A beginners guide to cryptocurrency 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 what a wallet is, why you need one and the different types that are available. There are also many wallet suggestions, links to official sites, and further information if you want to expand your knowledge. If you like to watch and listen, we have added some helpful videos which are well worth the watch
What is a cryptocurrency wallet, and how does it work?
A wallet is a software program that stores your public and private keys. It is these ‘keys’ or (secure digital codes) that give you access to the blockchain where you can view your balance, send and receive cryptocurrency
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 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 your email address that you give out to your contacts. When it comes to security, you would never give out your email account password. Likewise, to keep your coins safe you never give out the private keys (or password) to your crypto wallets.
When a transaction is made the sender is assigning ownership of the coins in question to you, which are then stored in your wallet. Your wallet balance will then increase and the sender’s wallet will decrease, similar to a bank transfer in effect. The transaction is recorded on the blockchain and cannot we reversed or changed in any way. The blockchain is an permanent, immutable ledger, storing every transaction ever made with that cryptocurrency.
- 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
- You can view all of your transaction history inside the wallet
- Transactions stored on the blockchain are very secure and irreversible
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Different types of cryptocurrency wallets
Hardware wallets (aka – cold storage)
Why chose 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 all these questions, then a hardware wallet is the right one for you!
A hardware wallet is the safest and most secure way to store your cryptocurrency because it holds the user’s private keys on a hardware device (like a USB). A private key is used to sign your transactions and is paired with a public key (wallet address). One of the main benefits of a hardware wallet is they isolate your private keys meaning your coins are completely safe at all times. Transactions have to be physically approved on the hardware wallet so your funds are secure even if you have viruses or malware on your PC that you are not aware of. They are compatible with many software wallets and can support multiple cryptocurrencies on the one device.
How it works
- Plug the device into any internet-enabled computer or device
- Enter your security pin
- Send the cryptocurrency
- 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’.
- The most secure wallet available
- A worthwhile investment to keep your cryptocurrency safe
- Prevents online hacking as it is stored offline
- No computer viruses can harm your device
- Supports multiple cryptocurrencies
- Added security with a pin code and advanced passphrase
- Costs around $150-$200 (NZD)
Watch this video to see a working example of a hardware wallet
Where do I find my wallet address?
Before you can order your coins, we need your wallet address. Finding your wallet address is easy, 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 when ordering your coins.
Buying a hardware wallet
Interested in a hardware wallet but don’t know what one to get? There isn’t a wide selection of hardware wallets currently available however offer support for the Ledger Nano S.
Software wallets (aka – hot wallets)
Why chose a software wallet?
Do you like the convenience and ease of cryptocurrency? Are you a beginner testing out cryptocurrency? If you ticked both these boxes then software wallets are perfect for you!
A software wallet can store your cryptocurrency, and on a range of devices, operating systems and browsers. For example, Windows, Mac, Android or iOS. We will go through all the different options, listing positives and negatives for each.
A desktop wallet is downloaded and installed on a laptop or PC and is only accessible from the one computer that downloaded the software. On the positive side this gives you a high level of security. The downside are that transactions can be authorised without a second layer of authentication as with hardware wallets. And they are not as portable as a mobile device. For desktop wallets we suggest and support Jaxx , Copay , Exodus and Toast.
Web based/Online wallets
A web-based, or online, wallet runs on the cloud and is accessible from any new device in any location with an internet connection. This type of wallet is one of the most convenient wallets to use, however, the downside is that your private keys are sometimes controlled by a third party. This means there is a higher chance for hacking attacks and theft. We suggest and give support for MyEtherWallet (MEW) which is one of the few web-wallets where you retain direct ownership of your private keys. Please check with us before using any other web-based wallets other than MEW. MEW is for Ether and other Ethereum-based coins.
There are also mobile wallets which are installed on your mobile device from the app store. These wallets are generally easy to use and holding your crypto wallet in the palm of your hand is obviously very convenient. Otherwise they are very similar to desktop wallets in terms of their use and capabilities. The only risk is that their are some apps where you do not 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 The mobile wallets we suggest are Jaxx , Copay , Exodus and Toast.
Are you wanting to hold your cryptocurrency investment long term and not spend it? Maybe saving for retirement or your kids to go to university? Paper wallets are used 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, but instead are locked away in a safe or with your will, for example. They are considered a form of cold storage like hardware wallets, but are completely free.
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 down side, 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 the paper wallets https://www.bitprime.co.nz/bury-bitcoin-paper-wallets/ to help you through the process.
Find your wallet address on a software wallet
Your “current address” is usually visible on all screens. But with some wallets you may need to press the receive button first, and you can also access the QR code here. Below is an example of the Jaxx wallet in use on a smart phone.
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.
Security tips & best use practice
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 two-factor authentication and additional pins or multi-signature wallets.
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 secuirty 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!
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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