One of the first things when you start to learn about Bitcoin and other cryptocurrencies, you will come across the terms “crypto wallet” and “wallet address”.
What is the difference between the two?
They are two different things; however, they are closely related to storing and transacting cryptocurrency. A Crypto Wallet is software or hardware that keeps all your cryptocurrency. A Wallet Address is a long string of alphanumeric characters you give to others who intend to send you funds, and it derives from your Crypto Wallet.
This article will explain in detail the differences between the two (2) in terms of their functions.
A crypto wallet is essentially an application that provides us with an overview of all transactions we made using it, the ability to send & receive funds, and functions as a secure place to store our cryptocurrency. Most crypto wallets are multi-currency wallets which means they can hold different types of coins. In short, if you want to own crypto, you must have a crypto wallet first.
Wallets can be categorized into three (3) types; software, hardware and web-based.
Software wallets are digital applications installed on computers and mobile devices. They are considered “hot” wallets as they are connected to the Internet. They need online connectivity to sync to the blockchain and make transactions, e.g. sending and receiving funds. Software wallets are helpful for users who require frequent transactional activities.
Some examples of software wallets are;
Hardware wallets are “cold” wallets, meaning they are not connected to the Internet. They are offline by intentional design and aim to achieve maximum security and privacy for their users. The first steps of setting up a brand new wallet using a hardware wallet are done via offline mode, showing how secure-tight they are. Hardware wallets are helpful to users who want to store their crypto funds for the long-term in a safe vault-like place and do not have any plans for them for the time being.
Trezor hardware wallets, for example, ship their wallet without any firmware installed. This prevents any man-in-the-middle attack on the hardware device before it reaches the customer. The customer will then have to install the latest firmware from Trezor’s website on the hardware wallet.
Some examples of hardware wallets are;
Web-based wallets are online wallets hosted by third-party providers, not you. These are mainly cryptocurrency exchanges that provide crypto wallets for their customers. These web-based wallets are very popular and adopted by many because it is convenient since crypto exchanges automatically provide them. Furthermore, web-based crypto wallets are helpful to those users who want to trade cryptocurrency frequently since the wallets are usually from crypto exchanges.
Some examples of web-based wallets are;
Sometimes referred to as a public address, this is the long string of alphanumeric characters that you will give to others when they have to send you funds. You can imagine this to be like a bank account number, which is meant to be given out when required.
New wallet addresses can be generated for each transaction if the user wants. This is supported by various software wallets and is considered a good privacy practice so that no one can snoop around and find out all your transactions and current balance if they want to query the blockchain, especially the Bitcoin blockchain.
Different cryptocurrencies have different address formats. Let’s look at the two (2) popular ones, Bitcoin and Ethereum.
For Bitcoin (BTC) wallet addresses, it is between 26 to 35 characters and starts with either 1, 3 or bc1.
An example of a bitcoin wallet address;
For Ethereum (ETH) wallet address, it is a sixty-four (64) character hex string that starts with the prefix of “0x”.
An example of an Ethereum wallet address;