How Does a Multi-Currency Crypto Wallet Function?

Crypto

Tech

How Does a Multi-Currency Crypto Wallet Function?

author

Getblock.io

6th October 2020

A crypto wallet is a convenient tool for storing and using cryptocurrency. A crypto wallet is much safer than an exchange account and it is almost impossible to hack. Let's take a closer look at the types and operation guidelines of crypto wallets.

What Is a Crypto Wallet

A crypto wallet is a software or equipment that allows to store, receive, and transfer tokens. A unique hexadecimal code is used to carry out any operations with a crypto wallet. Essentially, a wallet is not cryptocurrency storage. It just allows to access the blockchain, which stores all the records on tokens quantity. The wallet can be accessed through a browser or via a special application. Regardless of the device, it doesn’t matter what was the initial device for registration, one can access a wallet with any device. The only thing that matters is that the user will need the private key to access the wallet.

Crypto Wallets Varieties

There are two crypto wallet classifications. The first divide them into centralized and decentralized.

Centralized

The software is owned by one person (company, development team, etc.). It works like a usual bank. In this case, while the funds are kept in the wallet, they are fully owned by the 3rd party. Accordingly, this type of wallet is not safe, since all owners are at risk of becoming victims of fraudulent transactions.

Decentralized

It is also a software, however, the owner of a decentralized wallet has the full responsibility for saving and managing funds. If the owner loses the private key, wallet access cannot be restored. Also, wallets can be divided into hot and cold.

Hot Wallet

Has a permanent internet connection. The key information is stored on servers. A hot wallet is ideal for people who actively use cryptocurrency: traders, exchange owners, etc. This method of storing tokens is not secure, since anyone can attach a wallet while the user is connected to the Internet.

Cold Wallet

This is hardware that stores information without an internet connection. It looks like a USB flash drive, but it is designed to store one type of information: encryption keys. Suitable for cryptocurrency owners looking for long-term storage.

Multi-currency Crypto Wallet

The most secure wallets are those designed to store one specific cryptocurrency. In this case, if scammers gain access to the wallet, they will not steal all tokens at once. However, on the other hand, it is inconvenient to create or buy a wallet for each type of token and store dozens of private keys for each wallet. Multi-currency wallets have the same guideline as mono-currency ones. The difference is that a multi-currency wallet supports several types of data and allows transactions for different tokens.

The Recap

This article shows the basic information on crypto wallets: how they work and how a mono-currency wallet differs from a multi-currency one. You can learn how to create and use wallets on the website of each wallet.

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