What are virtual currency wallets?
Wallets are the place where we keep virtual currencies.
But this type of wallet is not a physical object, like what we usually associate with the word wallet.
Bitcoins are stored in the chain of blocks – blockchain – and the wallets will allow you to access them. Now, in order to buy and store your Bitcoins, or any other type of cryptocurrency, you will have to choose a type of wallet. There are two types: cold wallets and hot wallets. We tell you more about the characteristics of each one:
With a cold wallet you can store your cryptocurrencies more securely, as they require an external authentication factor to access them, such as a security key stored in a UBS memory.
As an example, it would be as if your cryptocurrencies were on an island that is part of an archipelago: to access your coins or take them from one island to another, you need the external authentication key to lower a drawbridge that connects the islands of the archipelago. .
On the other hand, with hot wallets, security is shared between the user and a third party. This means that when you access your wallet, be it online or through an app, by default you will not need an external authentication factor. Therefore, this configuration is less secure.
Within the example of the archipelago and its bridges, it would be as if your Bitcoins were on an island, but unlike the example of cold wallets, the bridges here are not liftable: they are fixed bridges and you will need to go through police control in front of the bridge, with your password.
We will explain more about them and their applications later.
How to choose your wallet according to your goals
When choosing a wallet, it is important that we are clear about what each type is intended for and what our objectives and investor profile are.
Cold wallet: They are the best option to safely store reserves and savings. It is the ideal type of wallet for investors with a long-term perspective, who is speculating on the price of cryptocurrencies, with the goal of achieving a higher price.
Caliente Wallet: They are intended to store cryptocurrencies that are used in regular purchases and daily transactions, such as buying/selling on the same day. As hot wallets are generally on our mobile phones or trading websites and are therefore less securely stored, we recommend that the amount of cryptocurrency stored in such wallets be small.
What is the best Bitcoin wallet?
The best wallet will depend on your goals. We recommend having a cold wallet for your savings, such as Trezor, and a hot wallet for fast transactions, such as Jaxx. In the articles Cold Wallets for Bitcoin and Hot Wallets for Bitcoin you can find our recommendations and specific examples of wallets.
Wallet fees
Since cryptocurrencies are considered a financial transaction, you should know that each operation will imply commissions, divided between the operator of your wallet and the Bitcoin miners.
All companies have different models of charging commissions and, as a general rule, the higher the commissions, the faster the operation will be confirmed. When choosing your wallet, it is important to understand them, even if they are small.
In general, cold wallets charge less commission than hot ones, since each transaction only requires a commission. On the other hand, the main disadvantage of many hot mobile phone wallets is that they are not clearly detailed.
It is also important to remember that the speed of the transaction is generally related to the price of the commission. In both cold and hot wallets, you will be able to choose the speed of the transaction and, therefore, know what fees you will be charged.