What is crypto wallet?
Cryptocurrency wallets are pieces of software that give you access to any cryptocurrency that you own and they enables you to transfer and receive coins on their blockchain and check out your coin balance. Your coins are not stored in your wallet. Wallet connects and analyse the blockchain. All transactions on the blockchain are public so all users on the blockchain can confirm that the coin changed hands.
Public and private keys
Two most important pieces of data inside every wallet are the public key and a private key. The public and private keys come together when it’s time to transfer coins from one user to the other. Keeping your private private key safe is extremely important.
Keep your private key secure and make sure you don’t lose it. Without it, all your coins will be lost. Various companies have developed different levels of security and ease-of-use. Some wallets have extra features, such as checking live exchange rates or maintaining balances from different blockchains. Crypto wallets are divided it 5 different types.
The most common types of wallet out there, desktop wallets, are downloaded and installed on your computer. Desktop wallets provide a high level of security since they’re accessible only from the machine on which they’re installed. The biggest disadvantage is that they also rely on you to keep your computer secure and free of malware.
Online wallets like the one you got on the exchange are the easiest to set up and use. The biggest advantages to online wallets are that they cannot be lost and that they’re accessible from any computer with an Internet connection. At the same time online wallets are easier targets for hackers.
Similar to desktop wallets, but running as an app on your smartphone. Smartphone wallet are often simpler and easier to use compared to their desktop counterparts, and include the ability to scan other wallet addresses for faster transactions. You will need to be extra careful about losing your smartphone. Anyone who has access to your device might also have access to your funds.
Also very similar to desktop wallets, hardware wallets add another layer of security by keeping the private key on a USB stick. Apart from added security, hardware wallets allow the user to plug the USB stick into any computer, log in, transact and unplug. Some hardware wallets require you to fisicaly press the buttons in order to confirm your transaction.
Paper wallets are simply a print out of your public and private keys. As secure as they are, paper wallets are also the most complex wallets to use as they require both the paper and a desktop (or software) wallet to work.
Using the recipient’s public key, i.e. the wallet address, you can send coins from your wallet to your recipient. Depending on the blockchain in use, the transaction might take some time to be verified because for most blockchains a miner needs to confirm and add the transaction to the blockchain.
Receiving coins is even easier than sending them. Your wallet provides you with an address which you can give to anyone you’d like to receive coins from. Some wallets even give you multiple public addresses including one-time-use addresses for security.
Keeping your wallet secure
Your wallet is the gateway to those funds. Wallets are built to be secure. They are almost completely unhackable and the weakest link is most often the user. So make sure to follow standard security best practices when using desktop wallet or when accessing an online/smartphone wallet:
- Always use strong usernames and passwords
- Install antivirus and anti malware software (and keep them up-to-date)
- Set up a secure firewall
- Never install software developed by companies you don’t trust
- Only use verified and trusted wallets
- Update your wallet software as soon as possible
- Double-check your public address when giving it to users sending you money
- Double-check your recipient’s public address when sending money
- If accessing an online wallet, make sure the address is secure (https://)
- Never access online wallets from public Wi-Fi
- Use two-factor authentication for login in your account
- Keep the private key and other backup on an offline medium in a secure location