Cryptocurrency Wallets: Everything You Need to Know
A cryptocurrency wallet is a digital Wallet that allows you to store, send and receive digital currencies such as Bitcoin. Cryptocurrency wallets are similar to bank accounts in that they allow you to store your money and make transactions.
However, there are a few key differences:
Decentralized - Crypto wallets are decentralized, meaning they are not subject to government or financial institution control.
Anonymous - They are often anonymous, meaning you can transact without revealing your identity.
Encrypted - Encryption is used to secure your funds and most importantly, your wallet's private keys.
Crypto wallets come in two main types:
Hot wallets - connected to the internet.
Cold wallets - offline and only connected to make transactions.
Cold wallets are considered more secure because they are not subject to hacking but they can be more difficult to set up and use.
Crypto wallets can also be:
Hardware wallets - you need a piece of hardware with wallet software inside to connect your wallet or just to hold your keys and tokens.
Mobile wallets - you can use an app on your phone or pc to hold your wallet.
Popular cryptocurrency wallets and how to set them up:
To set up a crypto wallet, you will first need to create a wallet address. All of those listed above do this for you in their onboarding process. Your address is simply a string of characters that represents your public key. You will then need to generate a private key which is used to access your wallet funds. Once you have generated a wallet address and private key, you can add funds to your wallet by sending them from another wallet or exchange such as Coinbase, Binance, KuCoin, or FTX. Also, some of the wallets allow you to buy crypto with the card, for example, Metamask.
First steps
When you want to make a transaction, you will use your private key to sign the transaction with your digital signature which verifies the authenticity of the transaction for the network. Once the transaction is verified, it will be added to the blockchain and the recipient will receive their funds. Once a transaction is done your wallet will reflect your new balances.
Safety: IMPORTANT
To keep your funds safe, it is important to keep your private keys offline in a cold storage device like a USB drive or paper wallet. You should also create multiple backups of your wallet in case of loss or damage. Finally, you should never share your private keys with anyone as they could use them to access your funds without your permission. BEWARE of scamming contracts, always Do Your Own Research (DYOR) before signing any approval or transaction in contracts.
