Hi, I am Mickael Mosse Blockchain and Cryptocurrency Expert. In this post, we are going to see what a “crypto wallet” is, how it works, what types of wallets exist, how to configure it, and if you followed me there, maybe you will get your first bitcoins!
What is a crypto wallet?
According to Mickael Mosse, A crypto wallet is a technological device (it can be software, hardware, or even a piece of paper) where we store cryptocurrencies. The most widely used means to store cryptocurrencies are through software, either an app on our smartphone or a program running on our computer. There are also other types of storage that we will see later.
How does a crypto wallet work?
If we adentramor in running a crypto wallet, let’s describe actually does not store any cryptocurrency, the concept of a physical or virtual cryptocurrency does not exist in the blockchain. Let’s remember that the blockchain is a transaction record, a large distributed ledger. For example, in the case of Bitcoin, this record tells from and to where a bitcoin was transferred. What the crypto wallet stores are the private key that has the right to spend the bitcoins that were transferred from one bitcoin address to another.
Private keys are the most important part and one of the foundations on which the security of the blockchain is based. It is VERY important to keep them stored in a safe place, they are the “keys” to your own “safe”. If someone steals your private keys, they have full control over your cryptocurrencies.
Types of Crypto Wallets
There are several types of crypto wallets, and several ways to classify them, below Mickael Mosse will show the most common forms of classification:
According to Mickael Mosse, The “Hot Wallets” or “Hot Wallets” are the types of wallets that have direct access to the internet, generally, they are a program installed on your computer or an internet browser, they can also be web portals where you access with your username and password. They are the easiest to configure and use for the common user. Being connected to the internet all the time, they carry a greater risk so they are not as secure as other storage methods.
We can classify Hot Wallets in:
Examples of Web Wallets are online exchanges such as Coinbase, Binance, etc. If you make a transaction within the exchange, you have to use the address provided by the website (eventually you can send your crypto to another address outside the exchange). These types of wallets are the least secure and I recommend never saving your cryptos on these sites, or at least not a significant amount. The main reason is that we are not in control of our “private keys”, they are inside the server where the website is hosted. This means that the exchange acts as a private key manager for all its users, which increases the chances of being hacked, and this is something that has happened several times recently. Remember: If you don’t have your private keys, it’s not your money. you may get advice from Blockchain and Cryptocurrency Expert by following the link Mickael Mosse,
Examples of Software Wallets can be any crypto wallet that you can install on your computer or on your smartphone. This storage method is a little more secure than web wallets, although we also run risks, since now the private keys are stored on our device, and if it is infected by a virus or malware, someone can exploit this vulnerability and steal our private keys. However, it is the most used storage method, and it is the one I recommend for the use of crypto on a day to day basis, not for long-term savings.
The “Cold Wallets” or “Cold Wallets” are storage devices that are “offline”, they are not connected to the internet, so your private keys are much more secure, and practically nobody can steal your private keys except in the case of physical theft.
We will see two types of classifications for cold wallets:
These wallets are the safest type of storage that exists today. They are generally a device similar to a USB pen drive, where private keys are physically stored. This device does not connect to the internet, so it is completely safe. Many of these devices have their own screen and buttons to navigate between your own private keys. This is the type of storage that I recommend 100% for your private keys if you have a significant amount of crypto. Examples of hardware wallets are NanoLedger or Trezor.
Paper wallets are very safe too, because obviously, as you may have deduced, they are not connected to the internet! Basically, they are a paper where we keep copies of the public and private keys of our wallet, usually in the form of a QR code, so we can quickly scan them to send or receive crypto. One downside to paper wallets is that paper and ink can degrade and lose clarity over time. You can visit Bitaddressorg to see an example of how to generate a paper wallet.
Now that we know what a crypto wallet is, what types of wallets exist, we are almost ready to configure our first wallet! There is only one concept that we must understand, and that is that of
When we install a software wallet or configure a hardware wallet, the application will provide us with a set of random words, usually 12 or 24 words. This sequence of words represents a random number that is used to generate the private and public key of your wallet. It is VERY IMPORTANT to keep these words in a safe place since they represent the way to obtain your private key. If someone steals your hardware wallet or your computer or smartphone where you had the wallet software installed, you can recover your private key from another wallet with these words. These words are the most important thing to keep!
The article was written By Mickael Mosse — Blockchain and Cryptocurrency Expert