Crypto Wallet - from A to Z
Ten years have passed since we first encountered words like blockchain or Bitcoin. Few could have guessed at the time that this new type of property would grow to over 50 thousand dollars today. Still, those who bought it then (mostly out of sheer curiosity) – today can or have already become millionaires. In order to preserve purchased Bitcoins over the years, there was a need for a storage location.
Well, that’s where we come to Wallet, and those that have evolved to date – can be completely digital or physical. The basic functions of Wallet are receiving and sending cryptocurrencies, but also the backup storage of the same.
Source:
Zipmex
Crypto Wallet (CW) aka crypto wallet and how to use it?
Crypto Wallet is a place that you access with your unique private key, which serves to securely store your cryptocurrencies in it. In addition to cryptocurrencies, you can also store other digital assets, such as non-fungible tokens. Non Fungible Tokens, NFTs).
Each wallet has its own private and public key. While the private key serves access, the public key serves to receive and send cryptocurrencies. Public keys function like an address and are visible to everyone for the purpose of sending and receiving tokens (just as anyone can share their email address to receive messages). On the other hand, the private key is necessary to access funds held at a public address, and to determine the beneficial ownership of the property. Think of a private key as a password to access your email account.
Each Wallet also has its own public address which we can say is a “scattered” version of the public key. Since the public key consists of an extremely long series of numbers, it is summarized and shortened to form a public address. In fact, the private key generates a public key, which in turn generates a public address.
After one user initiates a transaction to send a cryptocurrency to another user, the transaction is broadcast into a network where its validity is confirmed – before it is finalized and recorded on the blockchain.
Before broadcasting, the transaction is digitally signed via a private key, and thus also proves ownership of the private key. No one is going to reveal the details of the private key. As the public key is composed of a private key, with the help of a public key, it is proven that the digital signature came from his private key. After the transaction is confirmed as valid – the funds are sent to the recipient’s public address.
What else is important to know about Wallet?
You can install the wallet in the desktop version on your PC, but also on your smart device in the form of a mobile application so that you can easily use it anywhere it is.
In addition to an extremely important feature, which is cryptocurrency storage – Wallets also interact with online exchanges where the cryptocurrencies you own are easily exchanged for some others. You can also use wallet as a kind of digital identity, when connecting to different decentralized applications (dApps).
With a lot of positive features of Wallet, so far we’ve all had the opportunity to hear those slightly less positive stories about lost hardware, forgotten passwords, and even successful hacking attempts. That’s why your cryptocurrency has to be stored in a way that provides a high level of security, but it also has to go hand in hand with your still dealing with cryptocurrencies.
Cryptocurrency storage and corresponding Wallet
Once a particular cryptocurrency or several have been purchased, it is important to decide on how to use that currency further. Let’s list some of the ways:
- Daily trading
- Long-term storage as a kind of savings so-called. HODling
- A combination of daily trading and long-term storage
In everyday trading, the most important feature is liquidity, which in the context of cryptocurrencies refers to the conversion of a particular cryptocurrency into a traditional currency or fiat, or into some other cryptocurrency. It is precisely the degree of liquidity, that is, the frequency of conversions that determines the further method of storage.
Stock market storage - Why yes and why not?
After a cryptocurrency is purchased on an exchange, that exchange usually offers you a storage option as well. In this case – your cryptocurrencies remain on the stock exchange, but this may not be the best option for you. Among the hundreds of crypto exchanges currently existing in the crypto world – Binance is one of the most popular. The purpose for which the Binance exchange is appropriate is the previously mentioned daily trading of cryptocurrencies (eng. high frequency trading. The reason for this is that this type of exchange allows instant transactions, because cryptocurrencies are already on the stock exchange, so there is no need to transfer them from a wallet to a stock wallet. However, what creates the biggest problem is questionable security and a high chance of hacker attacks. So, the advantage provided by high liquidity also means less security of your cryptocurrencies.
The hacker attack that we remember to this day is the case of the Mt. Gox Stock Exchange, which at that moment was known as an almost impenetrable exchange, through which more than 70% of global transactions were carried out. This was not the only case of a hacker attack, which supports that – although some stock exchanges “swear” by their impenetrability, there is always a chance of an attack, as well as the chance that you will lose all your digital assets.
If you lose money once, the probability of a return is minimal. Namely, stock exchanges in previous cases, have not reacted “protectively” towards their users because they are actually the ones who own the funds, not you – given that you do not have your private key tied to one of the stock exchanges. As the saying goes, “Not your keys, not your coins!”
Source:
Medium
Storage in your Wallet with the help of a public and private key
Now that we’ve learned that a stock market wallet is questionable security, it’s time to get acquainted with a safer alternative – storing cryptocurrencies in a personal crypto wallet. Here it is important for us to familiarize ourselves with concepts such as public and private keys, and with what these keys allow us to do.
