There are many different types of wallets. Now, we have to find out what type of wallet is suitable for any cryptocurrency user. There are three main types of wallets. Online wallets, Desktop/Mobile wallets and Hardware wallets. Each kind of wallet has it’s own properties and a user many need more than one type, to satisfy the needs.
When a user, opens an account on a cryptocurrency exchange, the exchange creates a wallet for the specific user. It is needed, because, when coins are transferred with the use of the blockchain, there is a transaction fee. For day trading, the blockchain transaction fee, may lower or eliminate any profits of day trading. The coins, are exchanged between users, with no transactions on the blockchain. It is good for trading, but you do not control your coins. If there is a problem with the exchange, your coins are gone.
On line wallets as a service
The on line wallets, are a very good option, because you can access them through a web page. They usually create an account and there are two kinds of wallets. Some of them, give you functions to get the private keys, and some not. You can see the previous article https://read.cash/@tsakf/cryptocurrency-private-keys-keep-them-safe-12bd21de, to see why it is important to have the private keys. When you do not have the private keys, you do not control your coins. Generally, it is advisable to have funds available to be spent there, and don't use them for long term storage.
Again, there are two kinds of application wallets. Core Wallets, and light wallets. Core wallets, keep a local copy of the blockchain. When someone keeps a copy of the blockchain, he is classified as a node. A node has rights to vote for the project evolution. A core wallet needs bandwidth, to sync with the miner nodes, to have an updated copy of the blockchain. Sometimes, it is not possible to have a copy of the blockchain. Then, a light wallet can be used. A light wallet, uses a network of servers, that keep the copy of the blockchain. The application connects to a server, of it’s network. Light wallets, have a disadvantage that if the server network, vanishes, you can not use it any more. This is not a big danger although, because you can use your private keys, to transfer funds to a wallet that has a functioning server network.
Hardware wallets are special wallets, that communicate with application wallets, with USB or Bluetooth. The hardware wallets, keep the private keys, off line, and sends them to the application, when a send function is initiated. A special kind of hardware wallet is the paper wallet. A paper wallet is a wallet, that has the cryptocurrency address and the corresponding private key. The funds can be sent to the address, and the paper wallet, should be kept in a safe place. When the funds should be spent, the private key can be used to import the coins to an on line or application wallet.
A cash mentality should be kept again
Before banks, the people, had three different purposes for money. Pocket money, that is available for everyday expenses. money to be spent for monthly expenses, and money kept in a safe, for great purchases, like a house, a car, or special purpose money for medical or recreational needs. Pocket money, could be held on an on line wallet, or mobile application wallet, to have them anywhere any time. Monthly expenses, could be satisfied with a desktop wallet, with or without hardware wallet, because it is not advisable to carry a hardware wallet with you all the time. Hardware or a paper wallet, kept in a safe, is suitable for great purchases or special needs.
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