A step-by-step guide to Cryptocurrency Wallets


A step-by-step guide to Cryptocurrency Wallets 8931

Choosing a wallet is never easy. There are so many parameters you would want your new wallet to have. Like the right color, right material, the number of compartments, buttons or zips and the size of the wallet itself. All of this matters and helps in choosing the best wallet for yourself.

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But what about when you’re choosing a cryptocurrency wallet to store your cryptocurrency? You would be twice as careful, because you’re dealing with virtual money here and it’s stored in an online wallet. One which could just as easily be hacked as your physical wallet can be stolen! And in the end, you’ll be investing your hard earned money and who would like to lose it? So let’s learn all there is to know about cryptocurrency wallets and the best ones out there for your virtual money.

Cryptocurrency Wallets

Let’s get down to basics and start with what exactly these cryptocurrency wallets are:

Simply put, a cryptocurrency wallet is a digital wallet where you store, receive or send your cryptocurrency. The market is full of crypto wallets calling themselves the very best in the business. But your money’s at stake here, so it’s best to do your research.

A lot of cryptocurrencies out there have their own customized wallets. But there are wallets out there which can store different coins as well. Cryptocurrency wallets are of two types, hot storage and cold storage wallets.

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The hot storage wallets are connected to the internet while the cold storage wallets are offline or offer hardware storage. Wallets which offer offline or hardware storage are safer because the online ones may be prone to hacking.

How do they work?

When we say that you store your crypto coins in this digital wallet, it doesn’t mean physical coins like the ones you would store in your regular wallet. What’s stored in your digital wallet is actually a private key which is unique to your wallet. And you will have a public key through which you can send and receive cryptocurrency.

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It’s similar to email addresses, your email address acts as the public key through which you send and receive emails. And the password to your email is your private key. One thing you should remember, your digital wallet does not hold or store cryptocurrency.

In fact, no cryptocurrency is ever stored in any location or exists anywhere physically. There are only records of transactions on the Blockchain.

The types of Crypto Wallets

Crypto Wallets can be divided into three separate categories – software, hardware, and paper.

  • Software wallets: Software wallets can be either desktop, mobile or online.
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  1. Desktop:These are wallets which you download and install on your PC or laptop. They can only be accessed by a single computer; i.e. the one used to download it. These wallets are considered to be the safest option among all crypto wallets as they offer good security. Nonetheless, you could lose all your money in case your computer gets hacked or attacked by a virus.
  2. Online:These wallets are cloud based and can be accessed from any computer and anywhere. While easy accessibility is a great feature, it’s definitely not very secure.  Your private keys are stored online in these wallets and controlled by a third party making them quite vulnerable to hacking attacks and theft.
  3. Mobile:These wallets are an app which runs on your phone. These wallets are really convenient because you can use them anywhere, including retail stores. Mobile wallets are smaller and simpler than desktop wallets considering the space limitations of a mobile device.
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In this case, instead of the user’s private keys being stored online, they’re stored on a hardware device, like an USB. While you can make transactions online using hardware wallets, they are stored offline. This makes for increased security because the chances of it being attacked by a virus or hacked is much lower.

They’re also compatible with several web interfaces, support different currencies and above all transacting is easy. The user just plugs in their device to any internet-enabled computer or device. Then after they enter a pin, it’s just send currency and confirm! So hardware wallets are the best bet for easier transactions and keeping your money offline and away from danger.

Paper wallets while providing a very high level of security is also very easy to use. It can be a physical copy or printout of the public and private keys to your wallet. Or it could be a piece of software used to securely generate a pair of keys and then printed.

Transferring cryptocurrency to your paper wallet is relatively simple. You just transfer money from your software wallet to the public address displayed on your paper wallet. And for withdrawing or spending it’s vice versa, the money is transferred from your paper wallet to your software wallet. This process called ‘sweeping,’ can be done manually, where you enter your private keys. Alternatively the QR code on the paper wallet can be scanned as well.

The big issue: security

The one question on every novice investor mind is, “Are crypto wallets really secure?” The answer is, it depends on the wallet and the service provider; and each of them are secure to varying degrees.

