The 21st century has been remarkable for the rapid advancements in information technology, and consequently, it is fulfilling the dream of a digitized world. The novel coronavirus outbreak and the lockdown restrictions have been an eye-opener to the need for digitization and virtual interactions.
Of course, money and value exchange are at the heart of human interactions and certainly aren’t left out of this revolution. From automated teller machines (ATMs), mobile banking, electronic transfers, digital currencies, and now virtual wallets, banking has been rapidly digitized worldwide.
What Are Virtual Wallets?
A virtual or digital wallet is essentially a broad term that mainly refers to a smartphone, desktop, or notebook compatible application that helps store credit card information, send, receive and save money, and overall performs banking services through secure wallet passcodes or pins. Digital wallets have been around for about two decades; however, the popularization of smartphones in the past decade was mostly responsible for the tremendous global usage surge.
Before 2008, virtual wallets were restricted to fiat (paper) currencies; however, after the Wall Street financial crisis in 2008, an anonymous author, Satoshi Nakamoto, published the Bitcoin whitepaper, a path that ultimately unleashed cryptocurrencies.
Types of Virtual Wallets
Today, virtual wallets can be broadly classified into fiat and cryptocurrency wallets.
Fiat Virtual Wallets
Fiat virtual wallets allow users to send, receive, save and conduct a wide range of transactions using fiat currencies only. Fiat currencies are government-issued currencies and are regulated by the central banks; they include the US dollars (USD), Euros (EUR), Japanese Yen (JPY), basically any country’s currency that comes to mind.
There are thousands of Fiat wallets, and the notable fiat virtual wallets include Paypal, Cashapp, Walmart Pay, Apple Pay, Transferwise, and Wirex. In October 2020, one of the largest fiat virtual wallet merchants, Paypal, announced plans to enable users to hold, sell or buy cryptocurrencies in their wallets starting from January 2021. This decision is not surprising considering the massive surge in crypto; expectedly, other fiat virtual wallets would consider adding crypto wallets to their portfolio.
In the past decade, Bitcoin and cryptocurrencies’ growth has been incredible and mostly unpredicted. From that insane idea of decentralizing money transfer and conducting money transfer on a peer-to-peer basis, cryptocurrencies have grown from not just another means of money transfer but also a store of value as well. Bitcoin is steadily growing to become more popular than gold or crude oil as people seek to insulate themselves from failing economies globally. So what is a cryptocurrency wallet?
As you may have probably guessed, a cryptocurrency wallet is a virtual wallet that allows users to hold, buy or sell cryptocurrencies. However, unlike traditional fiat wallets, cryptocurrency wallets are decentralized, hence, much more sophisticated. Crypto wallets have these two main features.
Cryptocurrency wallet address: A cryptocurrency wallet address is a string of alphanumeric characters (25-35 characters long) that uniquely identify different wallets. If you’re familiar with PayPal, a wallet address is much more like an email address used by different users to send and receive money.
Private key: A private key is a unique identification that grants you access to your wallet. Much more like the key to a safety deposit box, a private key allows users to open their wallets, send, or receive a cryptocurrency. Private keys take many forms, usually a set of cryptographically generated alphanumeric characters, and they can be stored or kept in various means.
Types of Cryptocurrency Wallets
There are two broad places where you can keep your crypto; a hot wallet and a hard wallet.
Essentially, the difference between hot and cold wallets is that hot wallets are connected to the internet. Hot wallets are free and are by far the most common type of wallets, and they can conduct basic transactions as swiftly as possible.
Cold wallets, though less used, are much more secure wallets for storing Bitcoins and other cryptocurrencies. A cold wallet keeps the user’s wallet address and private key away from the internet, making them insulated from any potential internet hack or critical theft.
Securing a Cryptocurrency Wallet
Investing in Bitcoin has been on the rise in the past couple of months, with institutional investors like Grayscale, Microstrategy, and Tesla diving into Bitcoin investment. It’s certainly no surprise to see Bitcoin rise from a 2020 low of $3,850 to $50,000 in less than a year.
While the underlying blockchain technology itself is a tightly secure and immutable ledger that is theoretically impossible to hack, fraudsters and hackers have occasionally found a way to attack exchanges and private wallets to steal cryptocurrencies. Phishing scams, 51% attacks, key theft, and Sybil attacks are notable routes of attacks over the years.
So how can you secure your crypto wallet? Here are a few ways to insulate yourself from fraudsters.
Two-factor authentication (2FA): You may already be familiar with a two-factor authentication concept. If you’re not, it’s pretty simple; 2FA is an additional layer of wallet security that requires users to provide a one-time password (OTP) before accessing or sending cryptocurrencies on the wallet. The OTP is usually a four or six-digit number sent to your registered mobile number, email address, or both.
Hard wallets: As explained earlier, a hot wallet is quick and free; however, hard wallets protect you from online private key thefts. Trezor hardware wallets are by far the most common types of hard wallets, and they allow you to securely keep your private key, wallet address, and a wide range of cryptocurrencies away from the internet.
Make Your Crypto Decisions with Coin IRA
At this point, you probably have a few questions on crypto investment; What coin is the best? Which wallet should I use? How safe is Bitcoin investment? Should my retirement plan involve crypto? Chances are all your questions won’t be answered in a five-minute read or the tons of unfiltered information on the internet.
Coin IRA is leading the charge for Cryptocurrency IRAs, especially if you’re looking to diversify from traditional financial assets like stocks and bonds into cryptocurrency. Coin IRA has established relationships with pioneers in the cryptocurrency markets and reputable IRA consultants to bring cryptocurrency investment plans to a wide range of users.
With Coin IRA, your investments are managed by some of the most brilliant minds in the cryptocurrency markets, and you can leverage strong market momentums without any stress. Coin IRA guarantees secure storage of all crypto investments with various partnerships with the industry’s security leaders to protect your hard-earned assets.
Making investment decisions are a crucial part of an enjoyable future; hence, the need for IRAs. In a world that is rapidly drifting towards digitization, if you’re looking into cryptocurrencies, Coin IRA has your answers.