Beginners Cryptocurrency Wallet Guide: Everything you need to know about wallets
You’re interested in cryptocurrency and then get hit with the question ‘what is your wallet address?’
No idea what that is?
Don’t worry, BitPrime is here to help!
This guide will give you a better understanding on cryptocurrency wallets and by the end you’ll know:
How a cryptocurrency wallet works;
What to look for in a crypto wallet, and;
How to keep your wallet secure.
There are also many wallet suggestions, links to official sites, and further information if you want to expand your knowledge. If you prefer to watch and listen, we have added some helpful videos as well.
What is a cryptocurrency wallet, and how does it work?
A cryptocurrency wallet is a software program that securely stores your public and private keys. It is these key pairs, or secure digital codes, that your wallet uses to interact with a blockchain to give you access to view your balance, send and receive cryptocurrency. You can think of your wallet as like your local bank branch or ATM that provides you access to your funds stored within the bank, or blockchain, in the case of crypto.
Remember, the blockchain is a highly secure public ledger that keeps track of all cryptocurrency transactions. For anyone new to this, keep in mind that crypto wallets don’t contain any physical coins because crypto coins are digital.
To make this easier to understand, here’s another example. This time let’s compare a crypto wallet with something you probably use on a daily basis, your email.
Your wallet is like an email account for your cryptocurrency; you share your email address but not your password. Your public keys are like your email address, and private keys are similar to the password you use to login to your email. You give out your wallet address so that people can send you coins much like how you provide your email address to your contacts to send you messages.
When it comes to security however, you would never give out your email account password to anyone. Likewise, to keep your coins safe in your cryptocurrency wallet you never give out the private keys (or password/passphrase) to your crypto wallets.
How do you send and receive money with a cryptocurrency wallet?
When a transaction is made, the sender is assigning ownership of the coins in question to the receiver, which are then made available in the receiver’s wallet. The receiver’s wallet balance will then increase, and the sender’s wallet balance will decrease, similar to a traditional bank transfer in effect.
The transaction is recorded on the blockchain and cannot be reversed or changed in any way. It is this fact that makes a blockchain a permanent, immutable ledger, storing every transaction ever made with that cryptocurrency.
But, how do you get some crypto to start with?
This is where BitPrime comes in. You can easily spend your New Zealand Dollars and buy the cryptocurrency you want directly from us. Once you have a verified account, you use our site like any other online store. Simply choose the crypto you want to buy, give us your wallet address, and make the payment from your bank account. We have a step-by-step guide and video that walks you through that process, but for now, let’s carry on with learning about wallets.
If you wish to learn more about how cryptocurrencies are mined, or created, we cover that in a separate article too.
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Summary of this section
- A cryptocurrency wallet stores your public and private keys giving you control over the funds associated with that wallet
- Your keys allow you to send and receive coins on the blockchain via your wallet
- You can view all of your transaction history inside the wallet and in a blockchain explorer
- Transactions stored on the blockchain are very secure and irreversible
- Your private key, password and backup phrase stay private; your public key generates a wallet address that you can share
What to look for in a crypto wallet, and what are the different types of wallets available?
What features do good crypto wallets have?
Before you choose which cryptocurrency wallet to use, it is helpful to have an idea of the main features you should look for. In general, there are three types of wallets: hardware, software and paper. However, different versions of wallets exist, particularly software ones, so it helps to use the one most suitable to your needs.
Free vs paid
The first question to ask yourself is whether you want to pay for a wallet or not. If you plan to buy and store (hodl) a significant amount of crypto then it is highly recommended you purchase a hardware wallet.
As you will learn below, they offer an extremely high level of security; more so than online wallets.
Please note that when I say significant amount, I mean significant to you and your personal circumstances. For some, $1000 is significant, for others, $50,000 is. Only you can be the judge of that.
In addition to excellent security, a hardware wallet stores multiple different currencies on the one device.
This is not to say that there aren’t excellent free options available. In fact, there are many free wallets that we recommend due to their ease of use and high security. Later on in this guide we will cover some of those in more detail.
The next important factor to consider is how you wish to access your wallet. Would you rather have it as an app on your mobile device, on your computer, both or neither? All of those options are possible!
