DeutschThere are many ways to collect and secure your digital currencies. Explained below: the different types of wallets, digital wallets. One of the safest storage methods is the paper wallet – but other solutions for storing digital currencies also have advantages.
What is the Purpose of Wallets
Wallets, also called digital wallets, are primarily used to store Bitcoins and other digital currencies. In times of cybercrime, however, the protection of Bitcoins from theft is also an important function of a digital wallet. Basically, they consist of two keys – a public key and a private key. The former is primarily used for transfers between people or their wallets. The public key is comparable to an address – it allows other people to send Bitcoins to the wallet. In contrast, the private key: It enables sending to others. Together, the two keys make the transactions of digital currencies possible. Comparable to a transfer from one bank to another. If the private key falls into the wrong hands, the Bitcoins can be stolen. To avoid this, wallets help to protect the private key.
Types of Wallets
There are different types of storage and each has different advantages and disadvantages. Below is a list:
- Online wallets (also called hot wallets): The easiest way to store digital currencies, but also the most insecure solution. Again and again you read about online exchanges that have been hacked in various ways and criminals have gained access to and stolen large fortunes. The big advantage is that the wallets are often browser-based and are therefore easy to set up and manage.
- Offline wallets as a physical stick (also called cold wallets): A trend that is becoming more and more popular. The keys are stored with a kind of USB stick. The stick can be stored offline in a safe place after the transaction. The disadvantage here is: Offline wallets usually cost money and for transactions they have to go online just as much, which opens up the possibility of unauthorized access for hackers. In addition, the hardware can also break and this would also lead to the loss of the Bitcoins. But a definite advantage is: you can also store the stick safely (e.g. in a safe). One of the best-known providers is Ledger or Trezor.
- Offline wallets as software: These solutions are installed and operated on a computer hard drive. The advantage here is that they also work offline and usually give the user more freedom in managing the wallet. But if the computer is stolen, all digital currencies are also lost.
- Paper wallets: What sounds like an anomaly at first: paper and digital currencies has many advantages at second glance. Paper definitely cannot be “hacked”. It can be stored very well and safely. Paper is probably available in every household in Switzerland.
More Details about the Paper Wallet
First of all, it is important to understand how they work in concrete terms. These are copies of the two keys required (private and public). So-called QR codes are often used for paper wallets. These are graphics that can be photographed with any modern smartphone and behind them is a link / URL. These in turn facilitate the processing of the transaction. The big advantage (as already mentioned above) is that paper and thus the information on it is not stored digitally. Thus, it cannot be stolen via cyber attack or lost due to defective hardware.
Now it is up to everyone to find the right way to store digital currencies.
