In reality, there are many different types of crypto wallets, with each one offering its own unique benefits and security. In order to better understand how they work, it's important to look at how wallets function in general. All types of wallets—even bitcoin-only ones—provide a public address and private key that allow you to send and receive digital currency. The difference between them largely lies in what happens when you want to do so. Some only allow access from your computer or certain mobile devices, while others can be accessed from anywhere in world as long as you have an internet connection; still others keep keys offline for increased safety.
If you plan on getting involved in cryptocurrency investing or trading, having a wallet that works seamlessly with whatever exchanges and trading platforms you use will save considerable time (and headaches). Wallets also differ on features like whether they offer multi-signature options, two-factor authentication (2FA), automatic backups, vanity addresses, escrow services and more. At last count, some 140+ digital currency wallet options exist around today’s market; most fall into one of several main categories: desktop/laptop/mobile software wallets.
The original Bitcoin client was released as open source code by Satoshi Nakamoto back in 2009. This means that anyone can check, audit and verify its operation—an essential feature for something handling money. Early versions were text-only and mostly useful for tech-savvy folks; today’s clients are much easier to use thanks to powerful interfaces (e.g., Mycelium) or streamlined concepts (e.g., Coinbase). Also, you no longer need to download gigabytes of blockchain data or sync them with your computer’s hard drive.
Thanks to cloud technology, today’s software wallets allow you to create and access an account from anywhere in world so long as you have internet access; simply put, they enable you to easily be your own bank without compromising on security.