Ledger Nano X Wallet
- Hold 1,250+ cryptos
- Bluetooth connectivity
- Industry-leading security
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If you want to buy bitcoin or any other digital currency, you’ll need to choose a wallet where you can securely store your coins or tokens. But if you’re just starting out, choosing a wallet and learning how to use it can feel complicated and overwhelming.
That’s why we’ve put together this beginner’s guide to cryptocurrency wallets. Keep reading for information and advice on how crypto wallets work, the different types of wallets available and how to choose one that’s right for you.
A cryptocurrency wallet is a software programme that allows you to store, send and receive digital currencies.
Because cryptocurrency doesn’t exist in any physical form, your wallet doesn’t actually hold any of your coins – instead, all transactions are recorded and stored on the blockchain.
Some cryptocurrencies have their own official wallets, while other products allow you to store multiple currencies within the same wallet.
But be aware that different digital currencies have different address types, and you’re usually only able to send coins between like wallet addresses – for example, you’ll need to send bitcoin to a bitcoin wallet address and Ethereum to an Ethereum wallet address.
Instead of holding physical coins, a wallet has a public key and a private key.
As well as storing your public and private keys, crypto wallets interface with the blockchains of various currencies so that you can check your balance and send and receive funds.
The blockchain of any cryptocurrency contains a public record of all the transactions that have been made since it began. Your wallet address keeps a record of all your transactions, and therefore also tracks your crypto balance. By following the chain all the way to the present day, a wallet can figure out how many coins you have.
For example, let’s say Alice sends Bob 0.001 BTC. Once this transaction has been verified and added to the blockchain, the ledger records that the amount of bitcoin at Alice’s wallet address has decreased by 0.001 and that the amount of bitcoin at Bob’s wallet address has increased by 0.001 BTC.
The amounts sent and received as well as the public wallet addresses are all public information.
Now that you know how crypto wallets work, let’s take a closer look at the five different types of wallets available, each with its own advantages and disadvantages in terms of security, ease of use, convenience and a range of other factors.
As you’re researching and comparing a range of wallets, you’ll probably come across the terms “hot wallet” and “cold wallet”, or perhaps the concept of “cold storage”.
So, what does temperature have to do with crypto storage?
With this in mind, the safest solution is moving your coins into a secure wallet that lets you retain control of your private key.
Now that you know all about the different types of wallets available, it’s time to find one that’s right for you. To do that, you’ll need to consider your needs and compare a range of wallets based on several key factors, including the following:
You’ve chosen your wallet and completed the set-up process. Now it’s time to learn how to use it, so check out the step-by-step instructions below on what you’ll need to do.
To send funds from your wallet, you’ll need a wallet address (the recipient’s public key). These addresses are given in one of three ways:
Once you have this address, you will need to do the following:
Please note that the exact process will vary depending on the type and brand of wallet you choose. For example, hardware wallet users will typically need to connect their wallet device, enter a PIN or password and manually verify the transaction on the device itself.
Receiving coins is even easier than sending them. However, wallets vary greatly in the way this is done: some will provide you with a fixed public address, some will give you a new address for every transaction and others will provide a combination of the two.
If you want to hold onto your crypto, there’s typically not much you need to do once the funds have arrived in your wallet. You can log into your wallet whenever required to check your balances. Some currencies may allow you to earn interest on your coins by “staking” your holdings (you may need to follow specific instructions in your wallet to do this).
Other than that, the main thing you need to focus on is maintaining a high level of security at all times.
Wallet security is a crucial consideration for any crypto owner, so keep these tips in mind to ensure you keep your funds as safe as possible:
This is often a PIN code that is sent to your smartphone as an SMS, may expire after a set amount of time and is different every time you log in. This means that an attacker needs to know your username and password as well as be in possession of your phone.
Some wallets also require the use of a secondary app installed on your smartphone that generates these PIN codes for you, again adding another layer of security.
There’s no such thing as a one-size-fits-all “best cryptocurrency wallet”. The right wallet for you will be one that matches your needs, so if security is your number-one concern, you’ll probably end up choosing a different wallet to someone who wants fast and easy access to their coins.
The key thing to remember is to do your research and compare a range of wallets. Start with our range of crypto wallet reviews to get an idea of what’s available and the key features you need to consider.
Disclosure: At the time of writing, the author holds ADA, ICX, IOTA and XLM.
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