As we’ve explained before, a wallet which uses a web server is a riskier one when compared to offline wallets. Your wallet and currency is exposed to all kinds of risks online and any hacker can steal your funds. Offline wallets don’t rely on a third party for security and aren’t connected to an online network, so they’re are safe from hackers.

But whichever wallet you choose to use, you need to ensure that implement and follow security precautions diligently. All that matters is keeping your private keys safe, you lose them, you lose your money! Similarly, sending money to a scammer, even unknowingly will lead to you losing your money and neither can you reclaim it or reverse the transaction. Stay alert and stay safe is the only way to keep your currency safe!

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Here are a few ways you can keep your wallet and money safe:

  • Wallet Backup:It’s advisable to keep just small amounts of currency for everyday use online, on your computer or mobile. The majority of your cryptocoins should be stored in a high security environment. Choose a cold or offline storage options or an USB for backup. This ensures that your wallet can be recovered even if your computer fails or is lost or stolen.
  • Update software: Ensure that the software is updated with the latest security enhancements available. And this is not only for your wallet software but also the software on your computer or mobile.
  • Extra layers of security:As with everything else, it’s better to more layers of security. First use a reputed Crypto wallet, one which has extra security layers. Like two-factor authentication and additional pin code requirements for every single time the wallet is opened. Another way is to use long and complex passwords, additionally ensure that a password is required for any withdrawal of funds.

Anonymity

If you ask us, we’d say crypto wallets are kind of anonymous, but not really, rather they’re pseudonymous. All the transactions are stored on the Blockchain, this data is public and permanent. But the actual identity of a user isn’t tied to the wallets. Meaning, while your name and address might not be there, your wallet address is definitely traceable. It can be traced to your identity in several ways.

So, the best Cryptocurrency wallet is?

The list of cryptocurrency wallet is growing at a very fast pace. There’s a new one on the market every so often boasting to be better than its predecessors. But before you choose one, think about how you intend to use it.

  • What will you use your wallet for? Do you plan on purchasing every day or just buying and holding digital currency as an investment?
  • Are you buying one single cryptocurrency or several different currencies?
  • Do you want to access your digital wallet from anywhere or only from home?

Ponder over these questions, make a list of your requirements and then choose a wallet which is the most suitable.

Here’s a list of wallets we think are among the best out there:

Bread Wallet

In the simplest of words, you can describe Bread Wallet as the Bitcoin digital wallet which makes transacting as simple as sending an email. This wallet which is a mobile app has both iOS and Android versions. Bread Wallet offers a standalone client, meaning users are in full control of their funds and can access their money at all times. Bread Wallet offers a great user experience for both beginners and experienced users. It has a clean interface, lightweight design and continually updates to enhance security. Thus we have a wallet that is safe and fast as well as easy to use.

Pros: The app has an open source software which keeps updating itself. Increased security and privacy, user friendly, simple & easy to use, and free. Their help center is very active.

Cons: They don’t have a web or desktop version, lacks features there’s only a send and receive feature, hot wallet.

Mycelium

Mycelium is another mobile wallet with both iOS and Android versions which allows you to trade your Bitcoins. Moreover, a user will have full control over their bitcoins because there’s no third party to freeze your funds. Beginners might find it a bit complicated but Mycelium is perfect for the advanced users.

The wallet offers security superior to most other apps. It aslo includes features like cold storage and encrypted PDF backups, an integrated QR-code scanner, a local trading marketplace and secure chat amongst others. With all this, it’s understandable why it’s considered to be among the best wallets in the market.

Pros: Unparalleled security and privacy, great features, open source software. The app can be downloaded for free.

Cons: Lack of a web or desktop interface, hot wallet, too complicated for beginners. They charge miner and transaction fees.

Copay

Copay, a creation of Bitpay is one of the best digital wallets you’ll find on the market. Copay’s easily accessible and user-friendly interface makes it a very convenient wallet. It can be accessed on desktop, mobile or online. Copay being a multi-signature wallet, allows for sharing of funds between friends or business partners. A multi-sig (multi-signature) wallet needs a transaction to be verified by other users before it’s processed.

