What are the crypto wallets? Do we actually need them?

In simple words a cryptocurrency wallet is a digital medium used to buy, send, receive and spend digital currencies such as Bitcoin and any other supported altcoins or tokens. You can view cryptocurrency balances and make transactions. Cryptocurrencies are virtual currencies operating on a blockchain, wallets are created not to contain or store cryptocurrencies but to act as a tool for the user to interact with within the blockchain. The wallet generates and stores private and public keys that allow users to conveniently access their cryptocurrencies. For example, imagine a warehouse that helps keep your belongings safe and secure. The same goes for a cryptocurrency wallet. It acts as a store of private and public keys that are needed for any cryptocurrency transaction. Each wallet gives its users a unique account number, commonly known as the wallet address. Wallet addresses are simplified versions of public keys and a combination of randomly generated upper and lower case letters and numbers. Just like regular bank accounts, the wallet's public address can be shared with other people to receive cryptocurrencies. By contrast, private keys serve as a password or verification code for the user's cryptocurrency transactions. It gives users access to the actual resources they have in the blockchain. Unlike public keys that can be shared with the public, private keys must always be kept securely by the user. So, if you lose your public key or address, it can always be retrieved considering it still has the private key. Cryptocurrency wallets allow you to view existing balances and transfer cryptocurrency funds (such as buying and selling cryptocurrencies) on a blockchain system. The public key is associated with only one private key, which means that only the user can verify transactions in his wallet. The types of cryptocurrency wallets can be divided into two categories: hot wallets and cold wallets. Hot wallet is an internet connected wallet while cold wallets are not connected to the internet. Under the cold wallet category, there are different types of wallets: paper wallets, hardware wallets, and software wallets. The choice of a specific type of wallet depends on the needs of each person as each wallet has different functions and features. Hot wallets are: software wallet, web wallet or mobile wallet. Some wallets are only for one cryptocurrency while others offer more than one coin or altcoins.

It is always better to keep your cryptocurrency in your hands where only you have access to them. Many people use exchanges to store their crypto which is not always safe as we know lots of exchanges got hacked and funds are lost.

A cryptocurrency wallet is where we store our private keys. Cryptocurrencies don't leave their networks, so what determines ownership is access to a password that will allow us to transfer them. A private key is a long, random string of numbers and characters, practically impossible to remember. A cryptocurrency wallet is where we have it stored.

Example:

If I have 2 bitcoins and want to send them to Tom, I need to know his public address. It's like a letter that arrives in someone's mailbox - you need to know the address and provide it. The letter arrives in the mailbox, but in order for Tom to take it out, he must have a key to open it. If Andrew loses the key, he cannot get to the contents of the mailbox.

The difference between the letterbox key and the private key that allows us to access our cryptocurrencies is that the latter cannot be reset or recovered. There is no locksmith who is able to open our mailbox. If you lost access to your private key, you lost your cryptocurrencies. This is why wallets were created.

Cryptocurrency wallets are used to store private keys. "Physically" all bitcoins and other cryptocurrencies are located all the time in their networks - blockchains. Private keys are assigned to them, which make these funds have their exclusive owners. 

It is worth mentioning that there are wallets designed exclusively for specific cryptocurrencies as well as those supporting multiple types of them. If you send a particular cryptocurrency to a wallet not intended for it, you will probably lose it.