What Is a Crypto Wallet and How Does It Function?
What Are Crypto Wallets?
A crypto wallet might seem straightforward at first glance. For the uninitiated, it’s logical to conclude that crypto wallets are digital wallets that store your cryptocurrency. But that wouldn’t be exactly correct because your crypto holdings live on the blockchain. So, what are crypto wallets meant for, then? Well, crypto wallets hold your keys, not cryptocurrency.
At this point, it might be helpful to explain what the keys are. A “key” is a string of alphanumeric characters that is used to receive and send cryptocurrency. It’s like an account number for your bank account, but it doesn’t have any personal information attached to it. They prove your ownership of your digital money and allow you to make transactions. These keys can either be public or private. Public keys allow you to receive cryptocurrency transactions. Anyone can send transactions to the public key, but you need the private key to prove that you are the owner of the cryptocurrency received in the transaction.
Why Are Crypto Wallets Important?
The answer is very simple: security. That’s because your private key proves your ownership, and since there’s no personal information attached, you want to keep this as secure and accessible to you as possible. Always keep in mind that you lose access to your funds if you lose your private keys!
How to Use a Crypto Wallet?
#1: The first step is to find which cryptocurrency wallet, you would like to use.
There are three primary types of cryptocurrency wallets:
- Paper wallets: keys are written on paper and stored somewhere secure. This would be the most secure option, but not the most functional, because it makes using your crypto difficult.
- Hard wallets: keys are saved on a hardware device and kept in a secure location and are only linked to a computer when you need to utilize crypto. The main goal here is to strike a balance between security and convenience.
- Soft wallets: keys are stored in an app or other software. This is less secure than the other two options because it’s more vulnerable to being hacked, but it’s much more user-friendly and you don’t have to worry about misplacing your wallet.
#2: The second step is to follow the provider’s directions and set up your wallet as instructed.
#3: And the third and final step is to start sending and receiving crypto!
Why Should You Give It a Try Yourself?
It’s better to actually use a crypto wallet rather than read about how to use it. This is because you will be able to get an understanding of what it is like to actually have a crypto wallet and be able to experience it firsthand. You will also be able to learn more about the different features that are available on the wallets, as well as how they work.