Multi-currency vs single-currency
The particular cryptocurrencies you wish to buy also determines the wallet you use. If you’re only planning on using a single currency, then a wallet that focuses solely on that one works well.
There are several wallets designed purely for the use of a single crypto asset. For example, Trinity Wallet for an IOTA wallet seed, and many bitcoin wallet options too. Yes, that includes Bitcoin core, Bitcoin Cash and Bitcoin SV too 😉
Conversely, there are plenty of multi-currency wallet options. Brilliant examples include Exodus, and Ledger and Trezor hardware devices.
Perhaps one of the most important considerations security-wise is the way your chosen wallet backs up your private key. It is this backup that prevents you from losing access to your digital assets should something go wrong on or with your mobile or computer.
We can’t stress enough how critical it is for you to backup your wallet when you first create or use it. You then need to write down your mnemonic backup phrase (usually a series of 12 or 24 words) and keep it somewhere safe where you won’t ever lose it.
It’s advisable that you seriously consider having two copies of the backup. One that you store somewhere you can access it if needed, and the other with your lawyer in your will.
Here is an example of a Canadian exchange that allegedly lost all its crypto when the CEO died, because only he had the backup.
Private key control
Ideally, you want to store your crypto in a wallet that gives you control of your private keys. All of the wallets we recommend do this.
A lot of trading exchanges have hosted, online wallets. It’s advised that you don’t store your crypto in an exchange wallet. Rather, use them only to hold the crypto you are actively trading on that exchange. Again, refer to the example above illustrating what’s at stake when people leave their funds in exchange hosted wallets.
Other questions to ask
Do you need a wallet to hold enough crypto for you daily use, trading and purchases? Or, do you only need one for long-term storage and investment purposes?
In terms of security and trustworthiness, does the wallet, and the development team behind the wallet, have a good reputation? Wallet security should be of the utmost importance to you!
What is a hardware wallet (Cold wallets)
Why choose a hardware wallet?
Are you the kind of person that doesn’t mind making a small investment to keep your coins extra safe? Are you in this for the long run? Do you have many different types of cryptocurrencies? If you answered yes to these questions, then a hardware wallet is the right one for you!
A hardware wallet is one of the safest and most secure ways to store your cryptocurrency. Why? Because they hold the user’s private keys on a device similar to a USB stick that is offline until you plug it in to use it.
Remember: Your “private key” is what is used to unlock your crypto and sign your transactions and is paired with your “public key” which gives you your public wallet address.
One of the main benefits of a hardware wallet is the fact that they isolate your private keys from your computer meaning your coins are completely safe at all times. Additionally, transactions have to be physically approved on the hardware wallet even when you have the device plugged in to your computer. This way your funds remain secure even if you have a virus or malware on your computer that you are not aware of.
As well as having their own secure software app (e.g. Ledger Live) which supports multiple currencies, hardware wallets are compatible with several other external wallets too. This compatibility enables the support of many different cryptocurrencies on the one device. To illustrate this, Ledger devices currently support over 1200 crypto assets and Trezor devices support over 1000!
How it works
- Plug the device into any internet-enabled computer or device
- Enter your security pin
- Send the cryptocurrency via the relevant app
- And confirm
When sending the cryptocurrency, the app sends a copy of the transaction to the hardware device and asks for a digital signature which is verified by clicking the ‘confirm button’.
We have many in-depth guides in our Knowledge Base covering various aspects of using Ledger Nano S, Ledger Nano X, Trezor One and Trezor T devices. These include step-by-step setup guides as well as how to find your wallet address and sending and receiving transactions.
- The most secure wallet available
- A worthwhile investment to keep your cryptocurrency safe
- Prevents online hacking as it stores your private key offline and on the device itself
- No computer viruses can harm your device
- Supports multiple cryptocurrencies
- Added security with a pin code and advanced passphrase
Balances and transactions are only accessible via the downloadable software app on your computer while your device is plugged in
- Costs from $100 (NZD) depending on model and colour chosen
Initial setup can be challenging. However, we have walkthrough guides in our Knowledge Base that can help you
Where do I find my wallet address?
