What is Crypto Wallet?
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All cryptocurrencies are stored on the blockchain. To interact with your coins, you need a third-party application that holds the keys through which you can make transfers or payments. These third-party, private key holders are called crypto wallets.
We keep cash in wallets or a purse or our pockets when we are outdoors. When we need to buy something we can easily retrieve cash from our wallets. Crypto wallets serve the same purpose, but they do not exactly hold our crypto. Instead, they hold private keys through which we can access our coins.
Anyone who holds the private keys can have access to the coins the keys are securing, just as anyone who holds the purse can spend the money in it.
Why are Crypto Wallets Important?
Everything in the cryptocurrency space lives on the blockchain. Decentralized applications, your favorite coins— Bitcoin and Ethereum— and all transaction records. We cannot see the blockchain, just like computer software applications.
Here are a few points that emphasize the importance of crypto wallets:
- We need third-party applications and devices that can interact with the blockchain to access whatever crypto we own— which underlines the importance of a crypto wallet.
- A crypto wallet acts like a gateway to enter the world of the blockchain. We can interact with our favorite decentralized applications (dApps), play games, win lotteries, participate in governance, donate to charities in crypto, and do all the things we love with our crypto wallets. But that’s not all.
- A crypto wallet also helps us to keep our coins safe. Beyond private keys, some wallets have enhanced security measures like two-factor authentication and even military-grade encryption to provide extra protection. Losing your private keys may mean losing your coins, so you must exercise extra care to store the details of your crypto wallet securely.
Types of Crypto Wallets
Crypto wallets are built to meet users’ needs and are of different types. Primarily, there are two types of crypto wallets: Hot Wallets and Cold Wallets.
The blockchain exists online, and to interact with it, you must be online. Hot wallets are crypto wallet apps that are fully online, always connected to the internet. Hot wallets, since they are always connected to the internet, exist as mobile or desktop applications, or web wallets. While hot wallets are ideal for people who interact with cryptocurrencies regularly and are free to use, they are susceptible to hacks and thefts from malicious entities.
Mobile crypto wallet applications are built for mobile devices and run on popular operating systems like Android and iOS. You can easily install one on your device, and start using it right away. Popular examples of mobile wallets include Trust Wallet, Math Wallet, Coin98 Wallet, etc.
Cold crypto wallets are wallets whose private keys are stored offline and need to be connected manually to a device to interact with the stored coins. They are usually built as small and portable devices which you can easily carry around. They are generally more secure than hot wallets. However, these devices come at a cost, and you can buy one from $50 above. Popular examples of cold wallets include Trezor and Ledger.
Which is the Best Crypto Wallet?
While there are a host of crypto wallets out there, some are more user-friendly than others and have better security measures. Yet, we can not single out one wallet as the best, as they are suited to different sets of cryptocurrency users.
The bottom line is that you need to choose a wallet that is best suited to your needs.
Here are some of the best crypto wallets based on your distinct needs:
- If you want to hold coins for the long term, cold wallets like Ledger and Trezor devices should be your go-to options. They have a good record of being very reliable cold crypto wallets.
- If you are interested in trading cryptocurrencies, hot wallets— mobile, desktop, or web— should be your choice. Some wallets are compatible with multiple chains, like Trust Wallet, Math Wallet, and Coin98 Wallet, so they are good options for those who interact with several blockchain networks.
- If you need a wallet extension for your PC browser, the Metamask Wallet extension is the most reliable around.
How to Use a Crypto Wallet?
Different wallet applications have specific guidelines for creating a wallet. For this article, we will consider a mobile wallet.
- First, download and install the app for your desired wallet application from the app store on your device— Play Store for Android, App Store for iOS.
- Launch the app and follow the prompts to create a wallet. Write down your private keys and store them somewhere safe.
- You can now buy your favorite cryptocurrencies on an exchange or with your debit or credit cards.
- Use your public keys to receive crypto payments, and do not give out your private keys to anyone, no matter who they claim to be.
Crypto wallets are one of the tools you must know how to use when interacting with the blockchain. Several wallet apps have help forums where you can seek help if you are ever confused by anything. Find the best crypto wallets for you and start storing your favorite coins.