Transaction technology is currently undergoing the biggest revolution since the invention of cash. Digital transactions are nothing new as credit and debit card technology issued by your bank can be used over the internet on the digital platforms provided. However, emerging technologies are changing the way transactions are facilitated now and in the future.
At the most basic level, you can use a digital wallet to add funds from your existing bank account, and some significant players are pushing this technology. But the most crucial aspect for future transactions is the implementation of cryptocurrencies. Cryptocurrencies like Bitcoin, Ether, and Dogecoin operate via peer-to-peer networks rather than centralized banks.
You will no doubt have heard of cryptocurrencies unless you have lived under the proverbial rock. Some people shy away from using cryptocurrency as they believe it is complex. Although the way cryptocurrency works is complicated, it is not necessary to understand the inner workings of the blockchain to use cryptocurrencies effectively.
There are currently thousands of cryptocurrencies you can choose from. Sites like CryptoDeFix contain information on many of the most valuable platforms. In essence, cryptocurrency eliminates the middleman when facilitating a transaction. Evaluate how Bitcoin operates on a peer-to-peer network where transactions are sent anonymously and securely directly between the parties. Even PayPal and Venmo, which are designed to be safe, really or not, and are susceptible to unwanted intrusions.
Digital or electronic wallets
While digital wallets can facilitate transactions using cryptocurrency, they are not to be confused with cryptocurrencies themselves. However, cryptocurrency is a form of digital currency. Digital wallets are about trading physical (bank) money assigned to a digital system. For example, you can transfer money from your bank account to your digital wallet for use in transactions in lieu of a debit or credit card.
There are many digital wallet systems in use now, and some of the best are provided by the best tech companies in the world. For example, Apple, Google, and Amazon all provide their digital wallet systems. You can use these digital services between smartphone devices, systems within businesses or between two independent parties.
Although the cryptocurrency is very secure in nature, it is not unassailable when stored online. Furthermore, the anonymity provided by cryptocurrency platforms means that if you get hacked, you will never regain your finances as it is impossible to trace where the hacking originated. This is both the advantage and the disadvantage of cryptocurrencies. Online cryptocurrency storage is known as a hot wallet.
A hot wallet is essentially an online platform where you can store all your cryptocurrencies. But given the online nature of the hot wallet, it is susceptible to infiltration by malicious individuals. Additionally, the cryptocurrency is not given any assurances or guarantees from organizations such as FDIC or SPIC.
Hot wallets provide some security measures, but you will eventually need to move your cryptocurrencies to a more secure system. This is where cold wallets come in handy. Essentially a cold wallet is an offline storage system for your cryptocurrencies. The offline nature of a cold wallet means they are essentially unassailable, providing an extra layer of security to your finances.
There are two forms of cold wallets. You can use a paper wallet or a hardware wallet. A paper wallet is a print of a key that you need to log into your cryptocurrency account. This key is not stored anywhere online, so it’s a good idea to print the key and then keep it in a safe place for when you need it. A hardware wallet is a USB device that stores all of your cryptocurrency keys for later use when connecting to a specific online platform. USB wallets provide additional security as they are not prone to any malware or viruses that could be used to track transactions or keystrokes on your computer.
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