What is a cryptocurrency wallet and how does it work?

A cryptocurrency wallet (or crypto wallet) is a type of digital container that stores the public and private keys of your cryptocurrency and the amount owned. Your cryptocurrency itself is not kept in the wallet per se, but the keys to show ownership are. You can make deposits and withdrawals to and from your wallet using the keys. Unlike a regular digital wallet, no identity or banking information is kept in a crypto wallet. In a virtual currency marketplace like HBUS.com, each currency that you trade will have its own wallet and is automatically accessed by our system for your trading.

To own most cryptocurrencies, you usually need keys that are unique identifiers for them and a corresponding wallet for the specific type of cryptocurrency. However, there are some wallets that can hold multiple types of Ethereum-based, or ERC-20, tokens that are gaining market traction. When you own, deposit or withdraw cryptocurrencies, you digitally sign transactions on the cryptocurrency blockchain with the wallet keys and they are written into the blockchain’s distributed ledger. This all happens seamlessly but cannot happen without a wallet that safeguards the keys.

To be able to send or receive cryptocurrencies, the keys stored in your wallet must match the public address the currency is assigned to. If public and private keys match, the balance in your wallet will increase or decrease accordingly as will the sender’s. There is no actual exchange. The transaction is signified merely by a transaction record on the blockchain and a change in balance in your crypto wallet.

For cryptocurrency marketplace trading, your account’s wallets are generally sufficient for your needs. But to better explain crypto wallets, let’s look at the other four types being used and the varying levels of security offered:

• Desktop wallets are downloaded and installed on a PC or laptop. They are only accessible from the single computer in which they are downloaded. Desktop wallets offer one of the highest levels of security. However, if your computer is hacked or gets a virus there is the possibility that you may lose your funds.
• Online wallets run on the cloud and are theoretically accessible from any location. Although convenient to access, such wallets store your private keys online and are therefore controlled by a third party which makes them more vulnerable to hacking attempts or other issues with the third party.
• Mobile wallets run on an app on your phone and are useful because they can be used to make payments, including retail stores. Mobile wallet software is usually much simpler than desktop wallets.
• Hardware wallets differ from software wallets in that they store a user’s private keys on a device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security.
• Paper: wallets are easy to use and of course lightweight. They provide a very high level of security. While the term paper wallet can simply refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software that is used to securely generate a pair of keys which are then printed. Using a paper wallet is relatively straightforward.

Wallet security is a major concern for owners of cryptocurrency. Both the method and platform trusted with managing the private keys should be carefully selected. When the private keys and the backups are lost then that cryptocurrency is lost forever. If you manage your own wallet, an encrypted copy of the wallet should be kept in a trusted place, ideally off-line. For the HBUS marketplace, security is the priority when it comes to your wallet safety. As the US strategic partner of Huobi, HBUS implements the same cold wallet technology, internal control processes, online security procedures and best practices as those deployed by Huobi.

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