With personal Wallets, purchased cryptocurrencies are essentially still on the blockhain (from which they cannot be downloaded), but you can access them with the help of your private key.
Source:
Phemex
Where's your private key?
The private key is in your personal, non-stock Crypto Wallet – either online or offline. Consider that online Wallet completely “depends” on the Internet connection, while offline or hardware Wallet connects to the Internet at the time of making the transaction.
Because of this characteristic of the hardware wallet (eng. Cold Wallet), we can say that this wallet is still somewhat more secure than the online variant, and that it represents a kind of equivalent to a safe in the real world.
But let’s go back to the extremely important private key, which is also the “entrance” to your Wallet. Since a private key is essential when transferring cryptocurrency to another address, it is very important to carefully store your key and store it in a safe place – such as a vault or safe. If you lose your private key, you will lose your digital assets. What this really means is that Bitcoin or any other currency can’t be hacked by itself, but a device that stores a private key can.
What about the public key?
All cryptocurrencies you own are linked to a public key whose role we could best compare with a public address or an IBAN number from a bank card. In other words, the public key has the role of a locator, that is, the address where you can receive just purchased currencies.
Multi-coin vs. Single-coin Wallet
Although most Wallets are designed to handle one type of cryptocurrency (eng. Single-coin Wallet), there are also wallets in which you can handle several different cryptocurrencies (eng. Multi-coin Wallet). Multi-coin Wallets allow the user to convert one currency into another, while Single-coin Wallets allow you to receive and send only one cryptocurrency, such as Bitcoin or Ethereum.
A good example of Multi-coin Wallet: Trust Wallet
Source:
Trust Wallet
Trust Wallet is a crypto wallet that allows you to easily send, receive, trade and store cryptocurrencies. It is easy to use, and a simple user interface makes it suitable for absolute beginners.
Trust Wallet has another advantage – the ability to invest cryptocurrencies and earn rewards, and it is additionally interesting because it provides the ability to buy, store and sell non-fungible tokens (irreplaceable tokens). Non Fungible Token (NFT), about which we will discover more in one of the following blogs.
Unlike other wallets (e.g., Metamask or MyEtherWallet) that mainly support Ethereum ERC20 tokens, Trust Wallet supports a large number of cryptocurrencies from various blockhains including Bitcoin, Ethereum, Binance Coin, Litecoin, XRP and others. This figure is much higher than what most crypto wallets can support. Furthermore, with Trust Wallet, you can purchase cryptocurrencies from various third-party platforms, including Mercurio, MoonPay, Ramp Network, Simplex, Transak, and Wyre.
About Trust Wallet Security
Given that this is a decentralized Wallet – each user is independent and responsible for their security. Furthermore, this wallet is a good example of Hot Wallet – which, let us recall, we said is always connected to the Internet, and that compared to Cold Wallets – is less secure.
What does a Trust Wallet download look like?
This one, like most Hot Wallet, you download as a desktop or mobile app through Apple, Google Play or Android store. You choose create new wallet, followed by privacy policy and terms of service. You will then be asked to create a six-digit access code, which will furthermore be your secret security code to access your wallet. We can compare it to the pin you access your smartphone or to the pin that is attached to your bank card.
This is followed by a key step, where you are expected to create a backup of your wallet. This is an important step for the future because it will be the only way to recover your wallet – in case something happens to your computer or mobile device.
At this step, the app will display a unique 12-word recovery phrase (in the case of other Wallets it can also be a 24-word string) that is extremely important to write down in the correct order – just as you were originally shown, and then store it safely. On the next screen, you will select words in a sequence of 1 to 12 according to the previously written order. Once you’ve done it right, you’re ready to send and receive!
What are Ether Scan and Bitcoin Explorer and when to use them?
Source:
Cryptodefinitions
Etherscan is not an Ethereum wallet, nor is it a wallet provider. It is a free and independent block explorer based on the Ethereum blockhain. The Etherscan app tracks blockchain transactions on the Ethereum network, and the app then displays results like a search engine. This allows you as a user to find transaction details on the Ethereum blockchain – which at the very least gives you peace of mind, in case your transferred funds haven’t yet appeared in your wallet.
While using Etherscan, after you enter any Ethereum address in the search box (to see the current balance), but also the transaction history – Etherscan will display all gas and smart contracts that include that address.
The BTC.com Explorer works on a similar principle, and the main difference is that the latter is based on the Bitcoin blockchain.
What both researchers have in common is that they allow an overview of assets located at any wallet public address.
A thought for the end: Until the next Wallet story - repeat the old and get ready for more!
After we have successfully mastered the topic of Wallet, prepare for our next blog, in which we will reveal more details about the private and public key, and then we will follow a blog about the difference between Hot and Cold Wallet.
We’re excited about the next story, and hopefully so are you. Write to us and follow us on social media! Until the next blog,
Your Kriptomat.hr Team
