When you buy any cryptocurrency, you need a way to buy it, store it, send it, receive it or even keep it. This thing is what’s known as a cryptocurrency wallet. Without a wallet, it wouldn’t be possible to deal with cryptocurrencies at all. You need a wallet, whether you are handling Bitcoin, Ethereum or ICO tokens.
What Are Cryptocurrency Wallets?
You can compare a cryptocurrency wallet to the regular wallet that you normally have for carrying your money and credit cards.
However, your physical wallet has certain limitations. For instance, it can’t give you a record of how you have spent your money. It can’t show you how much money you gave as a tip at a restaurant and if you want to know how much money you have, you have to take the time and physically count the notes.
Your physical wallet can be quite handy, but you have to handle all the details that come with it manually and manually keep the records.
The thing about digital wallets is that you get the same advantages that you get as when you are using your physical wallet, plus all the other benefits that digital apps offer. You get all this when you use a cryptocurrency wallet.
Some of the benefits that you enjoy include unlimited space to hold all of your digital currency; no matter how much you have or the different varieties that you have. The currencies are neatly stashed into different categories, so they don’t get all mixed up. You also get a record of how you spend the money, where and when and the balance that’s remaining. There’s even a section where you can add notes about any transactions that you have made so you can remind yourself more details about it later on. This will help you track exactly how you used all the money that you spent.
In case you intend to invest in digital currencies or remit the currency, it’s important that you have a good understanding of how these currencies work.
How Do Cryptocurrency Wallets Work?
You can view your crypto wallet the same way you view the safe where you keep your valuable documents like a will, jewelry, and other valuables. This is by realizing that if you lose the keys to that safety deposit box, you will then be unable to access all the valuables that you have stored in there.
The same concept applies to crypto wallets. You need to guard your digital keys carefully so that no other person can access your keys and gain unauthorized access to your wallet.
Digital keys are also known as master keys or private keys. They are in the form of hexadecimal codes for instance; they are in such a form:
You can easily get intimidated by this until you realize that you can easily note down this key, or even print it or type it out or turn it into an image or even memorize it.
You will need to have your private keys to access your wallet. It’s important that you keep your keys in a safe place that other people will not be able to access. You should also not share out these keys or lose them. Keep them somewhere where you can easily retrieve them when you need to. Therefore, if you have invested in digital currencies or IPOs, it is important that you ensure that you have backups for your keys.
Different Types of Cryptocurrency Wallets
There are various kinds of wallets, where you can store your cryptocurrency. These wallets can be classified into three broad categories; this includes hardware, software, and paper. Software wallets can be grouped into desktop wallets, mobile and online.
- Desktop: Desktop wallets can be downloaded and installed to a single computer that you will be using. This provides one of the safest ways of keeping your funds. However, in case this computer is hacked, or it gets infected with a virus, you stand a chance of losing all of your funds.
- Online: With this kind of wallet, you can access them from anywhere you are, as long as you have a connection to the Internet. This is because these wallets are stored in the cloud. This can be quite convenient. However, these wallets store your private keys in the cloud. This makes them more susceptible to hacking attempts, especially considering that these wallets are controlled by third parties.
- Mobile: These are apps that you download and use on your mobile phone. They are much smaller in size, and you can use them anywhere, even in stores given that you can carry them around.
- Hardware: These wallets can be much easier to access as they store the private keys in hardware devices, such as USBs. When you want to access your wale, ensure that you have an Internet connection then plug in your hardware and perform whatever transaction that you want. This hardware is compatible with various internet browsers, and it’s also compatible with different digital currencies. They are also simple to use what you need to do is to enter your PIN after plugging in the device, then send the money and confirm the transaction. The good thing about hardware wallets is that you can easily carry out transactions while keeping your private key safely offline.
- Paper: These wallets are much safer to use, and they are much more secure. Paper wallet simply refers to private keys that are printed on paper, such that you have a physical copy of your private keys. They also refer to an application which generates private keys, which are then printed out. Using a paper key is quite straightforward. If you want to transfer Bitcoin or any other cryptocurrency to your wallet, the funds will simply be transferred to the address that has been printed on your paper. In case you want to send funds to another wallet, what you need to do is to send the money from your paper wallet to your software wallet. You can do this through a process that is known as ‘sweeping.’ You can do it manually by entering your private keys. Alternatively, you can scan the QR code that is in your paper wallet.
