How Does A Cryptocurrency Wallet Work and How to Create One

Without cryptocurrency wallets, cryptocurrencies would just be another idea dead in the water because it’s the only way users like you and I can adopt digital currencies. People need a way to access, store, send, receive and track their digital currency holdings whether it’s Bitcoin, Ethereum or much coveted ICO tokens.

Photo credit: La Compagnie Robinson

What are Cryptocurrency Wallets?

Cryptocurrency wallets are like the leather wallets some of us still use in real life for carrying cash and a slew of credit cards.

But there are some things your leather wallet cannot do. For instance, when checking how much you have, you have to count through your notes and coins. Your wallet doesn’t tell you when you last spend some money from it, or who you tipped at a restaurant.

So, while your physical wallet is great and all, you have to do all the thinking and record keeping.

As digital apps, cryptocurrency wallets are a lot smarter and combine all the advantages of your physical wallets with more sophisticated flexible features.

With just one wallet, you can hold hundreds of digital currencies without worrying about ever running out of space. All are neatly packaged into clearly marked sections, so you don’t mix them up. Also, a handy balance checker keeps track of crucial details such as when, where and how much you spent, added or withdrew. There is even an option to scribble a note next to any transaction you make so you can look back on it later and pinpoint exactly where that odd dollar wound up.

If you plan on acquiring some digital currencies for investment or remittances or what have you, you want to familiarize yourself with how they work.

How Do Cryptocurrency Wallets Work?

Cryptocurrency wallets work like the safety deposit boxes we use to store our most treasured possessions be they bond certificates, jewelry or a will. None of us can afford to lose the keys to the safety box because we could lose ownership of our valuables if they wind up in the wrong hands.

Cryptocurrency wallets work pretty much the same way only instead of physical keys we carefully guard our digital keys.

Commonly known as private keys or master keys, digital keys take form of hexadecimal codes, something like this:

“2940447a4ed5eef7f46bcc185cb2f21d2a8bffcde5418156a9d1a44aa137558

At first glance, it comes across as daunting until you find out it is flexible enough to be written down, printed on paper, typed on a document, converted to image form or even memorized.

Therefore, when you are holding digital assets such as ICO tokens and cryptocurrencies in a wallet, there is no excuse for not taking appropriate steps to secure your private key backups. You will need your private key to access your assets and authorize transfers from your wallet. So never lose them, share them with anyone and always keep them somewhere safe where you can retrieve when necessary.

Where Do I Get A Cryptocurrency Wallet? How Do I Create One?

Let me save you the trouble of having to look around.

You can find cryptocurrency wallets via web browsers, downloadable on smartphone app stores or for purchase in the form of hardware devices from online stores.

Myetherwallet.com (MEW), IMtoken, and MyTrezor have been recommended for past ICOs such as Aragon and Gnosis and upcoming initial coin offerings like the CrowdWiz token sale.

MyEtherWallet Web Browser

If you have ever signed up for an email address, then you are halfway through knowing how to create a web wallet. It only takes a couple of minutes to get set up.

  1. Go to myetherwallet.com from your web browser.
  2. Confirm you are on the right url site https://www.myetherwallet.com/
  3. Under the main Menu, go to ‘New Wallet’ to create a new wallet
  4. An entry field will prompt you for a password
  5. Enter a strong password and click on ‘Create New Wallet’
  6. Remember to write it down and store it safely. Preferably, somewhere you can easily retrieve it
  7. Next step is to download your Keystore/json file. Store it safely, do not lose it and do not share it
  8. The final step will lead you to your private key. Save it and download a paper wallet of your key
  9. I cannot overemphasize the need to store your private key safely, do not lose it and do not share it
  10. Congratulations! You have now successfully created a cryptocurrency wallet

From now on, whenever you need to access your wallet, you will access https://www.myetherwallet.com/, click on ‘Send Ether & Tokens’ on the main Menu and use your private key to log in.

ImToken Mobile Wallet

Mobile wallets resemble all the apps we use today on our smartphones whether on iOS or Android. IMtoken is one of the best lightweight wallets that supports multi-tokens.

IMtoken is downloadable on both Android and iOS

  1. Visit the android play store or apple store
  2. Search for the official ‘ImToken — Ethereum wallet’ by ConsensLabs co, ltd.
  3. Download, install, launch the app and read over the terms of service before confirming
  4. A quick step by step visual guide will walk you through how to use the app
  5. A follow-up prompt will request you to create a wallet and assign it a name
  6. Next, set a secure password and confirm it. Store it safely, do not lose it and do not share it
  7. Once created, it’s important to backup your wallet. Store it safely, do not lose it and do not share it
  8. You cannot recover your password and back up if you lose them, keep them safe
  9. Congratulations! You have successfully created a mobile wallet

IMtokens’ user-friendly interface is ideal for beginners and investors looking to take part in the token sales. If you are looking to participate in the CrowdWiz ICO, the app has a quick step-by-step guide on how to participate via the interface.

MyTrezor Hardware wallets

Hardware wallets are straight off the shelf ready to use cryptocurrency wallets. You can order one online from the manufacturers or vendors on Amazon and eBay.

Your package will arrive with a silver seal.

  1. Confirm the seal is intact
  2. Next, unpackage the trezor and use the USB extension cable to plug it into your computer
  3. Install a Trezor google app extension on your Chrome browser and follow the instructions
  4. A prompt will request you to set up a 4 digit PIN. Store it safely, do not lose it and do not share it
  5. The next step is a master backup of your wallet, write down the 24-word phrase somewhere safe
  6. Preferably on different papers that you can store in different locations. Store it safely, do not lose it and do not share it
  7. You can now visit Mytrezor.com to access the Bitcoin Trezor Client for set up
  8. As soon as you are set up, visit https://www.myetherwallet.com/, click on ‘Send Ether & Tokens’ on the main Menu and select ‘Trezor’ to access your wallet
  9. Congratulations! You have set up your hardware wallet

In Summary

Cryptocurrency wallets are digital safety boxes for storing your digital assets, ICO tokens and cryptocurrencies. You can create one via a web browser, download one via your smartphone or purchase a physical one from an online store. Once you have your wallet set up and running, remember not to share your private keys with anyone, never lose them and store them safely in a location where you can retrieve on demand.

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