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Everything You Need to Know About Cryptocurrency Wallets

For new cryptocurrency traders, storage is one of the first and most important issues to address. Allowing you to serve as your own bank is one of the key benefits of digital assets. Yet, in order to do so, you need to have a safe and secure place for your virtual currency. That is why finding the right cryptocurrency wallet is so critical. However, doing so isn't always easy. Though the idea behind a digital wallet is simple, the reality of it can be somewhat complex. There are thousands of digital assets available today, and many of them require their own dedicated wallet. Additionally, there are several different types of wallets that digital asset holders can use.

To help provide you with greater clarity, let's take a closer look at the basics of cryptocurrency wallets, and the different options from which traders may choose.

Cryptocurrency Wallets Explained

For the uninitiated, a cryptocurrency wallet is a software program that stores your digital assets and allows you to transfer them back and forth to and from other wallets. These wallets typically store your private and public keys and interface with the blockchains of the coins and tokens you're holding, allowing you to monitor your balances and send and receive funds. The private key of your wallet acts as your password to send cryptocurrencies and the public key of your wallet acts as your address so that others can send cryptocurrencies to you.

It's important to understand that these wallets don't actually store coins or tokens; when you send or receive Bitcoin, for example, the transaction is recorded on the Bitcoin blockchain. Your wallet interfaces with the blockchain to receive this information and then reflects your updated balance.

Types of Wallets

As digital assets have grown and matured, the number and types of available wallets has expanded. Let's take a quick look at some of the most popular wallet varieties:

Other Considerations

When choosing a wallet, it's important to consider your specific needs. If you are an active trader seeking to exploit fast-developing market opportunities, a hardware wallet may be too slow in terms of transferring cryptocurrency to exchanges. If you are a long-term holder, however, a hardware wallet is usually a good investment, as it offers the highest level of security.

Many cryptocurrency users tend to use a mix of wallets. For example, a trader might choose to keep the bulk of their cryptocurrency holdings within a hardware wallet, while keeping a smaller number of coins and tokens in desktop or mobile wallets for faster access. Or, that same trader may use a dedicated desktop or mobile wallet to store a specific coin or token that is not compatible with their hardware wallet.

Eventually, the cryptocurrency space will likely see universal wallets that combine the best attributes of all of these options. Until that day arrives, however, it's a good idea to choose the wallet (or wallets) offering the right blend of security and functionality for your needs.

Why Bitvo?

Bitvo takes security seriously, using a mix of hot and cold wallet storage. Bitvo utilizes hot wallet storage to allow for trading liquidity, storing all cryptocurrency holdings in excess of what is required for daily trading liquidity in cold wallet storage.

Bitvo is one of Canada's fastest-growing cryptocurrency exchanges. Why? Because of our commitment to low fees and great customer service. If you're looking for a better exchange experience, please visit Bitvo today.

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