Where do we all keep our cash money? Most of us generally use wallets. Nowadays in general finances became something that is not physically tangible, because it became digital. But we all understand that digital money also needs someplace to be kept and so the digital wallet was invented for that purpose. Then in 2008, the game of digital fiat money was changed with the creation of the cryptocurrency. Now we all have heard about cryptocurrency wallets, but what they actually are? How can we use them? And how can we have one? You will find answers for these and numerous other interesting questions connected with crypto wallets in this article.
What is a cryptocurrency wallet?
A cryptocurrency wallet is a program which connects with numerous blockchains and lets users transfer and hold digital currencies. If you have decided to begin working with cryptocurrencies, this kind of wallet is a required thing.
Some crypto wallets have the capability of keeping various coins and tokens at once, but most of them hold only a few numbers of currencies.
In reality, the crypto wallet doesn’t actually store coins, it saves something which is called a “private key”. The private key is a hash that consists of 64 characters, which is known only to you and crypto wallet that you own. The private key has to match the public key so you will have an opportunity to spend your cryptocurrencies.
How do wallets work?
As we have already mentioned, crypto wallets don’t keep currencies. Actually, cryptocurrencies cannot be kept anyplace materially. Everything that makes cryptocurrencies’ existence real are the reports about transfers on the ledger.
Instead of saving currency itself, this wallet stocks private and public keys. Public keys are special cryptocurrency account characters, that are required for transferring cryptocurrencies and can be shared. When a person wants to send a crypto coin it looks like a simple transaction, but actually, he does not send a token, he just gives you ownership of that amount of tokens. To have the ability to use this coin your private key must match the public key, which is attached to that currency. If it is so, and keys match your balance will correspondingly rise.
Types of crypto wallets
Crypto wallets can vary. Every kind of wallet provides a user with various ways of saving and accessing crypto coins. There are three big classes of wallets: software, hardware and paper. Software category has subcategories: desktop, mobile and online.
First, let’s descry Software wallets and its subcategories.
Desktop wallets are operating on a PC. They have access exclusively from a personal computer they’ve been downloaded on. These wallets are considered to be one of the most reliable wallets. However, if someone hacks your PC you may lose your finances.
Online wallets work based on a cloud system. Their advantage is that you can use them from any place and any computer or device you want. But as your keys are stored online, your wallet is at risk of hacks.
Mobile wallets are applications that work on your mobile device. This is also easy to use from anywhere in the world. These kind of mobile wallets are commonly manageable and smaller than desktop wallets, cause they have to match the mobile storage.
Hardware wallets are keeping user’s private key on USB or other hardware devices. These wallets are more protected despite the fact that they are making all transactions online. This is because they store keys offline and it makes them unattainable. This type of wallets can work with various network interfaces and can keep various cryptocurrencies. The transactions are also easy, you simply have to connect PC and device with an Internet, enter your pin and validate the transaction. This is a very good way to easy transfer currency and also keep your resources away from hackers.
Paper wallets are on the highest level of protection. This wallet is simply a piece of paper, where your keys are written. For making transactions, you just open a software program that lets you use the paper method. This method is often called “sweeping”. You can either manually enter your private key or just scan a QR code.
How can I create a crypto wallet?
The very first thing you need to do is decide the type of crypto wallet you want. Choose a type of wallet that is both protected and easy to use.
Next thing, that is also very meaningful is to choose a wallet that supports the certain cryptocurrency that you hold. Read about a wallet and learn about it to be sure that it’s trustworthy and safe.
The third step is learning your country’s laws. For example, there are several countries that have banned Bitcoin, like Algeria, Pakistan, Bolivia, etc. Make sure you won’t face any problems just because you have a crypto wallet.
The last step is simple, most applications have a guide that helps you create a wallet and use their app. The process looks like creating an email account, it’s simple and fast.
What do I have to do to keep my wallet secure?
Every wallet type has its own level of safety. Contrasted to offline versions, online once are much risky. But on the other hand, online wallets can be much attainable and easy-to-use. So here are some tip-steps to make your wallet more secure:
The first and really important thing is back up. You can store a small amount of currency for daily use on your online wallet and the other part of your reserves can be stored offline. Offline storages have a backup option, which lets you be sure that you can restore your wallet if something goes wrong.
Always update your software to have the freshest protection enhancements. This is not only about the wallet software but about your PC or mobile software as well.
Create more safety covers. The more covers, the better the protection for your reserves. Make sure that any withdrawal of capitals demands a password at the beginning. And of course, set a complex password that no one can guess. Use wallets with a reliable reputation and the once that provides two-factor authentication and supplementary pin code when the application is opened.
Should I use multi-currency wallets or single-use wallets?
The most successful cryptocurrency is the Bitcoin, but there are already thousands of new cryptocurrencies that have a promising future. If you are interested in the crypto environment and want to try using several cryptocurrencies, you can start using a multi-currency wallet, which lets you keep and transfer a variety of cryptocurrencies.
Of course there are fees, that are taken off when transferring crypto coins, but usually, the percentage is too small and people simply don’t notice that a fee has been taken. Sometime wallet can give you an option of setting your own fee. But there’s one point here if you set a fee lower than average your transaction will have low priority and it will take much longer for you to transmit coins.