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Introduction to crypto wallets: The “bank of the free”

Introduction to crypto wallets: The “bank of the free”

Opening a wallet is one of the first things you need to do to begin your journey into the world of crypto.  Crypto wallets are just digital or physical wallets but for cryptocurrencies. They help crypto investors to store, manage, and trade cryptocurrencies like Bitcoin, Ethereum, and Binance Coin

They are just like your regular digital bank wallet and can perform the same functions. Your wallet reflects the amount of crypto you have and how much the value of your portfolio has appreciated or depreciated over time.

Crypto wallets are peculiar to cryptocurrencies and one wallet cannot be used to receive multiple crypto coins. For example, a Bitcoin wallet cannot be used to receive Solana or DogeCoin.

Types of crypto wallets

There are two main types of crypto wallets depending on the form they take. 

Soft(ware) wallets (Hot Wallets)

Soft wallets are the most popular and easily accessible wallet type. The wallet is only available on the internet and the funds are stored online on digital platforms like apps and websites.

Soft wallets make it easy for crypto investors to send, receive, and transfer crypto as they can be accessed on any device connected to the internet. 

Soft wallets are also called “hot wallets.”

Hard(ware) wallets (Cold Wallets)

Hard wallets are not as popular as soft wallets, and are usually bought by crypto experts and not beginners. 

They are small devices that look like flash drives. It is used to store crypto offline. The crypto in a hard wallet can be accessed by plugging it into a computer via USB. 

Hard wallets are said to be more secure than soft wallets because the crypto is offline and in the total care of the investor but the wallets can easily be stolen, misplaced, or damaged. Hard wallets are also called “cold wallets” because the funds are stored offline. Some hardware wallets include Ledger and Trezor

How to create a crypto wallet

Creating a soft crypto wallet is quite easy and usually free. There are over a 100 apps which provide crypto enthusiasts the opportunity to create their own wallets in a matter of minutes. 

Most popular crypto exchanges like Binance, Coinbase, and Kraken usually offer wallet features along with their crypto wallets. There are also stand-alone wallet apps like Trust Wallet and MetaMask

You just have to download the app, sign up with the right information like email and phone number and you can create multiple wallets to hold multiple cryptocurrencies. 

Once a crypto wallet is created, it automatically gets a unique identifier which is an alphanumeric combination. This combination is called a wallet address. The wallet address acts like your bank account number. You can use it to receive and send crypto. 

You can decide to use one address multiple times or create a new address every time you want to receive crypto to your wallet. Think of it as being able to generate a temporary account number anytime you want to receive money. 

Every wallet address is different, randomly generated, and cannot be replicated. To create a hard wallet, you just need to buy the device and plug it into a computer so you can access the important security information and activate it. 

How to buy crypto on your wallet

You can receive crypto into your crypto wallet by buying it from an exchange with cash, exchanging one type for another, or by buying it directly from another crypto investor.

To buy crypto from an exchange, you first need to deposit money into your account with the exchange via bank transfer or a card transaction. When you decide the amount you want to buy, you purchase it directly from the platform and the crypto appears in your wallet almost immediately.

To receive crypto from another crypto investor, you need to copy and send them your unique wallet address.  The sending process is quite simple and seamless like PayPal or CashApp. 

However, it might take a few minutes to an hour (depending on the blockchain’s congestion) before the crypto which you bought reflects. This is because the blockchain has to verify and record every wallet transaction.

You can also exchange your crypto for different crypto coins. That way, you do not have to go through the long process of first converting to cash. This process is called swapping and stablecoins like USDT, BUSD, and DAI are mostly used for it. 

See Also

Stablecoins are crypto coins that have a fixed value. Unlike regular cryptocurrencies whose prices move up and down on a regular basis, the values of stablecoins are pegged to a traditional asset like crude oil or a currency like the dollar.  

How to secure your wallet

As a crypto investor, your crypto wallet is very important and must be kept secure always. If hostile actors get access to your wallet, you might not have any crypto left by the time you realise. 

Here are some ways to secure your crypto wallet;

Seed Phrases

Some crypto wallets give you a special key, usually a bunch of words, at the time of creation. This is an example of a wallet’s seed phrase: sweet, iron, mango, cat, pump, joy.

This seed phrase makes it hard for anyone to perform a transaction without your permission. The seed phrase also helps you to access your account from anywhere with another device. 

Passwords 

Just like every other digital platform, your wallet service would have password and pin security that can be used to prevent unwarranted access to your wallet. 

Biometrics

You can protect your crypto wallet using your biometrics like fingerprint and retina scan. The feature is not available to all crypto wallet providers.

Opening a wallet is one of the first things you need to do to begin your journey into the world of crypto.  Luckily, you can open an unlimited number of wallets on different platforms and move your crypto around as much as you like. 

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