What are crypto wallets?

Crypto wallets, short for cryptocurrency wallets, are digital tools that allow people to store, manage and interact with their cryptocurrencies. Crypto wallets store your private keys, keeping your cryptocurrencies secure and accessible. They also allow you to send, receive and spend cryptocurrencies such as Bitcoin and Ethereum. Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on decentralized accounting technology, such as blockchain. These wallets play a crucial role in the cryptocurrency ecosystem by providing a secure and easy-to-use way to store and manage your digital assets.

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These are the key functions and types of crypto wallets:

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• Storage: Crypto wallets store the private keys needed to access and manage a user's cryptocurrency holdings. Private keys are cryptographic keys that prove ownership of cryptocurrency assets. If you control the private key, you have control over the associated cryptocurrency.
• Receive and send: Wallets allow users to receive cryptocurrencies by providing a unique public address associated with the wallet. Users can also use the wallet to send cryptocurrencies to other addresses.
• Balance tracking: Crypto wallets typically display the balance of each cryptocurrency contained in the wallet, making it easy for users to track their assets.
• Security: Security is one of the main concerns of crypto wallets. They use various security measures such as encryption, two-factor authentication (2FA) and biometrics (e.g. facial recognition) to protect private keys and assets.

There are several types of crypto wallets, each with its own characteristics and use cases.

Non-custodied wallets are applications that offer users the ability to receive, store and send digital assets through public blockchains (Bitcoin, Ethereum, Stellar, etc.). These wallets provide an easy-to-use, human-readable way to manage and protect the private keys associated with accounts or "addresses" on those blockchains.  

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Benefits:

• Financial inclusion: users of non-custodial wallets control their own digital assets by ensuring that no one else can access them without private keys.
• Independence: non-custodied wallets, when used correctly, can receive, store or send digital assets securely to any other user with an account or address on the same network.

Disadvantages:

• Complexity: Digital assets and public blockchains rely on advanced mathematical and cryptographic technologies that can be exploited by bad actors attempting to access user funds. It is important for users to understand the risks and liability involved in self-custodianship of digital assets, as there is often little recourse for lost or stolen funds.
• Limited options: Digital assets can only be transferred to another address on the same network. Most non-custodied wallets do not offer the ability to exchange, buy or sell digital assets.

Non-custodied wallets come in many forms and offer unique ways to store the private keys associated with a user's funds.

• Software portfolios:
  
  • Online wallets: These are web-based wallets accessed through a browser. They are convenient, but less secure and susceptible to online attacks.
  • Mobile wallets: These are applications for smartphones and tablets. They offer a good balance between convenience and security if used correctly.
  • Desktop wallets: These are software applications that are installed on a computer. They are more secure than online wallets, but less practical than mobile wallets.
    

• Hardware wallets: These are physical devices specifically designed to store cryptocurrencies securely. They are very secure because they keep private keys offline and are immune to online attacks.
• Paper wallets: A paper wallet is a physical document that contains the public and private keys of the cryptocurrency. It is considered one of the most secure forms of storage because it is not connected to the Internet.
• Brain wallets: These are wallets generated from a memorable passphrase or set of words. Although they are easy to remember, they are also susceptible to attacks if the passphrase is not strong enough.
• Multi-signature wallets: These wallets require multiple private keys to authorize transactions, adding an extra layer of security and control. They are typically used for shared accounts and corporate use.

Custodial wallets are applications that allow users to interact with their account at a financial institution (FinTech's, banks, exchanges, custodians, etc.). CiNKO is an example of a custodied wallet, which means that our clients do not control the private keys associated with the funds in their wallet. Instead, CiNKO processes transactions on behalf of our clients, allowing us to offer products and services in both fiat currencies and digital assets.

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Benefits:

• Ease of use: CiNKO manages all private keys securing client funds and processes transactions on behalf of our clients through a user-friendly interface in the app.
• Fiat, digital assets and more: Our custody model allows us to bridge the gap between traditional and decentralized finance and offer products that meet the everyday needs of our users.
• Safety and security: Users can retrieve their funds even if they lose their phone or forget their password.

Disadvantages:

• Less privacy: While we respect our users' right to privacy, CiNKO collects certain KYC information about its customers to comply with regulatory requirements. Most non-custodied wallets do not collect KYC information from their users.
• Less control: CiNKO processes all blockchain-based transactions on behalf of our users.

Which one to choose?

The choice depends on your experience, needs and the level of security you are looking for. If you want full control and are technically savvy, a non-custodial wallet may be for you. If you prefer simplicity, managed security and more options for everyday use, a custodial wallet like CiNKO may be the best choice.

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