Discover some of the essential things you need to know when it comes to crypto wallets.
If it’s your first foray into crypto, wallets may have you wondering about a few things. Why not read on to discover some of the essential things you need to know when it comes to crypto wallets. Once you understand the basics, you’ll be able to start transacting in your favorite crypto with ease.
What is a Crypto Wallet?
While the name wallet may have you thinking of the wallet most of us carry around, cryptocurrency wallets are a bit different. Cryptocurrency wallets can store your private keys to allow you to send and receive crypto easily. However, while some wallets provided by centralized platforms and web wallets don't necessarily offer control of your private keys, they still let you manage your funds, albeit without having complete control over them.
What Types of Crypto Wallets are There?
Crypto wallets come in various forms. Some wallets can be in the form of an app, website, a piece of hardware, or even just a simple piece of paper. Hardware wallets or paper wallets are simply ways to securely store your private keys; they generally need to be used alongside supporting software to perform common wallet actions efficiently. Apps and web wallets are essentially what they sound like, platforms that provide wallet functionality via an app or website.
Which Crypto Wallet Do I Need?
Not all crypto wallets provide support for all cryptocurrencies. However, some great wallets offer support for a range of cryptocurrencies. If you are dealing with many tokens, you can often find a wallet that will allow you to send and receive many of these, provided they are on the same network. When looking for a wallet to use, it's essential to know what crypto or cryptos you will be dealing with.
As cryptocurrencies tend to vary, sometimes significantly, there can be a lot involved in providing the ability to deal with multiple cryptocurrencies. Hardware wallets often shine in this aspect as the best crypto hardware wallets tend to allow you to manage the private keys for a range of cryptos and transact with them by using the official software provided by the manufacturer.
How Does a Crypto Wallet Work?
The goal of any cryptocurrency wallet is to enable you to send and receive transactions easily. There are two common ways this can be performed. The first is with a non-custodial wallet, where the wallet stores your private keys to sign transactions and move your funds with total control. The second, managed wallets rely on a centralized platform to store and perform transactions on your behalf.
Understanding Wallets and Addresses
You may sometimes hear people referring to their cryptocurrency wallets in a more direct sense. For example, it's not uncommon to see people referring to a cryptocurrency address they control as a wallet. While this isn't incorrect, it can be a little confusing if you are new to crypto. However, often the context will make it easy to understand whether they mean the wallet they are using to access their funds or, more directly, an address to which they control the private keys.
Primarily this confusion comes from the reality that a wallet doesn't actually store anything physical like the wallet you may have in your pocket right now. Instead, cryptocurrency wallets are used to sign transactions, or as previously mentioned, sometimes you may just be using the word to describe and address for which you control the keys.
Even though wallets may seem confusing if you are brand new to crypto, they are getting more user-friendly all the time. Once you find a wallet you like, you'll be surprised how quickly you can become accustomed to performing transactions in your crypto of choice.
What Can You Do With a Crypto Wallet?
The things you can do with a cryptocurrency wallet are increasing, but here are a few examples of what you could do with your wallet.
- Send and receive cryptocurrency
- Use decentralized applications (dApps)
- Interact with smart contracts
- Pay for goods and services
- Access your NFTs or other digital assets
- Accept payments for your business
How to Backup Crypto Wallets
If you have access to your private keys or seed words, these can be used to access your funds using the same wallet or a different wallet should you require to do so. However, if you are using an exchange wallet that doesn't provide access to your private keys or account mnemonic. In that case, you won't be able to backup or recover your cryptocurrency wallets, and this is something to keep in mind when considering using custodial wallets like these.
Is it Safe to Use Mobile Crypto Wallets?
There's a pretty significant range of crypto wallets available on all popular devices. However, due to their exposed nature and the increased risk of you losing or breaking a device you carry around with you, it's generally not a great idea to store a large amount of funds using them. If you are looking for somewhere to store a small amount of crypto for on-the-go transactions, they can be a suitable option, but if you are looking to hold the bulk of your crypto, look elsewhere. In addition, malware is becoming a growing concern on mobile devices, and with these devices lacking the security of a quality hardware wallet, they can be a risk as you'll be storing your private key on the device when using them.
What is the Best Crypto Wallet?
The best crypto wallet is the one that supports your needs as well as the type of cryptocurrency you wish to transact using. Thanks to the security they provide, hardware wallets are the optimal choice for just about anyone. While they do come at a cost, if you are dealing with anything more than a small amount of cryptocurrency, they can be a worthwhile investment. For established cryptocurrencies like Bitcoin or Ethereum, there is a range of options when it comes to wallets, offering you plenty of options to choose from to suit your preferences.
If you're interested in learning more about cryptocurrency wallets, be sure to explore some of our other articles!