Crypto Wallets
A crypto wallet is a very essential part of cryptocurrency. It accounts for the storage and safety of cryptocurrencies. Perhaps, you are interested in crypto but do not know the mechanism behind crypto wallets. In this article, you will be taken on a journey of learning about crypto wallets, how it works, types, the best to use and, ways to protect your wallet. Welcome to the ultimate guide to crypto wallets.
Crypto Wallets: What does it mean?
A crypto wallet is a software used to store and secure public and private keys for crypto transactions. Public and private keys are key requirements for cryptocurrency transactions. They allow users to send and receive cryptocurrency without the input of a third party. For this reason, they have to be stored and secured as safely as possible. This is where crypto wallets come in. Unlike physical wallets, crypto wallets do not store actual money or currency but records of the transactions on Blockchain. For a cryptocurrency to be used, a digital wallet is required. An amazing feature about crypto wallet is that it is not subject to just one cryptocurrency but can store various cryptocurrencies.
How does it work?
Crypto wallets store public keys, private keys, public address, and record transactions. To have a better understanding on how crypto wallets work, we will compare them to banking transactions. Suppose someone wishes to send you some money via banking. They request your account number. You send it to them and they can transfer the money to you. To gain access to this money, your account pin is required. With that, you can withdraw the money, spend it or successfully send money to whoever you wish. Now if someone wishes to send you bitcoin, you provide your public address. This public address can be provided to anyone who wishes to transfer crypto to you. It is the location in which the bitcoin is going. The transaction is then authenticated on the blockchain. This indicates that there has been a transfer of ownership of the bitcoin from the sender to you. To access your bitcoin, a private key is required. Just like bank pins, a private key is a secret number that enables you to spend or transfer cryptocurrency. It is important to try as much as possible not to let your private keys get in the hands of hackers. This is why the usage of good and trusted crypto wallets is advised.
Types of crypto wallets
Crypto wallets can be classified into two; Hot wallets and Cold wallets. The difference between both is that a hot wallet is connected to the internet but a cold wallet is not. There is one type of crypto wallet that can be categorized under hot wallet: Software wallet. • Software wallet: As the name implies, they are installed on computers or other devices. They are designed so that private keys are under your control and only you are accessible to them. It is convenient for many users because it is easily accessible and easy to set up. Examples of software wallets include; Exodus, Electrum, Coinomi, and so on. In contrast to hot wallets, a cold wallet is that which is not connected to the internet. There are two major types of cold wallets: Hardware wallets and paper wallets. • Hardware wallets: Unlike software wallets, hardware wallets are not stored in computers. Rather, they are plug-in devices. They are notable for being very safe and secure. Their high security attributes to the fact that storage of keys is usually done in an offline environment. Examples of hardware wallets include Tether, Bitcoin, Ripple, and so on. • Paper wallets: This is a printed piece of paper that contains keys and makes use of QR codes to facilitate cryptocurrency transactions. They were once very popular and considered to be very safe because they are not connected to the internet. Users then came to the realization that it could easily be stolen, burnt, or undergo other forms of damage. So, users delved into other forms of crypto wallets.
How to create a crypto wallet
Having mentioned all you need to know about crypto wallets, you must be ready to open your crypto wallet. You will be provided two different ways in which this can be done. You will be given the steps, pros, and cons for each. It is advisable to take note to have a smooth wallet creation journey. • Online wallet: A popular method is making use of an online wallet. There are services in existence for the easy creation of crypto wallets. These services make it easy for this creation and take the burden away from the user. It takes over storage duties and they get small transaction fees in return. The downside of this method is that the user does not own the wallet or keys in it. In hindsight, if the owners of the service decide to shut down or make their way with the currencies they own, users can do nothing about it. Because cryptocurrency uses Blockchain, it operates on a decentralized system. This means that there is no interference from a third party. So if such loss happens, there would be no one to file a complaint to.
Setting up an online wallet:
1. Find a trusted service. 2. Download the wallet app. 3. Register and follow the instructions given by the app. 4. You will be given an address
Note that this address will be used to make crypto transactions.
• Hardware wallets: They are portable storage devices that store private keys. Hardware wallets are very convenient and secure. But they are quite costly. The required processes in opening a crypto wallet are embedded in a USB stick. It is highly secure because a pin code is required and you own access to public and private keys. It is very convenient and does not require the process of registration neither is it connected to the internet making it difficult for hackers to gain access. Also, if it gets lost, you could buy a new one and enter the private key you stored in the old one. 1.Buy a hardware wallet 2. Plug-in USB stick into a computer with internet access 3. Follow instructions from the computer 4. Choose to make a new wallet 5. After receiving a private key, set up a PIN code 6. Ensure that you backup your recovery phase Having followed these instructions, you now have a crypto wallet! Ensure that it is kept as safe as possible. The cryptocurrencies you have acquired won’t matter if your crypto wallet is compromised.