Crypto Wallet: A Beginner’s Guide
In this article, let’s learn what a crypto wallet is, how it works, and how to choose the right wallet type for you.
What is a cryptocurrency wallet?
As you may have guessed, a cryptocurrency wallet is an application where you receive and send your cryptocurrencies. It also does more than that. Your crypto wallet is your passport and seal of approval. You can receive or send transactions, and initiate other activities on blockchains.
How does a cryptocurrency wallet work?
Your cryptocurrencies aren’t ‘stored’ in your wallet, but on decentralized databases - blockchains - and cryptocurrency wallets are your blockchain interfaces. To look you up or send you cryptocurrencies or NFTs, people will need your public key - wallet address. To have full access to your account and everything in it, you will need your private key - a long line of mixed numbers and letters that looks completely random. A series of words that are known as seed phrase are also generated as an alternative to your private key, just to make things easier.
Anyone can send transactions to your address but only with your private key can someone unlock your safe and snatch everything in it. This also works both ways. If you lose your seed phrase or private key, you will also lose access to your crypto. In fact, according to an analysis, there are 6 million bitcoins, almost one-third of its total circulation, that are irretrievably lost.
Things are about to change, however, as with Ethereum’s Account Abstraction proposal (EIP-4337), your wallet will be essentially running on smart contracts. This allows for much more flexible permission controls and easier account recovery.
Comparing different crypto wallets
Like almost everything else, crypto wallets come in all shapes and sizes. They can be divided into hot and cold wallets - hot for wallets with Internet access and cold for those without, or custodial and non-custodial wallets depending on whether your keys are stored by third parties. There are also three subcategories by mediums:
These are more like paper keys than wallets, as they are just seed phrases (or private keys, if you feel like it) written on physical mediums - pieces of paper, for instance. Since there’s probably not a single piece of paper in the world that comes with Internet access, your crypto will be almost untouchable if you’ve done a good job protecting your piece of paper. This comes with an obvious drawback, as you have to go through an arduous journey each time you wish to do something with your wallet just to get it online.
These wallets are thumb drives with your private keys inside. Whenever you need to make a transaction, you can simply plug your hardware wallet into your computer and sign it off. Like papers, most thumb drives can not connect to the Internet by themselves. Hardware wallets are almost as safe as paper wallets but are several steps up the convenience ladder.
Connecting your wallets to the Internet all the time grants you immense convenience at the cost of a considerable sacrifice in safety. Software wallets offer such options on desktop and mobile devices. They can be a program, a browser extension, or an app. These wallets provide friendly interfaces and seamless experiences across all your interactions. Those come at a price, however, as devices may get hacked, people may get scammed, and third parties people trusted their private keys with may be breached or turn malicious.
Which crypto wallet should you choose?
Sadly, there is no definitive answer to this since it all comes down to your needs and preferences. We do have a few recommendations, however.
For those who prioritize safety above everything else, we recommend a hardware wallet. These devices are almost as safe as it gets and are easier to keep track of and interact with.
If you’re accustomed to browsing and investing on your desktops, then Metamask - a non-custodial wallet in the form of a browser extension chosen by millions of crypto lovers worldwide - could be your first choice. It is by far the most popular wallet on all Ethereum-based platforms.
Smartphones have become an integral part of our lives - that includes crypto, of course. There are hundreds, if not thousands, of mobile wallets out there but there’s one that stands out - BitKeep. It is a one-stop solution for asset management, bridging, trading, and exploring across over 90 blockchains.
Or, you could store your crypto at a trusted centralized exchange with dedicated protection fund against cybersecurity threats.
Step 1: Register your Bitget account via this link.
Step 2: Set up your account. This includes binding your email, mobile, Google Authenticator, and a fund password whenever you wish to withdraw your funds.
Step 3: Purchase crypto via credit/debit card, bank deposit, third-party payment solutions, or P2P trading. You can also transfer some of your assets from other wallets on your ‘Asset’ page and earn up to $5005 for your first deposit.
All set! You can now start enjoying our intuitive trading experience, backed by our 24/7 support and protected with our $300M fund.
Feeling ready? Register now and explore the wonderful crypto world at Bitget!
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