What is a Crypto Wallet Anyway?
If you’re just starting out on your crypto journey, you’ll want to learn all you can about how to invest and trade securely and successfully. If you’re serious about crypto, then you’ll need to give careful consideration to what wallet to use. You should do this before you decide what currency to start investing in.
What Is A Crypto Wallet?
Crypto wallets are essentially somewhere where you can manage your crypto assets. It’s not that you actually store digital coins here- currency is stored on a blockchain. What you actually store is the public and private key needed to carry out the transaction. If someone gets access to your private keys, they have access to your crypto- so you need to keep them safe!
Before we look at how they work, here’s a run-down on the main types of wallets available.
Types of Wallet
For a secure wallet that offers total control and more features than online wallets, non-custodial wallet is probably the way to go. These wallets will require you to download an app. The main drawback here is that you have way more responsibility than with an online wallet. If you lose your private keys or get hacked then you will lose access to your currency. If using a non-custodial wallet, then you should beef up your desktop security. You can also get mobile apps for many wallets which generally make it possible to pay for goods and services ‘face-to-face’ using your currency.
Normally, this type of wallet looks a lot like a USB drive. The appeal of a hardware wallet is that the keys are stored offline. Hardware wallets generally support different currencies and are considered one of the most secure options. However, there are some downsides. Losing the wallet is ok (though not exactly desirable) as long as you have a recovery seed. They are also relatively pricey.
Hosted or Custodial Wallets
These are sometimes referred to as online or cloud-based wallets. They are generally pretty easy to set up but have a significant drawback. A 3rd party service is holding all of your private keys. As such, they are more vulnerable to attack.
How Does it Work?
When you’re sent digital currency, it is sent to your wallet’s address (public key). Publicly available records will show that the currency is assigned to that address. Your wallet stores the ‘paired’ private key. When you trade or spend the currency, the private key needs to match the public key. If it does, the trade will complete!
The Top 5 Wallets
It seems that another wallet is developed every few days! To simplify things, here’s 5 of the best wallets out there. These are all non-custodial wallets. They might be more difficult to set-up, but they offer total control and complete security.
There we go, a quick run down of the basics. This should give you all the info you need to start storing your keys securely and trading with confidence.