Wallet In Blockchain World
What is Wallet?
Like the physical wallet, the terms wallet in blockchain is used the same way as the physical one. Wallet in blockchain is used to keep cryptocurrency. Although the wallet that are used are quite a different one but it still maintain its function which is to store "money". Wallet in blockchain is divided by 2 types, which is cold wallet and hot wallet.
Types of Wallet
1. Cold Wallet
Cold Wallet is a term that are used to call a digital wallet that can be used offline and have a physical form. These wallet can be used to pay with the cryptocurrency it stored. The transactions are signed offline and later will be processed when online. The private keys that are used to gain access to the wallet are stored offline on a paper when the wallet purchased. Cold wallet also enhance the protection of the wallet because it can be operated offline and out of the internet.
The example of physical wallet is ledger wallet. Ledger wallet can be purchased via online on the ledger website. There many cold wallet out there, but ledger is one of the most popular one out there.
2. Hot Wallet
Hot Wallet is a term that are used to describe a digital wallet that can be used online and can be downloaded and used either on pc or smartphones. Hot wallet, unlike cold wallet doesn't have a physical form and the private keys are stored in cloud. Hot wallet can only be signed and operate when online. The downside of using hot wallet is, it can be easily get hacked.
(Source: trustwallet.com)
One of the example of hot wallet is trust wallet. Trust wallet is one of the most popular one, because its also associated with binance. There are also many wallet out there that can be downloaded.
Depending on the blockchain and the availability sometimes some of the blockchain are not supported for the wallet, thus might resulting in lost of asset. Which is why its recommended to DYOR (Do Your Own Research) before jump into it.
Security
Wallet are usually comes with password and mnemonic seed for the wallet protection.
1. Password
Its usually used to sign transaction and for signing in to the wallet. You might also need to make an account in the first place, which then later the password will be used as the security pass.
2. Mnemonic Seed
Mnemonic seed is a collection of words which are generated randomly. These word will then be used to gain access to the wallet. Mnemonic seed too are important when recovering hot wallet, so be sure the store it in a safe place.
Reference
https://www.investopedia.com/terms/b/blockchain-wallet.asp#:~:text=A%20blockchain%20wallet%20is%20a,Peter%20Smith%20and%20Nicolas%20Cary.
https://www.simplilearn.com/tutorials/blockchain-tutorial/blockchain-wallet#blockchain_wallet_types
https://www.fool.com/investing/stock-market/market-sectors/financials/blockchain-stocks/blockchain-wallet/
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