{"id":8603,"date":"2022-07-25T18:37:25","date_gmt":"2022-07-25T13:07:25","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=8603"},"modified":"2023-02-02T23:25:39","modified_gmt":"2023-02-02T17:55:39","slug":"introduction-to-cryptocurrency-wallets","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/introduction-to-cryptocurrency-wallets\/","title":{"rendered":"Introduction To Cryptocurrency Wallets","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
Decentralized Finance or DeFi is fast becoming a household name. Chances are that if you have heard of Crypto, you would have heard the term DeFi.<\/p>\n
However, to many, the concept of DeFi and the infrastructure it entails is quite alien.<\/p>\n
In fact, most Crypto retail is limited to the Centralized Finance or “CeFi” experience of trading in cryptocurrencies through centralized exchanges (“CEXs”).<\/p>\n
This post, having previously dealt with certain advanced DeFi topics like Yield Farming<\/a> & Staking<\/a>, takes a step back to explain the Decentralized Web from the perspective of Wallets.<\/p>\n This is the first part of a series of posts to introduce you to trading through DEXs & is inspired by those of you who continue to have concerns in dealing with CEXs due to their KYC requirements<\/a> and the fact that many establishments are going bust in this market downturn<\/a>.<\/p>\n We will then explore DAOs & Web 3.0 to further our understanding of new age opportunities.<\/p>\n Put on your learning hats, folks, for here we go!<\/p>\n A cryptocurrency or DeFi wallet functions like a checking account at a Bank. Just like your bank account<\/a>, you can use it to receive, send and store Crypto.<\/p>\n The basic distinction when choosing a wallet is whether they are cold or hot. Regardless of the type, all wallets seek to preserve identity & privacy.<\/p>\n We will look at these issues in detail below.<\/p>\n <\/p>\n Cold wallets or hardware wallets store Crypto on the device instead of on-chain.<\/p>\n Since they are not connected to the chain at all times, it is maintained that they are almost impossible to hack. However, to receive or send Crypto, these hardware wallets need to be connected to the chain.<\/p>\n To understand cold wallets further, refer to this Ledger Nano S Plus review.\u00a0<\/a><\/p>\n Hot wallets, or software wallets, store Crypto on-chain but otherwise function just like cold wallets.<\/p>\n While this makes them vulnerable to a hacking attack, it is important to understand that the blockchain has various safeguards to prevent such an occurrence.<\/p>\n I would concede that the data does not support this point of view, with two of the largest hacks in the history of Crypto<\/a> taking place in the past 2 years.<\/p>\n However, the rate of occurrence of these hacks is not too high, whereas the overall market cap of the industry has been on a consistent rise.<\/p>\n Hence when a hacker does get through, he scores big. Also, important to understand that in most cases, the funds get returned as the industry acts together to block the hacker from moving the stolen Crypto.<\/p>\n <\/p>\n MetaMask<\/a>, Trust Wallet<\/a> & Phantom<\/a> are some examples of third-party Hot wallets that help you interact with a blockchain (or several blockchains) infrastructure.<\/p>\n1. What is a Cryptocurrency Wallet?\u00a0<\/b><\/h2>\n
1.1. Hardware Wallets<\/b><\/h3>\n
1.2 Software Wallets<\/b><\/h3>\n