What is a virtual currency wallet?

As the name implies, a virtual currency wallet is a place to store virtual currency .
If it is cash, you can deposit it in your bank account, or keep your money in your pocket, wallet, etc.
As the name implies, virtual currency is an “unreal currency” and cannot be deposited in a bank account or stored in a piggy bank.

However, by using various “wallets” that have characteristics like accounts and piggy banks, you can deposit virtual currency or keep it at hand.
If you want to buy cryptocurrencies, start by creating a “wallet”.

Hot wallet and cold wallet

Cryptocurrency wallets are roughly divided into two types, each with different characteristics.
The two types of wallets are called hot wallets and cold wallets, which are categorized into two different types of wallets.

A hot wallet is an online wallet that manages Bitcoin and Altcoin through web services on the Internet, and a virtual currency exchange that allows you to trade virtual currencies. Both are stored on the Internet using a browser or application, so you can deposit and withdraw at any time. In other words, remittance (electronic signature) can be done immediately.

On the other hand, a cold wallet is a terminal such as a USB memory called a hardware wallet, or a paper wallet that prints, describes and manages a private key on paper. Those that store virtual currency in isolation from the Internet are generally called cold wallets, and deposits and withdrawals are made on the Internet as needed.

Types of cryptocurrency wallets

There are various types of wallets in two major categories of crypto wallets: hot wallets and cold wallets.
The main types are the following five types.

  • ・ Exchange
  • ・ Online wallet
  • ・ Software wallet
  • ・ Hardware wallet
  • ・ Paper wallet

Advantages and disadvantages of hot wallet

This time, we will explain about exchanges, online wallets, and software wallets called hot wallets.


What is an exchange?

The place where you trade (buy and sell) virtual currency with other users is called an “exchange”. You can use the “virtual currency account” that can be opened on the exchange as a wallet (inside the virtual currency exchange).

Advantages of exchanges
Online wallets store virtual currencies on the Internet, so they can be used from various terminals such as PCs and smartphones. You can manage virtual currency as long as the terminal is broken or you can access it from other than your own terminal. (Be careful about passwords when using other people’s terminals) In
addition to managing virtual currencies, those who want to trade can buy and sell from the account of the exchange.

Disadvantages of the
exchange If the exchange site is down due to a failure, the wallet will be unavailable.
In addition, there is a risk of hacking and bankruptcy of the exchange, so it is necessary to choose a reliable trader such as safety.

Currently, there are various exchanges such as GMO Coin and DMM Bitcoin as major exchanges in Japan, but exchanges that have caused virtual currency outflow incidents such as Coincheck and Zaif were also one of the major exchanges before the incident. did. If you want to store virtual currency on an exchange, pay attention not only to the convenience and services of your account, but also to the strength and security of your server.

GMO coin https://coin.z.com/jp/

GMO Internet Group’s virtual currency FX / trading service

Cryptocurrency trading service operated by DMM Group

What is an online wallet?

Isn’t it the online wallet that is generally recognized as a wallet?
As the name implies, online wallets manage cryptocurrencies online . The difference from the exchange is that the online wallet is just a place to store virtual currency and you cannot trade. However, a major feature is that you can easily transfer money between wallets.

Advantages of online wallet Since
virtual currency is stored on the Internet like the virtual currency account of the exchange, it can be used from various terminals such as PCs and smartphones. The big difference with exchanges is that creating a wallet is very easy. Opening an account on an exchange involves steps such as account registration and identity verification, but online wallets can be created so easily that you might think, “Well, did you do this?”
(However, there are many sites that use English or literally translated Japanese, so it may be a little difficult in that sense.)

Disadvantages of online wallet As with
exchanges, if the server is down due to a failure, the wallet will be unavailable. If your account is hacked, your cryptocurrency can be stolen. There are many “phishing sites” that slightly shift the URL, and if you mistakenly enter the private key of your virtual currency there, it is possible that all the virtual currency will be stolen.

It has become a standard wallet for Bitcoin. It also supports Japanese, so it can be used intuitively.

Standardized as a wallet for Ethereum. Japanese is also supported, but it is a little difficult to use because it is a literal translation. Compatible with Ethereum, Ethereum Classic, and ERC20 tokens.

What is a software wallet (local wallet)?

As the name implies, it is a wallet that uses software . Download Bitcoin management software on the Internet and store and manage Bitcoins there.

Benefits of
software wallets Software wallets are more secure than exchange wallets and web wallets because they do not require you to enter your private key online.
As for wallet management, it is possible for the user to select whether to manage it on a PC or a smartphone app.
Since it uses a PC or smartphone, it is easy to send money to exchanges and other wallets, and it can be said that it is as convenient as exchanges and online wallets.

Disadvantages of
software wallet Software wallet can be said to be a relatively secure wallet, but if the terminal on which the wallet is installed is infected with a virus or malware and the private key is leaked, the virtual currency may be stolen. .. In addition, you should regularly back up your software wallet in case your PC or smartphone may be damaged.
And since there are various options for software wallets such as paid software and free software, it is necessary to compare prices and functions when choosing.

Not all Bitcoin software wallets and blockchains that support Japanese are installed, but because they are used via a separate server, the amount of data to be installed is small and the operation is light.

The wallet for Ethereum introduced in the previous section as an online wallet. It can also be used as a software wallet.

Hot wallet summary

A hot wallet is a wallet that allows you to store and operate virtual currencies on the Internet.
“Exchanges”, “online wallets” and “software wallets” are called hot wallets.
Since the hot wallet manages virtual currencies online, you can operate virtual currencies on any terminal as long as you are connected to the Internet.
However, if the server goes down, the wallet becomes unusable, and there are always security issues such as account hacking.
There is no doubt that hot wallets are convenient and easy-to-use wallets, but let’s check the strength and security of the server in advance so that you can manage virtual currencies safely.

Click here for cold wallet
Trouble before buying virtual currency, which wallet should I choose? [Cold wallet edition]