No-one in crypto space doesn’t know “Wallet”. The purpose of Wallet is straightforward as its name to keep your coin so if you hear someone talk about “BTC wallet” so please feel confident it is just a wallet use to keep Bitcoin(BTC). The mistake I usually hear is transferring another coin to a specific wallet for instance; Transferring ETH to BTC wallet or Transferring XRP to ETH wallet. In such incident,will cause your fund vanish forever. In theory, There is no way to recover such the mistake.
Well,The first wallet of the most people in crypto-space would be a exchange wallet because of user friendliness and costless but actually, There are a lot of wallet out there such as; mobile wallet, pc wallet, paper wallet, hardware wallet.
For my opinion there are two kind of wallet; The first type is Personal wallet, The second type is Hosted wallet.
But how to categorize it?
First, we should know the definition of each wallet. Personal wallet defines as the wallet that only the owner can operate it. Hosted wallet defines as the wallet that other people beyond the user can also operate it.
In another way saying this, When someone has the right to operate a wallet, in theory, it means he/she has the “private key” so if only you have the private key of your wallet, it’s mean your wallet is a “Personal wallet” otherwise “Hosted wallet”.
As I said above, personal wallet is the wallet that only you can operate so the strongest point is security which is in your hand. Normally, this type of wallet is the highest security wallet but if the user is neglect to security aspect such as; saving the screenshot of private key in the mobile or PC, saving private key in the mobile or PC, connecting to the internet while in the process of creating a wallet, etc,. So the wallet will be more easy to be compromised. I would suggest disconnecting the internet while in the creation process and writing the private key down to a paper by hand in this method will reduce the risk of losing mobile phone or broken computer. Moreover, you can make copies of the paper and keep it in different places for reducing risk of losing the paper.
Hardware wallet, Paper wallet, PC wallet (from the developer of a coin), all of these are personal wallet. I am saying this because only the owner have access to the private key so only the owner can operate his/her wallet.
Since hosted wallet is served by third parties so it cause the wallet is easy to use, move liquidity, easy for trading and cash out.
Exchange wallet is an example for hosted wallet. Actually, all exchanges have the right to access and control all of their customer wallets. Users don’t have access to their private key. But the business model of exchange is to operate the wallets on behalf of their user so some user may don’t feel any different from personal wallet. The purpose of writing this paragraph is not to terrify exchange wallet users but to clarify the real situation. So when you decide to use an exchange wallet make sure the exchange is trustworthy.
In my point of view, every wallet have been designed to serve different purpose. Each has difference strong point and weak point for instance; If you want highest security, so I would suggest buying a hardware wallet. On the other hand, If you want highest liquidity, so It would be an exchange wallet. So if you want to have a wallet, ask yourself first, what is the purpose of you wallet? The purpose will lead you to an appropriate wallet.
In the next article, I will compare all of personal wallet. The strong and weak points of each wallet. Why hardware wallet is the highest security in the market.