Cryptocurrency Wallets: A Quick Overview
At the time of choosing a cryptocurrency wallet, there are many options available on the market. On this post, we’ll go over the different options so that you can have a better understanding of the digital wallets available on the market. We´ve also recently announced the launch of the RWallet, which is another interesting option you may want to explore.
The first thing to have in mind is that there are different types of digital wallets known as hot and cold wallets respectively.
When analyzing the options for hot wallets, we have three typical options:
1 – Desktop Cryptocurrency Wallets
There are many options available on the market. Some typical options are Exodus, Electrum, Armory, Green Address, etc.
2 – Mobile Cryptocurrency Wallets
Exodus also has a mobile version available. Samourai Wallet, BRD, MyCelium are also other typical examples.
3 – Third-Party Cryptocurrency Wallets
Coinbase and Xapo are typical examples of third-party wallets.
Even though hot wallets have different useful features such as exchange functionalities, vault security and multi-signature to mention a few, some users prefer cold storage options in order to have direct control of the private keys. This leads us into cold wallets.
For cold wallets, you basically have two options:
1 – Paper Wallets
With paper wallets you have direct control of the private keys without using any hardware. Popular options are Bitkee, Cryptotag and Cryptosteel.
2 – Hardware Wallets
With hardware wallets you also have direct control over your private keys. Through specific devices such as Trezor, Ledger or Keepkey you create different public addresses and have direct control over the associated private keys.
Digital wallets (single and multicurrency) enable you to receive and send digital assets. For example, when you broadcast a transaction on Bitcoin´s network, miners have to include that transaction within a mined block for comfirmation purposes. Simply put, as long as a transaction is not included within a mined block, it´s not confirmed. All pending transactions are on the mempool and the direct incentive for miners on how to prioritize pending transactions is based on the transaction fee that each user is willing to pay to get each transaction included as fast as possible. This is particularly important in times of high network congestion.
Even though many digital wallets have the exchange function for swaps, there are many tokens that are no listed on cryptocurrency wallets. On those cases, the most typical option is to acquire those digital assets on exchanges. When acquiring digital assets on exchanges, you can withdraw the funds to your local address. For example, if you are purchasing bitcoin, RBTC or a typical Ethereum ERC-20 or ERC-721 token, you can withdraw the funds to the appropiate public addresses you created on your digital wallet.
Common practice usually entails using hardware wallets to hold those funds with direct control over the private keys. When dealing with exchanges, is always advisable to enable two-factor-authentication to add an extra layer of security. You write down your key (in case you need to claim the account) and then scan the QR code with apps like Google Authenticator or Authy.
One final important concept to have in mind, is that cryptocurrency wallets don´t actually hold your funds. Unlike physical wallets, the funds are on each blockchain. This is a key difference as you can always recover your funds through the seed, which you have to protect from third parties. Anybody getting access to your seed can immediately access your funds so that´s why protecting your private key is of paramount importance.
RSK has recently launched the RSK libraries, which enabled the creation of the RWallet. It will initially support RBTC, BTC and RIF cryptocurrencies. The new RWallet is designed for mobile users, and has been developed to support both Android and iOS devices. The wallet uses a secure seed to generate the private key and provide the users with a backup and recovery process to restore it if they misplace or lose access to their device.
In addition to storing, sending and receiving, the wallet provides swap functionalities, enabling certain assets to be swapped within the wallet using third party services. This will be especially useful to users looking to swap between BTC and RBTC and experiment with DeFi. Stay tuned!