A crypto wallet is where you keep your private keys – i.e. the passwords that give you access to your crypto – stored in an accessible and secure way. Think of your cryptocurrency wallet as the crypto-equivalent of the physical wallet in which you keep your cash or credit cards.
Crypto Wallet Basics
It’s important to note that a simple crypto wallet consists of pairs of public and private crypto keys. The keys consist of randomly-generated numbers used to track ownership and transfer crypto from one individual to another. It’s important to note that cryptocurrency wallets do not contain the crypto itself. Rather, they have the keys that enable the individual to access their pool of crypto and send and receive crypto.
There are three main types of wallets. Paper wallets are keys/passwords written on paper, which are then stored for safekeeping. Online wallets are keys stored in apps typically protected by two-factor authentication. These make sending and receiving crypto as easy as using Venmo or PayPal. Last but not least, hardware wallets are secure physical devices that store your private keys. They’re only connected to a computer when you want to use your crypto or assets.
Each type of wallet has its pros and cons. Hardware wallets are the most secure, but if lost, you lose access to your crypto. Online wallets are the easiest way to get started in crypto and fully understand the meaning of decentralization.
However, if you own large amounts of crypto and digital assets such as NFTs, investing in a high-quality hardware wallet is probably a good idea. This is because it allows you to hold many assets in one location, protect yourself against cyber attacks and hacks, and stay in control of your transactions.
When choosing a wallet, you need to make sure that the crypto wallet you choose suits your lifestyle. Therefore, you need to think about how you use crypto before making a final decision on which type of wallet or wallet company you’re opting for. Finally, make sure you have a backup, as losing your keys can be tragic!