The crypto world has been received with mixed reactions with some people optimistic and behind the idea but with others very skeptical about the whole thing. This may make it look not very easy, but it is something you could easily understand. Let’s start by understanding the basics and, in this case, a crypto wallet.
In day-to-day terms, a wallet is a small case that can be used to carry such small personal items as paper currency, credit cards, and identification documents, among others. These wallets have been developed further, and now we have digital/e-wallets and crypto wallets.
What’s a crypto wallet?
Unlike the ordinary wallets used to store small personal items, crypto wallets DO NOT store digital currencies, and this is because the real cryptocurrency is stored on the blockchain. Therefore, a crypto wallet is a software where you store and secure your proof of crypto ownership.
A crypto wallet is a prerequisite to using cryptocurrency, and it can be used to either send or receive cryptocurrencies. Some of the most common cryptocurrencies include; Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Zcash (ZEC), and Stellar Lumen (XLM), among others.
Related Article: How different is cryptocurrency from normal money?
Types of crypto wallets
Crypto wallets fall mainly into two categories, hot wallets or cold wallets.
- Cold Wallet: This is a hardware device where you can store your private keys (more on this later). This type of wallet, also called a hardware wallet, is not connected to the internet and is less susseptible to hackers. Examples include; paper wallets, and hardware wallets. These cost between $100 and $200.
- Hot Wallet: This is a crypto wallet where the rivate keys are stored online at all times. Examples include; desktop wallets, web wallets, and mobile wallets. Apps like Chipper Cash and Eversend that allow crypto transactions are examples of hot wallets.
How Crypto wallets work
Each wallet type is different, but they work similarly. The crypto wallet generates pairs of keys, one public and one private, which allow you to send and receive or otherwise manage your crypto.
Public keys act like account numbers, which can be used to receive a specific type of cryptocurrency. For example, if you need to receive Bitcoin, you should use the Bitcoin address available publicly. You can think of the private key as a PIN to access your crypto. Anyone can transfer cryptocurrency to a public address, but a corresponding private key is required to take the funds.
To illustrate in banking terms, if I wanted to send you money, you would be required to share your account number (public key) with me. Once the money has been transferred, you will be required to input a PIN (private key) to withdraw it or to access your account generally. The difference here is that with crypto wallets, private and public keys come in pairs because the public key is derived from the private one.
Choosing a Crypto Wallet to use
Although crypto wallets are mainly used for cryptocurrency transactions, there are many other uses for these wallets. Digital information stored in a blockchain that represents anything, for example, NFTs, can be accessed through a crypto wallet.
When deciding what crypto wallet to use, it is easier to use an official or officially endorsed wallet for any given coin. For example, if you want to use Ethereum, go for the Ethereum Wallet. There are, however, many other crypto wallets out there that trade in more than one cryptocurrency. Check the official website of your preferred digital coin for official recommendations.
It is worth noting that there is no single wallet that stores every digital coin. Whatever wallet you choose will depend on what coins you would like to invest in.
Image by Bastian Riccardi from Pixabay
