A crypto wallet allows users to directly interact and transact with blockchain networks. Crypto wallets can be software based or hardware based.
Hot wallets and Cold wallets
Hot wallets are usually software wallets that are connected to the internet.
Cold wallets are usually hardware wallets that have no connection to the internet.
Hot wallets are considered to be less secure than cold wallets because they are connected to the internet and cold wallets aren’t. However hot wallets are still considered to be safer than storing crypto on centralised exchanges.
MetaMask (https://metamask.io/) and TrustWallet (https://trustwallet.com/) are examples of software-based hot wallets. Trezor (https://trezor.io/) and Ledger (https://shop.ledger.com/) are examples of hardware cold wallets.
A crypto wallet is comprised of one or more pairs of public and private keys, and an alphanumeric address generated using these keys.
Users can share their address with others to receive funds. The private keys must never be disclosed to anyone as this can be used to access crypto funds.
Common software wallets
Trust Wallet is a free-to-use app that allows users to store crypto and transact with decentralised applications. In 2018, it was acquired by Binance (https://www.binance.com/en).
Trust Wallet is considered to be a hot wallet but it allows users to store personal information on their devices, away from the internet.
Common hardware wallets
Is a cold wallet that is used to store crypto assets and sign transactions in a secure manner. It is a USB device that stores crypto assets and private keys offline.
Ledger is another cold wallet that uses offline storage mechanisms like USB drives to store private keys. It can be used to send and receive crypto safely through secure elements and proprietary operating systems designed to protect users’ crypto assets.