What is a crypto wallet?
A crypto wallet is simply like your personal wallet. You can put your money in it or take the money out to buy something. Think of the crypto wallet as something like that. The only difference is that you are storing or putting your cryptocurrencies in it or using it for some transactions.
Of course, crypto wallets have different security levels and sizes going from your pocket to a secure vault. They also have many advantages and disadvantages. In this article, I will go over everything you need to know about cryptocurrency wallets.
Crypto Exchanges are platforms that allow you to buy, sell, and transfer cryptocurrencies. Want to know more about crypto exchanges? Read this article.
I will be summarizing what I have said in this article at the end, so if you want to skip straight there, feel free. But I strongly advise you to read the whole article.
Choosing the right crypto wallet:
Each one of us has personal preferences, depending on how much you want to invest and how secure you want the crypto wallet to be.
Small Investor:
If you have a small amount of money and you are going for trading and short-term holding, you should consider keeping your money in a crypto exchange. They are going to keep things more secure and safe. Here are the ones I recommend.
Big Investor:
If you are investing large amounts of money, you should consider keeping your money in your own wallet. Not an exchanger because they are safer. We have a pretty good example of why they are not safe, like the company called FTX that pretty much scammed everyone. Some of the exchanges were even hacked. So if you are thinking of a long-term holding, you better have your own wallet and put your crypto in there.
What are public and private keys?
Consider your cryptocurrency address to be like your email address. People can send you money, and you can send them money by knowing their cryptocurrency address.
Note: Each cryptocurrency has a different address and uses a different network.
Then there is a password to access your email. Think of it as your private key. That private key is alphanumeric. and whoever is the owner or has access to the private key. They can also access all of the cryptocurrencies in that wallet. so don’t share it with anyone.
As I previously stated, it is alphanumeric, so there is another thing called seed words, such as “sleep” and “eat,” and there are about 12 or 24 of them for each wallet. Those seed words are used to generate the private and public keys.
Note: “Alphanumeric” refers to a combination of alphabetical and numerical characters, typically used to describe a set of characters that includes both letters and numbers.
Note: When you are setting up a wallet, you usually get these seed words that you need to store somewhere safe.
Classification of crypto wallets:
1. Custodial and Non-custodial Wallets
A custodial wallet is when you are restoring your cryptocurrencies on an exchange. You are giving custody of your wallet to someone else. If the exchange is shut down or gets hacked, you would never be able to retrieve your coins because you don’t have the private key.
A non-custodial wallet is one in which you have full ownership of your wallet. You are the one who has to ensure the safety of the seed words and the private key in this case.
2. The second classification is based on the type of wallet or device:
Browser Wallets
The browser wallet is similar to a Chrome add-on, a Brave add-on, or a Firefox add-on, and some popular ones that you may have heard of or even used are MetaMask and XDEFI, which allow you to store cryptocurrencies on a browser extension.
Desktop Wallets
The first two are desktop browsers like Exodus and Ledger Live.
Mobile Wallets
A mobile wallet like Trust Wallet.
Hardware Wallets (Safest)
The safest among all of them is a hardware wallet like the Ledger Nano X, Ledger Nano S, or Trezor. There is also a cheaper version called Safepal. It is for people who are looking for a budget hardware wallet solution.
Why is the hardware wallet the safest?
The reason for choosing a hardware wallet as the safest is because you know the seed words and the private key. When you set them up on a mobile or a browser wallet, they give you or show you these words on the screen. If a hacker or an app like a recording app had access to your screen, they could also see these words and have access to your wallet. But when you are using a hardware wallet, it has its own screen and processor. which means that your cryptocurrencies are always safe and secure. When you are sending a transaction, you have to physically press the button on the hardware wallet to make the transaction; otherwise, no one can transfer coins from your wallet.
Where can someone purchase hardware wallets?
Always buy from the official website of the wallet or through authorized resellers only. (Some of them have Amazon links you can buy from, and you can find them on their official website.)
Summary
Safety: If you want the one that has the highest level of safety, go for the hardware wallet.
Easy access for buying and selling: You can use the Binance wallet or the Crypto.com wallet, and they are both exchanges at the same time.
Unsafe Transactions: If you are trying to buy something from a website and you are not fully trusting it or are trying something for the first time, it is better to use the browser wallets or the mobile wallets.
Note: Everyone can select the type of wallet that best suits his or her needs and preferences. If you want more help choosing a combination among all of them, contact me through email.
Scenarios:
A Beginner: If you are just starting out, you can use a mobile wallet. “Be aware of any recording apps on your phone, especially if you are on an Android phone.”
A Developer: If you are a developer and are building an app, you need to transact every now and then, and you want to store a small amount just to pay the gas fee. In that case, a browser wallet like MetaMask is the best for this scenario.
An Investor: If you are investing $10,000 or $20,000 USD in bitcoin, Ethereum, or another cryptocurrency, you should definitely consider purchasing a hardware wallet.
Bullet Points:
- Bitcoin address is like an email address
- The private key is like the password to your email address.
- Wallets have 12 or 24 seed phrases or words.
- For short-term holders and small investors, it’s okay to keep your bitcoins in the exchanges.
- For long-term holders or big investors, it’s better to keep your bitcoins in your own wallet.
- Wallets on the centralized exchange are custodial wallets.
- MetaMask & XDEFI are popular web browser wallets.
- EXODUS & LEDGER LIVE are popular desktop wallets.
- Trust Wallet is a popular mobile wallet.
- Ledger Nano X, Ledger Nano S, and Trezor are Hardware wallets.
- Safepal is a budget hardware wallet.
- Never take photos of your seed words or put them online.
