Transaction technology is currently undergoing the biggest revolution since the invention of cash. Digital transactions are nothing new since debit and credit card technology issued by your bank can be used over the internet on digital platforms that they provide. 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 to future transactions is the implementation of cryptocurrencies. Cryptocurrencies such as Bitcoin, Ether and Dogecoin operate via peer-to-peer networks rather than through centralized banks.
You will undoubtedly have heard of cryptocurrencies unless you have been living under the proverbial rock. Some people shy away from using cryptocurrency since they feel like it is complex. While the way in which cryptocurrency works is complicated, you don’t need to understand the inner workings of blockchain to use cryptocurrencies effectively.
There are currently thousands of cryptocurrencies from which you can choose. Sites like CryptoDeFix hold information on many of the most valuable platforms. Essentially, cryptocurrency cuts out the middleman when facilitating a transaction. Currency such as Bitcoin operates on a peer-to-peer network where transactions are anonymously and securely sent directly between parties. Even PayPal and Venmo, which are designed to be secure, really or not and are susceptible to unwanted intrusion.
Digital or E-Wallets
Although digital wallets can facilitate transactions using cryptocurrency, they are not to be confused with cryptocurrencies themselves. Although, cryptocurrency is a form of digital currency. Digital wallets relate to the commerce of physical (bank) money assigned to a digital system. For example, you can move money from your bank account to your digital wallet to be used in transactions in place of a debit or credit card.
There are many digital wallet systems in use now, and some of the best are supplied by the world’s top tech companies. For example, Apple, Google, and Amazon all provide their digital wallet systems. You can use these digital services between smartphone devices, systems inside retail establishments, or between two independent parties.
Although cryptocurrency is very secure in nature, it is not unhackable when stored online. Furthermore, the anonymity provided by cryptocurrency platforms means that if you are hacked, you will never regain your finances as it is impossible to trace from where the hack originated. This is both the advantage and disadvantage of cryptocurrencies. Online storage of cryptocurrency is known as a hot wallet.
A hot wallet is essentially an online platform where you can store all your cryptocurrency holdings. But given the online nature of the hot wallet, it is susceptible to infiltration by malicious individuals. Additionally, cryptocurrency is not granted insurance or guarantee by organizations such as the FDIC or SPIC.
Hot wallets provide some security measures, but you will eventually need to move your cryptocurrency holdings to a more secure system. This is where cold wallets come in handy. Essentially a cold wallet is an offline storage system for your cryptocurrency holdings. The offline nature of a cold wallet means they are essentially unhackable, 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 printout of a key which you need to access your cryptocurrency account. This key is not stored anywhere online, so it is a good idea to print the key and then keep it somewhere safe for when you need it. A hardware wallet is a USB device that stores all of your cryptocurrency keys to use later on when you connect to a specific online platform. USB wallets provide additional security as they are not susceptible to malware or viruses that might be used to track transactions or keystrokes on one’s computer.