Most people don’t understand what a crypto wallet is, not to mention knowing the best crypto wallet and the safest one to choose.
This includes even some people who own cryptocurrencies already.
So I have written this crypto wallet beginner’s guide to help everyone understand everything they need to know about it, and to help you choose the best crypto wallet for yourself.
Because as an investor, finding the best crypto wallet to store your funds is as important as finding the best cryptocurrency to invest in.
While the best cryptocurrencies will grow your money, only the best crypto wallet can secure the money, keeping it away from theft.
You cannot have the best cryptocurrencies, but storing them in an unsecured place where they can be stolen.
For this reason, I charge you to pay attention as I take my time to explain everything you need to know about a crypto wallet.
The Things We Will Discuss Here;
- What is a crypto wallet?
- Private Key
- Public Key
- Wallet address
- Types of crypto wallet
- The Pros and Cons of each wallet
- The crypto wallet I like
- Sending & receiving crypto from/to your crypto wallet
What Is A Crypto Wallet?
A crypto wallet is a software program that enables you to store and access your cryptocurrencies.
It is a program people use in sending and receiving cryptocurrencies like bitcoin, ethereum, etc. Storing them and monitoring the balances.
They are similar to the regular wallet where you put your cash, helping you keep your money safe and secure.
Some crypto wallets hold only one type of coin, while others hold multiple cryptocurrencies, which is good if you don’t want to limit yourself to just a crypto.
Each Crypto wallet consists of two key pairs that are; public and private keys.
What Is A Private Key?
A private key is a secure code used by people to access the crypto wallet and manage the funds tied to it.
It is exactly as its name ‘PRIVATE.’ Meaning it is personal and not to be shared with anyone.
You can also see it as the key to your safe deposit box. If you lose or forget your key, you will lose your crypto.
And if anyone gets hold of your private key, they can be able to access your crypto wallet and take your money.
This is why you must take securing your key seriously if you want to secure your crypto.
Your private key is for you and only you. Never share it with anyone.
What Is A Public Key?
Haven learned about private keys; a public key is also as their name ‘PUBLIC’, meaning you can give it to anyone without worry.
While private keys are made for you alone, public keys on the other hand are made for you to receive crypto from others.
It is a long string of alphanumeric characters.
They allow you to receive crypto in transactions. But by using a wallet address which is a shortened form of your public key.
What Is A Wallet Address?
Unlike what some people think, a wallet address is not the same as a public key.
But as discussed earlier, it is the shortened form of your public key.
Your wallet address is a unique string of numbers and letters that people can use to send you cryptocurrency.
For example, if someone wants to send crypto to you, let’s say bitcoin, they will send the money to your bitcoin wallet address which you provided to them.
A crypto wallet address can come in two forms; a unique string of numbers and letters or a QR code that someone can scan.
NOTE; your wallet address transaction records are public on the blockchain explorer where all transactions that have ever taken place on the crypto network are stored. The good side is they are not linked to their user’s real-world identities.
Types Of Crypto Wallet
Generally, there are two main types of crypto wallets; hot and cold, and under them, we have different types of hot and cold wallets that we will discuss too.
Each type of crypto wallet has its benefits and drawbacks, providing a different level of security.
While hot wallets are built for convenience, cold wallets are built for security.
But your decision should be based on your needs.
If you want to buy and trade cryptocurrencies or think you might cash out your crypto after a while, accessibility will be of great importance. That means a hot wallet should be your choice or leaving it in your crypto exchange wallet.
But, if you want to store a large amount of cryptocurrency for a long time, then a cold wallet that provides security over convenience should be your choice.
A cold crypto wallet is an offline wallet, either on a USB-like device or on paper.
Unlike hot wallets, cold wallets do not connect to the internet but are offline physical wallets for storing cryptocurrencies.
And because they are not connected to the internet, they cannot be hacked.
Cold wallets are built for security, making them the safest crypto wallet.
They are made for storing large cryptocurrencies, and coins you do not intend to use anytime soon.
I will not forget to state that they give you 100 percent control of your money.
Types Of Cold Wallet
1. Hardware Wallets
These are physical devices similar to a USB stick that contains your wallet keys or code.
They focus on security.
Offering the highest level of protection against cyber threats because the keys are stored offline.
Your money is safe as long as you make sure you don’t lose your private keys and recovery seed.
Hardware wallets are the most recommended cold crypto wallet.
But you should buy a hardware wallet only from a verified seller or directly from the manufactory, and avoid a second-hand hardware wallet.
2. PAPER WALLET
Paper wallets are an early prototype of a hardware wallet.
