As part of our initiative to guide newcomers in the crypto and Web3 world, we will continue providing relevant information that is useful early on. Crypto wallets are a massive part of this landscape, and it’s vital to understand what they are, how they work, and the different options of wallets available. Here’s all you need to know about wallets (At least, as a beginner)!
Different Types of Crypto Wallets
There are many types of wallets with varying levels of security, convenience, and functionality. It’s important to understand what each offers and pick the best one depending on your needs and preferences.
Software wallet: A software wallet is an application that allows you to interact with the blockchain. It offers you possession of your private keys and allows you to manage your assets through interacting with the blockchain. Software wallets are connected to the Internet, so while they offer security, they can be susceptible to spyware and online attacks.
Hardware wallet: Hardware wallets are devices that store your private keys offline and separated from the Internet. The core purpose of a hardware wallet is to keep things offline to add another layer of security; even transactions are signed offline. While hardware wallets can be much safer, many new users will find them daunting. Also, it’s possible to lose your physical hardware wallet through theft or negligence, so stay vigilant!
Smart contract wallet: Smart contract wallets is a wallet that allows for customization through utilizing smart contracts. It’s essentially a decentralized application that makes full use of smart contracts to offer features including multi-signature functionalities, automated transaction conditions, recovery mechanisms, and more. They differ from externally owned accounts (EOA) which are wallets secured with a private key. Smart contract vs private key, it’s your pick!
Hot wallet: Hot wallets are software wallets.
Cold wallet: Cold wallets are NOT hardware wallets. Cold wallets can generate and store your private keys offline while never interacting with smart contracts. They are wallets that go even further and protect you from malicious smart contracts.
Custodial wallet: Custodial wallets are wallets where the keys are held by a third party. The cons of a custodial wallet are obvious; having a third party control your keys can be scary. The upside to this is the user experience can be much more friendly, and should you ever lose the password to your wallet, a third party might be able to recover it.
Non-Custodial wallet: These wallets are ones where the user controls their private keys. Due to how everything is up to the user to manage, it is more suited for experienced users (A hardware wallet is noncustodial).
Risks and Things to be Cautious About
If you frequent the Internet, you’ve heard about the horror stories of users being hacked for thousands and even millions. While utilizing a crypto wallet is safer in terms of personal ownership (In the case of non-custodial wallets), it also means you are in charge of not being exposed to attacks. Here are some of the risks or things to be cautious about:
Losing or forgetting your seed phrase/wallet: One of the most common problems connected to crypto wallets is losing or forgetting your password or wallet. Keeping your key phrase online or on a device can expose it to attacks while keeping it offline in a physical form (Written down or carved into something) will expose you to simply forgetting where you kept it. There have also been accounts of users forgetting where they stored their hardware wallets. Be mindful!
Scams and phishing: Don’t click on any suspicious links and don’t interact with suspicious messages/transactions. Many scams and phishing are done through tricking users into clicking these links. Check out our phishing article!
Viruses and device security: Devices that have viruses can also threaten your wallets. This includes viruses, malware, and spyware that can either steal your information or influence your actions. Keep your devices clean!
What do I Choose?
Wallet preference will vary depending on the user and their needs. Our very own TT Wallet is a great choice that focuses heavily on security and convenience. Offering the ability to create and access accounts through your social media accounts, TT Wallet provides incredible convenience while offering users the freedom to easily explore every DApp imaginable on the ThunderCore Ecosystem. Check out more about TT Wallet here.
Choosing a wallet can be very flexible. Those who want to keep things very safe can look for hardware wallets and cold wallets, trading off convenience for security. Those who just want a great user experience can use custodial wallets and software wallets. You can even use both hot and cold wallets, keeping some assets offline for safety and some online for ease of utilization. Just be mindful of what each type of wallet is and its characteristics!
About ThunderCore
ThunderCore is an EVM-compatible blockchain featuring a breakthrough consensus protocol, PaLa, allowing lightning-fast efficiency. With users in more than 100 countries, this blockchain emphasizes a growing global reach. ThunderCore offers a native currency, TT, and nurtures an innovative ecosystem within the TT Wallet mobile app.
What’s Next?
On the topic of wallets, be sure to check our own TT Wallet! Next time on Thunder Academy, we will talk about a very popular crypto investing strategy called dollar cost averaging! We will continue providing relevant information for those stepping into this landscape for the first time. Catch us next time!
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