Usually, the first step to start investing in crypto is to open an account in a digital wallet. In fact, you don’t even need to be into crypto to use a digital wallet, as some can be used with fiat currencies to make them more accessible for everyone in the world. You can learn more about bitcoin trading like the BitIQ trading software .
However, most people don’t know how these wallets work and why they’re so useful to have. In this article, you’re going to learn all the basics about digital wallets, so keep reading if you want to find out.
What Are Digital Wallets?
Digital wallets or e-wallets are software services that can be used from any electronic device to store money, make transactions, and receive payments in a much faster and more efficient way.
You may even use a digital wallet such as PayPal or Payoneer in your everyday life. However, there are special wallets created for crypto investors. These wallets are connected to the blockchain and allow crypto payments to be made as instantly as possible.
They also help keep your money safe, as they usually come with extra layers of protection to avoid any possible cyberattacks.
How Do Digital Wallets Work?
Most of these wallets are created to be as user-friendly as possible. Money tends to be a delicate matter, which is why app developers want to make you feel comfortable while you use your wallet.
All you have to do is download the app on your phone or go to the website and log into your account. You’re going to be asked to add a password and other information to verify and secure your data. Then, you can begin receiving and making payments from the app to other people’s wallets.
How Can I Use a Digital Wallet?
Digital wallets are very versatile, as they can be used in many different scenarios. The most common ones are online shopping on your desktop and through your cellphone. However, some of them can also be used in ATMs instead of a regular debit or credit card.
Are Digital Wallets Safe?
Yes, most digital wallets include solid safety protocols to protect your data and money from all possible attacks. Some of these protocols are two-factor authentication, an assigned token, or an encrypted code.
Moreover, you can permanently close your profile from a given device if it gets stolen.
Types of Digital Wallet
Now we can dive into the different types of digital wallets and how they benefit you.
Closed
These wallets are created by a certain company to facilitate the purchasing process of their clients. However, the money in the wallet can only be used to buy items from said company. One example of this is Amazon Pay.
Semi-closed
This type of wallet is quite similar to closed wallets, as you can only make transactions with a limited list of parties. These parties usually need to sign agreements with the wallet provider to accept payments from them.
Open
These are the most common digital wallets, as they can be used for all imaginable transactions. We use these in our daily lives, as these are the type of wallets that banks and financial institutions use.
Bottom Line
Having a reliable digital wallet is extremely important if you wish to be a crypto trader. Some of the most famous are Coinbase Wallet, Electrum, and Mycelium. However, the best way to find out which one is the best for you is to do your own research and ask experts about it.