Beginner's Guide to Different Types of Crypto Wallets

Beginner’s Guide to Different Types of Crypto Wallets (2023)

In this beginner’s guide to crypto wallet for 2023, we explain what a crypto wallet is and why it’s important to access your wallet’s private keys. Plus, the difference between a software wallet, a hardware wallet and a paper wallet.

Once you have purchased your first cryptocurrency, it’s important to consider your security and how you will store your crypto assets. It’s most likely you have purchased your crypto on an exchange. However, keeping crypto on an exchange is not good practice. Now you must consider how to keep your crypto safe and how much responsibility you want.

So, let’s dive into this beginner’s guide to different types of Crypto Wallets to help you work outthe best wallet for you.

Beginners Guide to Crypto Wallets

In this beginner’s guide to crypto wallets, we explain and go through the different types of crypto Wallets Explained, such as hardware, software, online & paper wallets. Picking the right crypto wallet is important, as you need to consider the safety and security of your cryptocurrency assets.

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What is a Cryptocurrency Wallet?

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To use cryptocurrency, you’ll need to use a cryptocurrency wallet. A wallet is a secure digital wallet that stores, sends, and receives digital currency like Bitcoin.  Although I mention “store, ” cryptocurrency is not actually “stored” in a wallet; it is stored on a coin’s blockchain. Your wallet is just the software designed to interact with the blockchain. 

Instead, your wallet stores the address, not the actual crypto tokens. Bitcoin wallets interact with the Bitcoin blockchain, allowing Bitcoins to be moved between addresses by the owners of those addresses. Also, allowing users to see the balances associated with an address.

A blockchain address is similar to an email address and is used to receive and send funds on the blockchain. Similar to how you would use your email address to send and receive messages and represents a destination for a cryptocurrency payment.

Crypto Hot Wallet vs Cold Wallets

Each blockchain address contains a string of numbers and letters but can also be shown as a scannable QR code. These addresses may have specific identifiers depending on the type of cryptocurrency. Different types of cryptocurrency will have different types of addresses and cannot accept other forms of cryptocurrency. This is an important factor to remember. For example, you cannot send Bitcoin to an Ethereum address. If you were to do so, the transaction would be non-returnable, and you would lose your funds.

There are four different types of wallets you could use to manage your assets; Hardware, Online, Software and Paper Wallets.

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What are Private Keys?

what is a crypto wallet private key?

First, let’s talk about your private keys, as this is an important part of the story. A private key is a sophisticated form of cryptography that allows you to access your cryptocurrency. It’s an integral aspect of Bitcoin and Altcoins and helps you to protect yourself from theft and unauthorized access to funds. Essentially, when you have access to the private key, you can access the funds.

Some wallets let you control your private keys. However, some are custodial and don’t. If you are keeping your crypto assets over on an exchange, they are custodial. Therefore you are entrusting a third party with these private keys and mandating them to serve as a safeguard. Owning and having access to your private keys gives you much more power and control. But you’ll also need to take care of their security and ensure that you keep these keys somewhere really safe, offline and away from any potential harm.

What are the 3 Different Types of Crypto Wallets?

Confused about the different types of crypto wallets available? In this guide, we’ll break down the three main types of crypto wallets; software wallets, hardware wallets, and paper wallets, so you can make an informed decision on which one is right for you.

So, let’s dive in and explore the world of crypto wallets!

Crypto Hardware Wallet

What is a Crypto hardware wallet?

Hardware wallets are considered the most secure way to store your crypto. And they are offline storage options for private keys. They are physical, dedicated hardware that is specifically built to hold cryptocurrency and keep it secure. These devices can go online to make transactions and get data and then can be taken offline for transportation and security.

They also store your private keys offline and on your device. Plus, you can also use the device to verify transactions so that funds never leave your wallet without confirmation. With your hardware wallet stored offline, it is kept away from any potential hackers, who would need to hold the device physically (and know the pin) to be able to steal your funds. 

There are a few different hardware wallets available, such as a Ledger, Trezor, and KeepKey. Hardware wallets range in price from $59 to $150+. The two devices I personally use are the Ledger and the Trezor. I don’t have a clear preferred device as they both have their advantages and disadvantages. Please ensure that you always purchase hardware wallets new and sealed. Ensure they haven’t been tampered with and are from reputable sources.

Examples of Hardware Wallets

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