because they blocked your account for no obvious reason… But do we really have time to think about what a wallet is? Of course no. Merriam-Webster dictionary, that remains one of the team’s favorite books for a good reason, states that the “wallet” is:

A folding pocketbook with compartments for personal papers and usually unfolded paper money

Makes sense. However, if we are talking about blockchain, things get a little bit more complicated. First of all, the wallet is not physical. Secondly, you can not put unfolded (or folded, really) Bitcoins in there. This is where we state:

A crypto wallet is an application allowing the users to generate and manage private and public keys. The funds still remain in the blockchain though.

The world of crypto wallets is great and vivid — the storages come in a variety of forms, with a great many features included, designed for particular causes and much, much more. Hopefully, we will manage to cover at least the main types in this article.

Keys-keys-keys

How do we distinguish wallets on the most general level? Possibly, the most basic distinction would be by the way your wallet generates the keys. There are two types of keys that you need to interact with blockchain— a public key (sort of a more lengthy version of your address) and a private key (the key that your SHOULD NOT SHARE WITH ANYONE, which is used to sign transactions and manage dem Bitcoins). A wallet can either generate the keys in a deterministic or a nondeterministic way. Believe me, it gets easier if you pronounce this a couple of times.

Nondeterministic vs. Deterministic crypto wallets

If you ponder on the word “deterministic”, it is possible to understand that this type of wallets DETERMINES the keys from… Something. This is absolutely true — deterministic wallets generate the keys from a common seed. This is pretty great, as the wallet only needs one backup––the private keys all get generated from the parent seed, no worries here. You can also use the same backup to manage the wallet (for instance, export it or import it).
Nondeterministic wallets, on the other hand, do not have the seed to generate the keys from — each key gets created individually and can only be used once. Great for privacy. Hell for those who love comfort — you need to keep all the copies of your keys, otherwise, you might be locked out of your wallet and say farewell to the coins in it. The more keys get generated, the more challenging the wallet management becomes.

Custodial vs. Non-custodial wallets

Crypto wallets

Offline wallets, Online wallets and where to find them

Types of crypto wallets

Cold Wallets

Storing cryptocurrency offline is sometimes not as easy as it might sound — after all, you will need to think of the way the keys are actually going to be held. With Cold storages, there are not too many options to choose from, so here we will break down two main categories.

Hot wallets

Look at Guarda. We are here 24/7, always online, ready to answer all your questions. Our interface, too, is here to generate the keys at all times — all you need to have is a stable Internet connection and, of course, a device to use. As we have already covered all the platforms in cryptocurrency wallet development, we will have the audacity to describe the forms of hot cryptocurrency wallets using our own examples.

This is just too much — what do I do now?

Great! We got everyone absolutely confused! Now, you just have to process all this information and continue living with it.
Ah, just kidding. We hope that this guide will be enough for you to understand the very basics of cryptocurrency wallets and their types. When it comes to choosing a service and trusting your blockchain access with it, there are really several rules to follow:

  1. Think about the purpose — if you are in for cryptocurrency storage and management, choose a non-custodial wallet. First of all, this increases your security levels, secondly, your data remains yours at all times.
  2. Choose cold or hot storage — are you just here for a massive USD 2398305872350323 investment in Bitcoin? You will not touch these funds ever again? Possibly, it makes sense to look for a hardware wallet. If you change your mind and decide to play around with your BTC somewhere along the way, Guarda and Ledger integration is also always here for you.
  3. Pick a wallet that is versatile — if you are new to cryptocurrency, you might want to just have fun. Check all the features, get a smooth onboarding process, exchange one coin to another, do this and do that. This is why it is good to pick a wallet that supports many coins, comes in different forms (talking about platforms here) and offers a range of features to choose from. It is important to feel good about your wallet. We know. We’ve been doing this for years.
  4. Sometimes, it’s good to follow the rules of security but also go with the gut. Pick a friendly service that makes you comfortable!
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