Just today I read the news of Turkish Police arresting 11 suspects in an alleged hack of crypto wallet accounts, where victims reported a loss of $80,000. As a cryptocurrency user, it is crucial for you to know the terms commonly used while registering for a crypto wallet, so let’s get started-
If you are new to Crypto wallets and interested to know What are crypto wallets and How crypto wallets work, please check our last post here.
Terms Used in Crypto Wallets
Hot and Cold wallets
The hot and cold wallets or hot and cold storage simply refers to whether the wallet is connected to the internet and available 24*7 or not. So a hot wallet is available online and connected to the internet, whereas cold storage or cold wallet is only available when you want to make any transaction. A quick difference
|Feature||Hot Wallet||Cold Wallet|
|Connected to the Internet||All Time||Only while performing a transaction|
|Suitable For||Small day to day transactions||Long-term holdings|
Public and Private Keys
To understand public and private keys lets take an example from a fiat currency world. A user is inclined to make an online funds transfer, he registers with the bank via their app/website, on registering they ask to set up a password this password in encrypted form gets stored on the server. This could be termed as a public key. Now when the user initiates a funds transfer, he is asked to log in again with the set password, and as an extra measure of security, he is either asked for an OTP [One-time password] or biometrics[fingerprint, face or retina scan] this could be termed as a private key in crypto world.
In cryptosphere this private key is of utmost importance for you to move your amount and also needs to be secured as once a hacker knows your private key, he can easily access your wallet.
Multi-Sig and Multi-Currency Wallet
Multi-Sig wallet or Multi Signature wallet usually refers to a wallet that needs inputs from multiple parties to complete a transaction. Just for example a joint savings account that allows money transfer only when all the parties involved agree to it.
On the other hand, usually a crypto wallet is allowed to store only one type of digital currency say a Bitcoin wallet or Litecoin wallet, but some wallets allow users to store multiple currencies in one wallet that is referred as a Multi-currency wallet.
Our next post would talk about types of crypto wallets and their security features. Stay Tuned.