Before you can order your coins from BitPrime, we need your wallet address, so we know where to send them. Finding your wallet address is easy. As an example, simply:
- Press the receive button
- Look for the QR code followed by your wallet address. You will see the long string of random numbers and characters. Best practice is to highlight your address then copy and paste it into the wallet address field on our site when ordering your coins.
To find detailed instructions on finding your wallet address in specific apps and devices, please refer to our Knowledge Base.
Buying a hardware wallet
Are you interested in buying a hardware wallet but don’t know what one to get? There isn’t a wide selection of hardware wallet brands currently available – about five or so spring to mind. However, we recommend either a Ledger and Trezor device and also offer some setup and troubleshooting support for these two only. Currently, you can buy them directly from the Ledger or Trezor websites.
For security reasons, never purchase a second-hand hardware wallet. Also, only buy them from the manufacturers themselves, or from approved retailers/resellers. You’ll find approved retailers on the manufacturer’s official websites.
The reason for this is to prevent yourself from falling prey to people with nefarious intentions. You should refer to our article here if you wish to check the integrity of your hardware device and ensure you have purchased a legitimate one.
What is a software wallet? (Hot wallets)
Why chose a software wallet?
Do you like the convenience and ease of cryptocurrency? Are you a beginner testing out cryptocurrency? Would you prefer a free wallet? If you answer yes to these questions, then software wallets are perfect for you!
A software wallet can store your cryptocurrency for you and there are many available on a range of devices, operating systems and browsers. For example, Windows, MacOS, Android, iOS, Chrome and Opera. Now, let’s go through an outline of the different options and some of the positive and negative aspects of each.
A desktop wallet is a type of software wallet that is downloaded, installed and accessed on your computer. This is perhaps the most common type of wallet available which can make it hard to know which to chose!
- Most desktop wallets are relatively straightforward to install and use
- Come in single-currency or multi-currency options
- Many don’t enforce the use of two-factor authentication for login or for transactions authorised and sent
- Most don’t have the capability to sync/pair your desktop wallet to a mobile app
Recommended desktop wallets
We suggest and provide some setup and tech support for Exodus and Toast Wallet.
A feature worth noting is that Exodus can sync/pair to your mobile
Web based/Online wallets
A web-based, or online wallet runs on a cloud server and is accessible from most internet capable devices. This type of wallet is one of the most convenient wallets to use for this reason. However, the downside is that, depending on the wallet in question, a third party may retain control of your private keys. An example of this is a hosted exchange wallet hence why we recommend you don’t store large sums in one.
If a third party has control of your keys this means that there is a higher chance of the wallet being susceptible to hacking and theft.
- Able to access your wallet from most internet capable devices
- May be able to recover your account’s password if you lose it
- Far more susceptible to hacking and theft
- Remember: not your keys, not your coins
Recommended web-based/online wallet
For an online wallet, we suggest and can provide some support for MyEtherWallet (MEW). MEW is one of the few web-based wallets where you retain direct ownership of your private keys.
Blockchain Wallet is another option that is very popular.
Feel free to check with us before using any other web-based wallets if it isn’t obvious who has access to your key store.
The final class of software wallets is the mobile wallet app. You download these wallets to install on your mobile device or tablet from the appropriate app store for your device. These wallets are generally easy to use and having your crypto wallet in the palm of your hand is obviously very convenient.
Other than on the go availability, they are very similar to desktop wallets in terms of their use and capabilities. Again, one risk to watch out for is that there are some apps where you don’t control the private keys. As always, we recommend that you never use wallets where you do not have direct control of the private keys. If you are unsure about any apps, always talk to us first.
- Easy access to your cryptocurrencies via an app
- Several mobile wallet apps are designed to make it easy to purchase goods and services using crypto (where available)
- Some sync/pair to your desktop wallet
- You must be extra vigilant not to lose your backup phrase. If you lose your mobile device as well as this phrase, you’ll lose access to your coins
- If two-factor authentication isn’t enabled or supported, anyone who unlocks your phone has access to your wallet
Recommended mobile wallets
The mobile wallets we recommend are MEW, Exodus and Trust Wallet. A feature worth noting is that Exodus can sync/pair to your desktop wallet.
