Cryptowallets

Cryptowallets are the gateway to decentralized finance and a way to have control over our funds. Let’s see exactly how they work and the different types there are.

A crypto wallet is a digital tool that allows you to send and receive cryptocurrencies.

It is a device, service or program that stores the public and private keys needed to make cryptocurrency transactions. The public key serves as the address used to send assets to the wallet (like the IBAN of a bank account), and anyone who knows the private key (the password) can control the cryptocurrencies associated with that address.

An example of a public key is as follows:

1K6KoYC69NnafWJ7YgtrpwJxBLiijWqwa6

The wallets use the internet connection to access the blockchain of the cryptocurrencies you use. It is important to understand that cryptocurrencies are not stored anywhere, they are simply data that is scattered throughout the blockchain. So the wallet finds the data associated with your public address and adds up the amount to show it to you in the application. Resulting in your cryptocurrency balance, which is what you see in your wallet.

If we think about it, it is a very innovative concept, since in traditional finance there is no way to be the only ones who have access to our assets such as stocks or financial derivatives. It is always a third party agent that holds them for us.

With cryptocurrency portfolios, on the other hand, no one but us has access to our funds.

Types of cryptowallets

Although there are more and more types of portfolios, they can mainly be divided into two categories:

Software wallets: the best known example of this type of wallet is MetaMask. These are wallets that are installed on your computer or cell phone and allow you to create a wallet with your private key to start trading cryptocurrencies.

This type of wallet is more secure than trading with centralized brokers such as Binance or Coinbase, although there are other types of wallets that are even more secure.

If you don’t know how to create your MetaMask wallet here is a guide.

Hardware wallet: These wallets add an additional level of security to common cryptocurrency trading. They are physical devices that store your private keys and usually have security-enhancing features, such as double confirmation to carry out a transaction.

At the same time, they are not connected to the internet constantly like software wallets, only when you go to make a transaction. This decreases the chances of hacking.

Main cryptowallets

When investing through DeFi, the first thing to do is to choose a wallet to carry out our operations. This decision will depend, above all, on which blockchain we want to invest in and from which device.

Focusing on those compatible with computers, we have several options:

MetaMask: This is the best known wallet for trading cryptocurrencies. It is very easy to use and very intuitive. It supports almost all available blockchains and, of course, all the major ones.

It is installed as a browser extension, although once created from a computer, it can also be used from the mobile by downloading the application. It is the most recommended wallet, as it is the only one that has compatibility with all major Dapps on the market, allowing us to access the entire DeFi ecosystem.

Trust Wallet: If we do not have a computer available, but we want to interact with this entire ecosystem, we can use Trust Wallet. It is a wallet specially designed for mobile devices and with compatibility with many networks and applications.

Coinbase Wallet: This wallet has taken a lot of prominence in recent times. It is developed by the broker Coinbase and is very beginner friendly.

Even so, we do not recommend this wallet, as there could be information exchange with Coinbase and several problems have been reported to access the funds.