Digital wallets are here to stay. Find out more about the shape of digital transactions and the different types of wallets that store cryptocurrency.
In the mid-20th century, credit cards and bank charge cards revolutionized how consumers accessed money to make payments on bills and to merchants. Payments were no longer restricted by location or how much cash an individual had on hand. With full access to accounts practically in a person’s pocket, life became easier, as funds were also more secure.
Fast forward to 2018, and a new revolution in commerce has again reshaped the way we think about monetary transactions. With the evolution of e-commerce, mobile payments, and auto-bill pay, people around the world are storing their funds in a whole new way: digital wallets.
What Is a Digital Wallet?
Digital wallets allow people to hold, send, and receive money through electronic transactions. In many ways, a digital wallet is just a high-tech update to the traditional, physical wallet you might keep in your pocket or purse. Most digital wallets have all the functionality of regular old wallets, with a key difference being that you can access them through connected devices like a computer or mobile phone.
The first digital wallets were created for online shopping. Websites like eBay needed a solution for return shoppers to make faster transactions, rather than manually inputting their payment information with each consecutive purchase. Eventually, mobile payment options progressed, and in 2014 Apple Pay expanded the use of digital wallets to all iPhone users. Today, we can do everything, from buying groceries at the store to instantly sending and receiving money, from the convenience of our smartphones.
That versatility is making digital wallets more widely used than ever before.
If we look around the world, many countries are already transitioning to digital wallets and mobile payments as a primary means of transacting. China has essentially become a cashless society, and could be an early example of how digital wallets will be used in society.
What Are the Benefits of a Digital Wallet?
Digital wallets offer many benefits including enhanced security, greater convenience, and financial flexibility.
Some digital wallets are directly linked to bank accounts and credit cards, allowing users to move money back and forth as needed. This makes it easier to consolidate or separate financial resources to meet the needs of tracking budgets and expanding currency portfolios.
Digital wallets frequently operate through apps on smartphones. In many cases, you can use them to pay for goods at retail outlets, restaurants, and other places of business. If a business has a compatible point of sale, you might simply be able to tap the phone at checkout to make an instant payment. Starbucks, for example, is notorious for rewarding return customers who spend money using the Starbucks app.
Digital wallets that offer different kinds of currencies and asset flexibility can be a useful tool for international travelers, and for people who hold cryptocurrency assets. If you’re a crypto trader or investor, digital wallets are basically a necessity.
Digital Wallets and Cryptocurrency
Digital wallets are essential to using cryptocurrencies. When it comes to cryptocurrency, there are two main types of digital wallets:
1. Cold Storage
When cryptocurrency is held in a reserve offline, this is known as “cold storage.” Cold storage wallets are commonly used to store large amounts of a crypto, like bitcoin, for security. These reserves are safer from hackers as they don’t exist on a web server.
2. Hot Wallet
A “hot wallet” is a cryptocurrency wallet that is online. Any cryptos in a hot wallet are not in cold storage. Hot wallets are more vulnerable to hackers, but with a hot wallet, trading is easier and more efficient.
Both types have pros and cons, but the main difference is that cold storage wallets require more effort, expertise, and maintenance on the part of the user. For advanced cryptocurrency users, setting up your own cold storage wallet may be the way to go. For everyone else, using a digital money platform like Uphold can be a huge benefit, making it easier to keep funds in both cold storage and hot wallets. Check out our cryptionary for more cryptocurrency terms.
Set Up Your Digital Wallet with Uphold
Uphold offers one of the most user-friendly, easy-to-access, safe and secure digital wallets out there. At Uphold, we offer our members a range of features, including:
- Regular Security Audits and Penetration Testing of our systems and Two-Factor Authentication to secure your account. When it comes to safeguarding the money you’ve worked hard to earn, these extra layers of security are a must.
- Buy and Sell Cryptocurrencies and Other Assets. Uphold’s digital wallet contains “cards” that represent your preferred forms of cryptocurrency, traditional currency, and even commodities. (We’ve got 30+ available on our platform!) Once your digital wallet is set up, it just takes a few easy clicks to move money between different cards. Buying and selling cryptocurrencies has never been easier.
- Send and Receive Money. Your digital wallet also makes it easy to send money to friends and family, and receive money from employers and followers. You can send money to any Uphold member no matter where they’re located around the world, with the touch of a button. You can also receive money from any Uphold member and hold it in the currency of your choice.
For step-by-step instructions to get started and set up your digital wallet, check out our blog post: How to Setup Your Digital Wallet on Uphold.
Whether you need a place to have your funds stored online, or are buying and selling cryptocurrencies, digital wallets are the tools of the future. By 2020, digital payments are expected to hit $726 billion! With that kind of transaction volume, it’s possible that everyone around the world will be holding a majority of their funds in digital wallets within the next ten years. It’s only a matter of time, and we can help you get started.
We make buying, holding, converting and sending value between the 30+ digital and traditional currencies we support easy for anyone to understand and anyone to do.
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This article should not be used as or considered investment advice. If you have questions regarding cryptocurrencies, tokens or any financial investments please consult your financial advisor.