A cryptocurrency wallet is a digital tool that allows users to store and manage their cryptocurrencies, such as Bitcoin, Ethereum, and other altcoins. It functions similarly to a traditional wallet, but instead of storing physical money, it holds private keys — cryptographic keys that are used to access and manage the user's cryptocurrency.
There are two main types of cryptocurrency wallets:
Hot Wallets: These are connected to the internet and are more convenient for frequent transactions. They come in the form of web wallets, mobile apps, or desktop applications. However, they are more vulnerable to hacks and security breaches due to their constant internet connection.
Cold Wallets: These are offline wallets and are considered more secure because they are not connected to the internet. Cold wallets include hardware wallets and paper wallets, which store private keys offline, making them less susceptible to cyberattacks.
Cryptocurrency wallets can also be classified into custodial wallets (where a third party controls the private keys) and non-custodial wallets (where users have full control over their private keys). Non-custodial wallets are generally preferred for greater security and privacy.
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