A Cryptocurrency wallet is a must have for anyone who enters the crypto world. This is because digital currency cannot be stored in a physical wallet, nor in the blockchains that generate them.
Just like hard currency, digital cash needs to be kept safe from thieves, both real and imagined.
In this article, we will learn exactly how you can protect, trade, and interchange your digital currencies using different types of wallets.
After you read this, you will easily be able to buy, safely store, exchange, and move your digital cash easily.
Let’s do this!
What is a Crypto Wallet?
We normally use a physical wallet to store paper money, business cards, some mugshots of loved ones and other interesting valuables (I never keep money in my wallet, heheee!).
In a similar fashion, a crypto wallet stores digital information about the amount of cryptocurrency that has been allocated to you by a blockchain.
In other words, there is no actual money in the wallets. It is just an assigned digital balance that is directly attributed to you through historical transactions on the blockchain.
Crypto wallets are only similar to fiat wallets in that they store money. From there, things start to get interesting.
Crypto wallets are as digital as the currencies they store.
They can be online (‘hot’), or offline (‘cold’).
Some of the wallets are quite choosy, especially the more established ones. These wallets mainly handle bitcoin. Some handle currencies that have specialized wallets.
Some hot wallets can allow crypto to be interchanged inside them.
Crypto wallets have public keys (more like the way you can see your wallet lying on the ground and say “Hey, that wallet belongs to me!” …
…and private keys (more like a combination to a vault). Private keys are the digital signatures that combine with your wallets public keys to make your transactions verifiable as valid.
While I’m on private keys, HEAR THIS;
NEVER share your private key with anyone.
If you do, they have access to your hard earned crypto!
Also, NEVER lose your private keys!
If you do, You will never get your crypto back. It is gone. For ever. Capisce!
I have a friend who has bought a metal box, hidden printouts of his paper wallets in it (more of paper wallets later), and toted the precious box upcountry for safe keeping.
How do you decide what crypto wallets to have?
In life, we do not need money. No.
What we need is what money can guarantee us: Freedom, choice, a good life, mobility, security, name it.
Some of us keep the money we earn, some of us spend it (all of it or a portion of it) … We do with our money whatever we choose!
And don’t get me started on the cavalier ways I have seen money being kept…
The situation is not that different when dealing with cryptocurrencies.
Digital currency wallets are designed to assist you in making your choices easy to implement.
And the choices are easy to relate to:
Long-term holding: If you are looking to hold your bitcoin for the long term, Nakamoto style, then you need the most secure cold storage for it.
I don’t care whether you are Satoshi or Santa, but I wonder… how can Nakamoto keep a million bitcoins untouched for a decade, even if he founded Bitcoin Core?
Short-term speculative trading: Many astute crypto traders are in the space to speculate and grow their portfolio through active trading. You can speculate on price movements of crypto and buy-sell different currencies on trading platforms.
Normal Commerce: If you are in Nyeri, you could simply want to hold crypto that you can use to grab a bite with at Betty’s place. Crypto is becoming a street-level currency, and in the West, there is widespread use of crypto to buy common household and everyday items.
All of the above: Sometimes you want to do a little of each of the above options. It means that you may want to have a wallet for each function, or one that is powerful enough to handle several of these functions.
When we finally examine the available wallet types, it will help us identify these wallet properties easier.
How though do you select which wallet to choose?
There are several types of wallets.
The best way to study each of them is to check what crypto they support, what other users are saying about them, their user friendliness, their security features, and most importantly, how suitable they are for the purpose you have for holding crypto.
The 4 Main Types of Crypto Wallets
There are four main types of wallets, and they can either be online (otherwise known as hot wallets), semi online (which means they operate either online or offline), or completely offline wallets (also known as cold wallets).
The four categories are either web wallets, mobile wallets, desktop wallets, or hardware wallets.
Some people treat paper wallets as a fifth category, but I simply put them as a subset of hardware wallets.
1. Web wallets
Most newbies want, and actually need, web wallets.
With these, you will ease into crypto trading before you can plunge into the deep sea of crypto hodling. You must start with a web wallet because they are the gateway for converting fiat currency to crypto through deposits on exchanges.
But here’s the kicker:
Web wallets are the main cannon fodder for hackers to steal your crypto.
This is mainly because they are visible on the internet.
They are also quite susceptible to phish and insider attacks.
To protect your loot, you can do several things, including keeping your antivirus up-to-date.
Avoid going to X-rated and other ‘private’ websites, that is, if you want to avoid being scammed with phantom programs and malware.
This exchange is based in Delaware, USA, and has more than 90 trading pairs. However, it’s rating on community trust is below average. This is possibly due to the fact that they have poor customer support, which is a big problem in the crypto world.
Poloniex is notorious for withdrawal delays going by the comments from current users on Reddit.
Mobile wallets allow you to have mobility with your crypto. They are susceptible to pick-pockets just as much as the phones they are installed on, so you need to store the private key somewhere very secure just in case you lose your phone. Also, do yourself a favor and avoid unsafe public places!
Supported by BitPay to support their payments, Copay is a bitcoin wallet that also supports Bitcoin Cash. It is a multi-sig wallet, making it ideal for corporate payments.
It allows users to check bitcoin prices in more than 150 fiat currencies, and is available on Windows, Mac, Linux, Android, and iOS.
It is easy to use, open source (free to acquire) and highly reputable.
3. Desktop wallets
When handling crypto, you mostly want a desktop wallet to hold a chunk of your crypto in offline storage. However, you will come across some desktop wallets offering online functionalities similar to crypto exchanges.
If offline, you can stow away your digital stash in a desktop that requires little or no expert upkeep like debugging or software updates.
Because those geeks will zero in on your wallet and if not careful, they will cart away your hard earned crypto.
Always keep your desktop wallets under password protection. Avoid those well-meaning geeks on that desktop if you can’t trust them explicitly around your loot!
Don’t keep your private key on the same desktop or laptop!