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What is a Crypto Wallet?

Austin Diamond
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Co-Founder & CEO

What is a Crypto Wallet?

As crypto becomes more popular, one of the best ways to access funds and NFTs are crypto wallets. We'll quickly distill how to tap into wallets and effectively leverage them, so you can get started trading today!

TL;DR: A crypto wallet stores a private key that gives you access to your crypto on the blockchain and makes it simple to buy, sell, receive, and trade crypto assets.

Let's dive into the deep end

Your crypto wallet is your password to accessing your funds. It stores your private keys, which unlock your funds to be moved away from the wallet, and ensure you are the only one granted access. Crypto wallets come in many formats:

  • Hardware wallets (like Ledger and Trezor)
  • Online wallets (like Metamask)
  • Paper wallets (storing the password on a piece of paper)

How do they work?

Your crypto wallet is your digital bank account on the blockchain. The main difference between this one and your bank’s, is that this one cannot be accessed by a third party: you are your own bank. Regardless of the format they come in (hardware, online, or on a piece of paper), wallets all perform the same functionality. The password they contain (private key) manages the control to your funds by being proof that you are the rightful owner (through a digital signature). If you lose your private keys, you lose access to the funds in the wallet.

An important thing to note about your crypto wallet is that it doesn't store your crypto, your crypto assets live on the blockchain and your crypto wallet holds the private key that lets only you access those assets as the private key proves that you own those assets. If you lose your private key, you lose your assets which is why it's very important to keep it as secure as you can.

What’s the difference between the types of wallets?

  1. Hardware wallets: They resemble USB drives, and store your keys in a physical format that needs to be stored in a safe place. Hardware wallets still have an extra layer of protection with an additional password you set when first using them. These make accessing your funds harder, both for you and bad actors.
  2. Online wallets: The keys are stored in the software. These make using your funds easier as they typically integrate with exchanges and apps across the ecosystem. 
  3. Paper wallets: Keys are directly written on a physical piece of paper and stored in a safe place. This makes moving your funds the hardest, but also impossible to recover if you lose the paper.

What about when people send me funds? 

Each crypto wallet comes with two keys: 

  1. A private key: the password that is only revealed to you.
  2. A public key / address: this address can be freely given to others when receiving funds, such as with a QR code. Anyone with the address can see the funds stored on the wallet, but cannot access them. It is safe to share your public key. 

How do I backup my crypto wallet?

Wallets come with a seed phrase that allows them to be recovered in case they are lost. Seed phrases are strings of randomized words (i.e. world shape apple mug…) that when combined unlock access to the wallet. The seed phrase should be stored in a safe place, and preferably not digitally (as this can be susceptible to hacks). 

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