Overall, Copay is the best choice because entry-level users will find it easy enough but they have something for the pros too. The hard-core crypto enthusiasts and experienced players will benefit from the additional geeky features on the wallet.

Pros: It’s a multisig wallet, offers good privacy & security, multiple platforms & devices, beginner friendly, open source software, free

Cons: The app is sometimes slow & unresponsive. The user support is very limited.

Jaxx

Jaxx is a multi-currency wallet and user interface. You can store Ether, Ether Classic, Dash, DAO, Litecoin, REP, Zcash, Rootstock and Bitcoin in this wallet. The wallet is designed so as to deliver a smooth Bitcoin and Ethereum experience. It allows for cross platform pairing. Meaning you can access it from several platforms and devices like Windows, Linux, Chrome, Firefox, OSX, Android mobile & tablet, iOS mobile & tablet.

The wallet also connects with websites through Firefox and Chrome extensions. You can convert your coins in the wallet to Bitcoin, Ether and DAO tokens through Shapeshift. It also allows users to import Ethereum paper wallets. Jaxx is the perfect choice for a multi-currency wallet with its array of features and continuous integration of new currencies.

Pros: You can trade with a range of different currencies in the wallet. It offers good privacy & security and easy linking of your wallet across multiple platforms. Additionally, they offer great user support, rich features is user-friendly and free.

Cons: They don’t have an open source code and is sometimes slow to load.

Trezor

If you need a wallet for storing a large number of Bitcoins, look no further than this hardcore bitcoin wallet called Trezor. Trezor’s most unique feature is that it cannot be infected by malware and neither will it ever expose your private keys. Making it as safe as your physical wallet that holds your traditional paper money. Trezor has an open source code, is transparent and all the technical decisions are taken after consulting with the wider community. Moreover, the intuitive interface which is easy to use can be accessed on Windows, and Linux.

The Trezor wallet is apt for those investors who buy and save coins rather than trade enthusiastically. Even those who wish to store large amounts of Bitcoin in a highly secure wallet could benefit from this. Its greatest disadvantage is that you must have it with you to send bitcoins from your wallet.

Pros: Trezor offers good security & privacy for your cryptocoins. It’s a cold storage wallet with an easy to use web interface, in-built screen, open source software and beginner friendly.

Cons: It’s not free, it costs a hefty $99 and you must have the device with you to send the bitcoins.

Ledger Nano S

The Ledger Nano S being a multicurrency wallet allows users to store all their cryptocurrency in one place. The coins you can store include:

Bitcoin, Ethereum, Bitcoin Cash, Bitcoin Gold, Ethereum Classic, Litecoin, Dogecoin, Zcash, Ripple, Dash, Stratis and NEO among others. Being an offline wallet ensures that it is not vulnerable to online attacks, thus keeping your cryptocurrency safe. The wallet is built for compatibility and can be accessed on Linux, Windows, Mac and Chrome. It comes with sophisticated features, an easy to use interface and is reliable, making it a top choice for crypto enthusiasts.

Pros: Private keys cannot be accessed by unauthorized personnel because of its state-of-the-art secure element. A tamper proof secure environment to store your cryptocurrency safely. In-built screen which allows users to monitor and verify transactions.

Cons: It quite expensive at 79 Euros and each transaction on the wallet will incur transaction fees.

So there you have it, our top picks of the best crypto wallets in the market. It’s advisable to do your own research into each of these and choose for yourself.

Disclaimer: The information above should not be interpreted as an endorsement of any cryptocurrency, wallet, specific provider, service or offering. It should not be treated as a recommendation of any sort to trade. There are significant risks involved in trading in cryptocurrencies. They are speculative, complex, highly volatile and sensitive to secondary activity. Please conduct your own research and verify the nature of any product or service (including its legal status and relevant regulatory requirements) before making any decision. We do not endorse any of the cryptocurrencies or wallets mentioned above.

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