Cryptocurrency, in more ways than one, is similar to its traditional, tangible counterpart: it signifies a certain value that fluctuates based on developments, is traded on a daily basis, can be exchanged for other currencies, and needs a wallet as storage.
What makes cryptocurrency wallets special?
As opposed to traditional currencies, however, the wallet where you store your currency allows you to protect and store your money without the need for a bank. While the current traditional monetary system does not render an account holder in full control of their funds, cryptocurrency wallets allow investors to stay in total control of their earnings.
The upgraded system that cryptocurrency abides by allows investors to possess a certain level of absolute and total control over their money without the flawed “IOU” system that traditional banks have.
Answering any crypto wallet questions you might have
To better understand why you should get a crypto wallet and how it can help you more than you’d expect, let’s go over a few questions that are frequently asked about the digital storage option:
1. “What is a Crypto Wallet?”
The main definition of a crypto wallet can go two separate ways:
A technical definition of the term: Through the use of a software program that stores both public and private keys with each type of currency a user may have, crypto wallets enable investors to monitor, send, and receive coins.
The simplest way to put it: Crypto Wallets (or cryptocurrency wallets) are an encrypted type of software program that stores the various coins that you possess.
2. “How do crypto wallets work?”
Aside from not necessarily being tangible (unlike a physical wallet), crypto wallets are different from physical wallets in regard to what they store.
Basically, digital or crypto wallets store private and public keys to the coins that you have in your possession (as opposed to money), which makes things a lot more secure. To put things into perspective, the private and public keys that digital wallets have are very much like the ATM cards that you have in your pocket, which are an access point that you can use to retrieve cash from a secure bank source.
Public keys act as your cryptocurrency bank account number that can be used to source the exact location of your coins. On the other hand, private keys work as a pin number that can access your coins once they’re located. If the public and private keys don’t match, then access isn’t denied—making it very much similar to having a bank account or ATM card (except that you have total control).
3. “Is it better to keep my coins on an exchange, so I don’t have to complicate myself with this crypto wallet mumbo-jumbo?”
While it may be very much possible to keep your coins on an exchange, doing so would strip you of control over your private and public keys because they’ll be kept in an exchange-hosted wallet.
In spite of it’s perceived complexity, storing your coins in a crypto wallet will provide you with the utmost control over your investment. This security prevents it from being subject to a possible exchange shut down or loss due to hacking that you could possibly experience if you keep your coins on an exchange. Additionally, the lack of regulatory frameworks concerning cryptocurrencies and exchanges as a whole can put your coins at risk if you leave them on said exchanges, making it optimal to keep your coins within reach.
Having a crypto wallet that you can use in your day-to-day cryptocurrency investment activities is an investment decision that will pay off in the long run by keeping the fruits of your labor as safe as possible.
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