How Secure Are Cryptocurrency Wallets?
There are different levels of safety when it comes to crypto wallets. This is largely determined by what kind of wallet you have whether it’s a desktop, mobile, paper or online wallet. Online wallets tend to be the riskiest, considering that your keys are stored in a cloud that is run by third parties. This is because hackers have more access to these kinds of wallets and might try to hack into the system. Offline wallets tend to the less risky ones since they are offline. Therefore, someone can’t hack into the system, and there are no third parties involved.
Online wallets tend to be the most unsafe as they can get hacked into. However, you still need to be cautious regardless of whatever kind of wallet that you have. You need to be diligent in ensuring the safety of your private keys. If you lose your private keys, it will be the same as losing cash. In any case, if you happen to send your cash to a con artist, then there is no way of recovering the money back. There is also no way of reversing the transaction. That is why you need to be very cautious.
Are Cryptocurrency Wallets Anonymous?
Since crypto wallets are usually registered under assumed names, it can be hard to trace them back to the real owners. Even so, all the transactions that are carried out in these accounts are permanently recorded in the blockchain publicly. Details of your name and street address won’t be visible. However, there are some ways that your wallet address can be traced back to you. Various strategies have been put in place to beef up security and the privacy of users; however, there are certain disadvantages for full anonymity to be achieved. Projects, such as the DarkWall Project seeks ways to increase the anonymity of users through street address and coin mixing.
How to Create a Cryptocurrency Wallet?
I will show you how to create a cryptocurrency wallet.
You can start your search for crypto wallets by searching through your web browsers. You can also download them on your mobile phone, or you can buy a hardware device.
Some of the wallets recommended during ICOs that took place in the past, such as Aragon, Gnosis and CrowdWiz ICOs include Myetherwallet.com (MEW), IMtoken, and MyTrezor.
This is an online wallet that you can easily sign up for. If you are familiar with the email creation process, then you know at least half the process of signing up for this account. You only need a few minutes to set up the account.
- Open your internet browser and then go to this site myetherwallet.com
- Look for the main menu and then navigate to ‘New Wallet’
- Input a password when prompted to
- Ensure that you use a difficult password and create the wallet
- Write down your password and keep it somewhere safe, where you can easily find it
- Then download the Keystore/json file. Keep it in a safe place and don’t lose it.
- You will then be taken to your private key. Download your key’s paper wallet.
- Keep the key safe and do not misplace it or live it somewhere unauthorized persons might find it.
- Well done, you now have a new cryptocurrency wallet.
Anytime you want to log into your wallet; you have to go to myetherwallet.com, go to the main menu, click on ‘Send Ether & Tokens’ and then input your private key.
- ImToken Mobile Wallet
Just like other apps, mobile wallets can be used in Android or iOS. IMtoken is an app that supports multi tokens.
To start using the app
- Go to the Play Store, if you are downloading Android or Apple store if downloading for iOS.
- Download the app and then install it. Launch it and agree to the terms and service agreement.
- Go through the step-by-step guide to familiarize yourself with how the app works
- When prompted, create a wallet and give it a name
- Set up a strong password, and then confirm it. Keep the password in a safe place.
- Keep your password securely, since once you lose it, you won’t be able to find it.
- Well done! You have a new crypto wallet.
This app is quite easy to use, even for beginners, especially if you want to take part in a token sale.
MyTrezor Hardware Wallets
The good thing about hardware wallets is that you can purchase them and then start using them immediately. You can buy them online from the manufacturers or eBay and Amazon.
You will get a silver sealed the package.
- Check that the seal hasn’t been interfered with
- Remove the Trezor and then plug it into your computer using a USB cable
- Create a new 4-digit PIN when prompted. Keep it safe. Don’t share it with anymore and be careful not to lose it.
- Set up a master backup of your wallet when prompted. Note down the 24-word phrase that shows up and keep it somewhere safe.
- Now go to Mytrezor.com and go to the Bitcoin Trezor Client to set up your account.
- Once set up, go to https://www.myetherwallet.com/, then go to the main menu and then click on Send Ether & Tokens’. Next, click on ‘Trezor.’ You will be able to access your wallet.
- That’s it! You have registered a new hardware account.
You can use your digital cryptocurrency wallet to keep your cryptos, ICOs and digital property secure. You can set up an online account, hardware, mobile app or set up one on your desktop. Once you have created your account, keep your private key secure and don’t share it with other people.