Find your wallet address on a software wallet
Your “current” address (aka receiving address) is often visible on all screens in your wallet.
But with some wallets, you may need to press the “receive” button first. You can also access the QR code here too.
For instructions on finding your wallet address in specific apps and devices, please refer to our Knowledge Base.
For these software options, please make sure that you update your software so that you have the latest security enhancements available. This goes for not only your wallet software but also the software on your mobile and computer.
Wallet Setup Video Guides
Please find a series of step-by-step videos teaching you how to set up various wallets below:
What is a paper wallet? (Cold wallets)
Why chose a paper wallet?
Are you wanting to hold your cryptocurrency investment long term and not spend it? Maybe you’re saving for retirement or for your kids to go to university? Paper wallets are used much less frequently than the other types of wallets, but for specific needs they can be the perfect choice!
A paper wallet is literally what the name suggests – your private and public keys are recorded on a piece of paper! The best safety feature is that your keys never go on the internet, until you chose to send a transaction from the paper wallet. Instead of the key being online or on a computer it can be locked away in a safe or with your will, for example. For this reason, they are considered a form of cold storage like a hardware wallet is but they are completely free to set up.
On the plus side, nothing is stored online so hacking and theft is avoided. But they have to generated on a computer with no internet connection (permanently), never on a website where keys can be intercepted. However, on the downside, to spend or send this cryptocurrency at a later date you will need to transfer this information to a software wallet. For more information, we have written a blog on paper wallets to help you through the process.
- Completely offline
- Great for long-term coin storage
- Only recommended for those who are already familiar with wallets, key pairs, and a bit tech savvy as they can be tricky to set up
- If it’s on paper it can be easily damaged or destroyed (there are options to have it engraved etc. but that adds a cost)
- Not for daily (weekly, monthly etc.) use
Best cryptocurrency wallets
The best cryptocurrency wallet depends on your needs and the features as described above.
The wallets that we believe are among the best include Ledger and Trezor hardware devices, Exodus, Trust Wallet, MEW and Blockchain Wallet.
Cryptocurrency wallet security & best practice tips
Always backup your wallet!
You need to make sure that you have it backed up because losing your back-up phrase (mnemonic) or private key will result in you losing your cryptocurrency.
Try and create long and complex and unique passwords when possible and ensure to make passwords “Always Required” wherever you can. We recommend using a password manager for this.
Added security options:
Use wallets that require added security such as 2FA (two-factor authentication) and additional pins or multi-signature wallets. Where possible, you should always have two-factor authentication enabled for any websites, software or wallets associated with your digital (or other) assets.
Regularly check that your wallet, computer, and security software are up to date.
Do regular security scans:
Schedule nightly scans of your computer with your security software. That way you do not need to remember to do it yourself.
Always copy & paste wallet addresses:
When sending and receiving transactions never type the wallet address. Always copy & paste. Typing addresses introduces human error and is very time consuming. Once you have pasted the address always double-check that it matches the one displayed in your wallet.
Once it’s gone it’s gone forever:
If your wallet gets hacked or if you send funds to a scammer remember that these transactions are irreversible! Also, private key security is of utmost importance. Never share your passwords, private keys or backup phrase with anyone. Unfortunately, it is likely impossible to recover a lost private key without the JSON file or mnemonic phrase so keep it safe and don’t lose it.
We’re here to help:
If you are unsure about something, please just ask us. That’s what we’re here for. The only silly question is the question that you didn’t ask. 97% of the population have never made a cryptocurrency transaction before so we spend most of our day helping with these types of questions.
We are here to help you de-code the world of cryptocurrency. BitPrime is committed to being NZ’s go-to for cryptocurrency information and education.
We deliver content that is accessible to the non-techie investors, along with content for the more seasoned investor.
For more information on how to set up wallets and recommended wallets: watch our videos, read through our FAQ’s, and dive deep into detailed content on the BitPrime blog.
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We aim to bring your concerns to the light and decode the world of cryptocurrency so you feel reassured, just as you would trading in the regular stock market.
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