Types of cryptocurrency wallets and how they work

Wallets are digital wallets where we can store our cryptos and connect to the web 3.0 and the Blockchain network in a decentralized way to perform any type of operation.

Wallets are protected with a series of keys, and these are divided between public and private keys.

Clave pública:

The public key is like an account number with which we can make transfers with any other wallet, without the risk that they can extract our funds.

Through the public key, addresses are generated to receive, consult and view the status of our funds.

Clave privada:

The private key is the one we use to protect our funds since this is the one that gives us access to them and the one we must take complete care of.

Types of cryptocurrency wallets:

There are different types of wallets but we can divide them into two main categories:

  • Hot wallet: These are online wallets, which can be applications or can even be installed as browser extensions such as MetaMask. 
  • Cold wallet: These are physical wallets that work without an internet connection, which makes them the safest wallet option.

We find different subcategories of wallets within these two:

Hot Wallets:

Host Wallet:

The point is that it is the exchange platform itself that safeguards your cryptocurrencies, so there is no real independence between Wallet and Exchange.

Online Wallet:

These Wallets are independent of the Exchanges and we have total control. They are 100% connected to the internet and have an extra security feature that uses a technology that prevents them from tracking your IP.

Cold Wallets:

Fisical Wallet / Hardware:

Physical or hardware wallets and to use them you will have to enter a PIN code in the wallet which is not stored digitally anywhere.

This type of wallet is probably the most secure, but also the most expensive. Although it is not as versatile as an online wallet, you will also be able to carry it with you as they are small-sized device.

Paper Wallet:

A physical document that has both the keys, as well as the address for sending and receiving funds.

You have to store that paper in the best possible way and they cannot be used for exchange as they are only useful for crypto asset management.

How to choose the best type of wallet for me

First, we must ask ourselves what we want it for, these are some questions to consider:

  • How much money you are going to invest in cryptocurrencies.
  • How many transactions you are going to make, that is, how much you are going to use to buy or sell?
  • If you are interested in operating in the short, medium, or long term.
  • If you intend to store cryptocurrencies or exchange them.

Since we have all this into account we can decide which wallet best suits us and the type of investor we are at the moment, we can even get to have more than one.


Wallets will always accompany us in our walk in the crypto world, so we will surely have more than one at some point since the things we will be doing will be more and more advanced and in the end, there we will have our portfolios.

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