Cryptocurrency Wallets Overview

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An Overview of Storage Types for Cryptocurrency

What Is A Wallet?

A wallet is a mechanism that allows for storage and transaction of cryptocurrencies. Users receive keys during wallet generation that enable them to utilize wallet functions. A private key and a public key are generated for use in receiving and transferring coins and tokens. These keys are what give access to your wallet.

What Are Keys?

Public Key: A public key is a string of numbers and letters that identify a wallet. This address can be used to receive coins and tokens, but sharing this key with someone does not grant them the ability to withdraw from your wallet.

Private Key: A private key is a string of numbers and letters specifically used to access the contents of a wallet. As the title implies, this key is not meant to be shared and doing so would allow others to access your wallet and make transfers.

Take a second and envision your cryptocurrency wallet like a safe hidden in your closet. You can tell someone where your safe is, but this doesn’t give them any access to the inside. This is like your public key, which can let someone view your wallet but they have no control over the contents. The combination to the safe would be your private key, and only with the combination can you access the inside of the safe.

What Is A Seed Key?

A recovery key (often called a seed key or seed phrase) is a mnemonic phrase used as a backup in case your private key is lost. It will look like a nonsense grouping of words, but this list of words can be used to access the wallet in the event a user no longer has private key access. When writing down your seed key, keep in mind that both the words and their order are important and using a seed to recover a wallet will require that the phrase is entered in the exact order it was presented. This key needs to be treated similar to a private key, as it can grant full access to your wallets. There are millions of combinations for seed keys, and it is very unlikely that two people will receive the same seed. 

Types of Wallets

  • Hot Wallet: Hot storage refers to the practice of keeping your keys (and access to your funds) on a device that is connected to the internet. Hot wallets can be acquired through a browser add-on, on an exchange, through a mobile app, or a software wallet on your PC.
  • Cold Wallet: Cold storage refers to the practice of keeping your keys (and access to your funds) in a manner that is disconnected from the internet. The primary methods of cold storage are paper wallets and hardware wallets.  A paper wallet has the keys printed directly on a piece of paper. A hardware wallet must be plugged into a computer and funds can be managed through the hardware wallet. Without physically having a cold storage wallet or knowing the secret backup key, there is no transferring the funds out of the wallet.

Which Type of Wallet Is Best?

There is no single answer to this question. Both types of wallets have their own benefits and risks. A hot wallet is much more convenient but is able to be compromised by phishing or malware attacks. A cold storage wallet must be kept in a physically safe location and risks hardware failure or degradation over time if it’s a paper wallet. Choosing a type of wallet all comes down to your individual needs.

What Types of Storage Does Dropil Offer?

Dropil offers a variety of storage options for our users. Through Paper, users can securely store keys for any wallet they want with our cold storage paper wallet solution. Within the Dex portal, users can store DROP tokens in their portal wallet for quick and easy access to Dex. Using Max, users will be able to store an increasing variety of coins and tokens accessible online from anywhere.  

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