In this crypto wallet beginners guide for 2022, we explain what is a crypto wallet and why it’s important to have access to your wallet’s private keys. Plus the difference between a software wallet, a hardware wallet and paper wallet.
Once you have purchased your first cryptocurrency, it’s important to consider your security and how you’re going to 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 need to think how to keep your crypto safe and how much responsibility you want.
So, lets jump into this and hopefully we can help you find the best crypto wallet for you
So, let’s dive into this beginners guide to crypto wallets, to help you work out the best crypto wallet for you.
What is a Cryptocurrency Wallet?
In order to use cryptocurrency, you’ll need to use a cryptocurrency wallet. A wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin. Although I mention “store” cryptocurrency itself 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 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.
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 4 different types of wallets you could use to manage your assets; Hardware, Online, Software and Paper Wallets.
What are Private Keys?
First up though let’s talk about what your private keys are, 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 have access to 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 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 too so that funds never leave your wallet without your confirmation. With your hardware wallet stored offline, it is kept away from any potential hackers, who would need to physically hold the device (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
Colour Touch Screen
Cheapst Hardware Wallet
Trezor Model T
Ledger Nano X
Ledger Nano S
What is an Crypto Online Wallets?
Online wallets are online services that enable you to access your crypto assets from any browser that’s connected to the internet. With an online wallet you don’t download an app, but rather data is hosted on a real or virtual server.
Some wallets let you control your private keys and some are custodial where you don’t. When you leave your crypto assets on a cryptocurrency exchange platform, you’re actually using the platform’s online wallet. Most exchange wallets are custodial wallets.
Recommended (and non-custodial) Online wallets include the likes of Blockchain.com and MyEtherWallet. Custodial online wallets (where you don’t control your private keys directly) include the likes of the Coinbase or Binance Exchanges. Although keep crypto on these exchanges is not advisable.
The biggest advantage of online wallets is that they are easily accessible from any computer or device with an internet connection. Plus they are most likely free to download. However, this is also their biggest disadvantage as they can become targets for hackers.
What is a Crypto Software Wallets?
Software wallets are applications for managing cryptocurrencies that can be installed on your computer or smartphone. You remain in control of your private keys which are not shared to nor controlled by a third-party.
There are many types of software wallets available, desktop wallets will include the likes of Exodus or Trust Wallet. There are browser extensions such as Metamask and Phantom wallet. Mobile apps might include the likes of Crypto.com or FTX App. Coinbase also has their own mobile wallet app, which is separate from the exchange.
Phones are a great way to access your crypto on the go. As a software wallet is installed on your PC or smartphone, it is still connected to the internet which could potentially expose your private keys to hackers. Also as phones are regularly taken outside the home they could potentially be lost.
Software Wallet Examples
At Every Bit Helps we have covered a number of crypto software wallets and some of our favourites are;
What is a Crypto Paper Wallets?
Next up we have our paper wallets, which is another offline option for storing your crypto assets. As the name suggests the process involves printing the private keys and its corresponding public address onto a piece of sheet and storing
This is a nice and simple way to store your cryptocurrency keys offline. But it will require you to pay a lot of attention and care to this paper. If your paper wallet gets lost or destroyed, you will permanently lose access to your crypto assets. Also, processing a transaction with a paper wallet can be long-winded and possibly unsafe.
In this method, you will need to manually enter your keys in a transaction tool. You typically do this by using your computer’s internet browser which could expose the keys to a cyber attack.
Best Crypto Wallets 2022
In this beginner’s guide to crypto wallets, I explain and go through the different types of crypto wallets available, 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.