Want to start buying and trading in cryptocurrency? You’re going to need a wallet first. In this guide you’ll learn about what a wallet is, the different types, and how they might be used in future.
What is a wallet?
A cryptocurrency wallet is a piece of software that stores your public and private keys. More on keys below.
It also allows you to send and receive digital currencies and monitor your balance. It’s like a mini bank, just for you. What’s more, you can have as many as you like, and move currencies between them.
What are keys?
When it comes to sending and receiving cryptocurrencies, you need a set of keys: one public, one private. These are typically 64-digit numbers. They are tied to each other – and you need both in order to send and receive currency on the network.
Did you know?
Fun fact: the network can tell your public and private keys are connected without having to know what your private key is. Clever, huh?
Your Public Key is what you share with your sender/recipient. You can share this key with as many people as you like.
Your Private Key is the key you keep to yourself. This is connected to your public key using cryptography and acts as a digital signature for the transaction.
In order for you to access the information sent to you, you need both keys.
Now we can talk about the different types of wallet.
These run on your computer, and can only be accessed on the computer you downloaded it on. If the computer is connected to the internet, these are referred to as hot wallets. This means they could be at risk if your computer gets hacked.
These are smaller, ‘lighter’ versions of their desktop cousins. Some mobile wallets only cater for certain currencies, but there are lots more currencies being added. You can download these from app stores.
Hardware wallets are physical wallets that you store somewhere safe. Many look like USB sticks and allow you to detach your private keys from the internet and keep them somewhere safe.
Going old school! You take your private key and physically write or print it out on a piece of paper and store it someplace safe, like a safe!
The technology wallets and digital keys are built on has the potential to be used for all kinds of things. It could be used to prove your identity, store digital goods, or even run an entire state!