It is paper printed with a QR code and your wallet address and key.
Created via dedicated service, then print your private and public addresses on a piece of paper, either as a string of letters and digits or as a QR code.
But they are considered one of the safest crypto wallets. Though personally, my preferred cold wallet is a hardware wallet.
But receiving funds from your paper wallet is not any different from other types of wallets.
While Cold wallets can be likened to a vault, with a high level of security, hot wallets are more like the regular wallets you carry for day-to-day transactions.
They are user-friendly.
They give you easy access to your cryptocurrency.
Hot wallets are best for small amounts of cryptocurrencies that are used frequently, such as for daily trading or online purchases.
To keep a large amount of crypto in a hot wallet is a poor decision unless you’re trading with it or cashing it out soon.
Types Of Hot Wallet
1. Mobile Wallets
A mobile wallet is an app that lets you store and control your cryptos on your smartphone or tablet.
They are the most frequently used type of crypto wallet, as they make it easy to check crypto balances on the go and to send and receive cryptocurrencies anytime, anywhere.
Mobile wallets can be used as means of payment even in physical stores.
They are similar to desktop wallets. But just with additional features like a QR code scanner for faster transactions.
2. Desktop Wallets
Desktop wallets are apps you download and install on your computer or laptop.
Like the other hot crypto wallets, the crypto in your desktop wallets is at risk if the device is hacked, has a virus, or is damaged.
But most wallets will provide you with a mnemonic phrase upon installation.
The mnemonic phrase is a long string of words required for a wallet recovery if the wallet is to be re-installed.
For viruses, you may consider having antivirus installed on the same computer you’re using a desktop wallet.
3. Online Wallets
These online crypto wallets live in a cloud and can be accessed via any desktop or mobile with an internet connection.
They combine the functionality of desktop wallets and the accessibility of mobile wallets.
Many of them are integrated with cryptocurrency exchanges.
However, since your passwords are kept on online servers, there’s an increased risk of theft, even though some online wallet providers have insurance for your funds.
Pros Of Cold Wallets
- Highly secure and cannot be hacked
- Not reliant on a third-party
- It gives you 100 percent control of your funds
Cons Of Cold Wallets
- Must physically have the wallet to use it
- If the wallet is lost you may lose your funds.
Important tip; you can recover the cryptocurrencies in your hardware wallet if it is lost or damaged. But only if you still have access to your recovery seed. You will only need to import the recovery seed into a new hardware wallet.
Pros Of Hot Wallets
- Easily accessible
- Usually free or inexpensive
Cons Of Hot Crypto Wallets
- Vulnerable to hacking
- Online and mobile wallets are kept through third parties, which are also vulnerable to hacking and are often uninsured
- Susceptible to scams
- You do not have 100 percent control of your funds.
Cold Crypto Wallets I Like
They offer you the highest security for cryptocurrencies not moved around regularly.
Hot Crypto Wallets I Like
- CoinBase Wallet
Sending & Receiving Crypto From/To Your Crypto Wallet
To send or receive cryptocurrency is easy.
To send crypto, you will need the wallet address of the receiving person.
Then go to the ‘send’ feature in your wallet and enter the wallet address of the person you intend to send crypto to.
Select the amount of crypto you want to send, and click ‘confirm’.
[READ: 10 Best Cryptocurrency to Buy]
To receive crypto, you need to generate your wallet address from your wallet.
To generate your address go to ‘receive/generate address’ in your wallet, click it, copy the alphanumeric address or QR code and share it with the person who wants to send crypto to you.
If you are sending a large amount, you may consider sending a small test transaction before sending the remaining.
The reason is that crypto transactions are designed to be irreversible.
So it is good to be careful when sending or receiving cryptocurrencies.
If you make a mistake when entering or sending your wallet address to others, the sender will not be able to find out.
You must also make sure to send the address of the exact crypto you want to receive.
For example, if you send a bitcoin address when you want to receive ethereum, the crypto will be lost forever.
So remember always to send a bitcoin address when you want to receive bitcoin and ethereum address to receive ethereum, and so on.
If you are still a beginner, some of the things shared here may be confusing.
However, feel free to leave a question under the comment section, and I will be glad to help in any way I can.
IMPORTANT; you must never send money to anyone you meet online asking to help you invest in cryptocurrency. They are scammers. Crypto is easy, and you can do it all by yourself.
The information presented here should not be used as the sole basis of any investment decisions, nor should it be construed as financial, tax, legal, or accounting advice. I will also advise that you invest in cryptocurrency only what you are comfortable living without, at least temporarily.