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Basics

Wallets

What a Wallet really does

A cryptocurrency wallet is a vital tool that allows you to send and receive cryptocurrency. It also allows you to generate new wallet addresses. There are many different types of wallets and they are not all created equal. Your choice of wallet and how you secure the information associated with it are vital to your security.

We call it a wallet because that is the word we are accustomed to saying, however a wallet does not actually store or hold any cryptocurrency. It actually functions more like a key chain as in it give you the keys to access the cryptocurrency on the blockchain. This is why you can have a wallet deleted or lost and restore on another wallet and/or device.

Below we will look at more features of a cryptocurrency wallet and different types of wallets.

Public and Private Keys

Crypto wallets are able to generate one or more pairs of public and private keys.The public key is used to generate wallet addresses, which are needed to receive payments. Public addresses can be shared with others as they cannot be used to access your funds, only allow you to receive cryptocurrency.

The private keys, on the other hand, are used during the creation of digital signatures and verification of transactions. They should be kept and should never be shared with anyone, not even those claiming to be technical support for that wallet

Seed Phrases, What To Do and Not To Do With Them

When you set up a wallet, you will be provided with a set of randomly generated words that are called seed phrases or backup phrases. This is a set of 12-24 words depending on the wallet type.

In a wallet where you control your private keys, there is no customer service agent that you can contact to reset your password if you forget. These words are your backup to restore access to your wallet if you either forget your password or lose access to the wallet. These should NEVER be shared with anyone. It is also best not to store these digitally on any device connected to the internet. Do not store in your email, or on the notepad on your phone or computer. It is best to write these down and store multiple copies in more than one geographic location.

For example, in a fireproof safe where you would normally store important documents. Some companies offer a metal punch card where you can punch out the words onto the card which allows it to be more durable than paper or card stock. Remember, you are responsible for your own security so do not take this task lightly.

Different types of Wallets

Although there are generally 3 main types of Cryptocurrency wallets, software, hardware, and paper wallets, we will look at those a few alternatives.

Software wallets are those that are software that you download in the form of an app. Mobile wallets are those that are available in a mobile application and can be downloaded from either the Google Play Store or Apple App Store. Always check the validity of an app by going from the wallets main website rather than using Google or search function in app store. Some fake, malicious apps have popped up in the past. Popular mobile wallet apps include the Newscrypto Wallet, Exodus, and Trust wallet. Exodus also offers a desktop wallet, which can be installed on your computer. This is another type of software wallet. There are also web based wallets that can be installed on your computer as a web browser plug in. One of the most installed one is MetaMask.

Hardware wallets are also called cold storage wallets. These wallets are not connected to the internet at all except for situations where you connect device to send cryptocurrency. Hardware wallets are considered more secure than software wallets due to the fact it is a separate device that you choose when it is connected as compared to phones or computers which are usually always connected. Some of the most popular brands of hardware wallets are Ledger, Trezor, and Ellipal. The most important aspect of buying a hardware wallet is to make sure you are buying it directly from the manufacturer. Third party sellers could be offering fake wallets that are designed to steal your funds. Hardware wallets are recommended for larger holdings that you are not actively trading on exchanges.

Paper wallets are another secure method of storing your cryptocurrency but not without certain limitations. Paper is never connected to the internet however, due to the fragile nature of paper, over time the paper may become illegible and is susceptible to the elements, especially water and fire. Alternatives to this type are card wallets that give you the security of paper wallets with a little better durability. One of the most popular card wallets is the Swiss Key Card by Tangem.