The Beginner’s Guide to Crypto Wallets

In recent years, online cryptocurrency exchanges have become increasingly popular as more internet users fashion themselves as traders or investors in cryptocurrency. For beginners in the crypto game, the terms and procedures associated with managing cryptocurrency must be learned and understood. 

Crypto wallets are a very important part of trading and managing cryptocurrency, as one could not do either of these things without them. This article will introduce crypto wallets, outlining what they are used for and how they work.

What is a Crypto Wallet? 

A crypto wallet is central to how those who own, trade, and manage cryptocurrencies are enabled to do any of these things. As the name suggests, a crypto wallet is a place where you can store, view, and manage the crypto that you own. Some prefer to think of it as a bank account, although there are some key differences. 

In simple terms, a crypto wallet is a software that permits you to store, access, and interact with your crypto. While a bank account makes your account number public to be linked to your identity, a crypto wallet cannot be linked back to you through the account number/key. Furthermore, unlike a fiat currency bank account, where your transactional history remains private, a crypto wallet makes your transactions public, and for a good reason too. 

Two key elements make up a specific crypto wallet address or number. These are known as public keys and private keys, and each one has a specific function. 

Public Keys 

The generally accepted term for a crypto wallet’s account number is ‘public key’ in the crypto world. This key also serves as your wallet’s unique address and consists of a string of letters (upper and lower case) and numbers. This string of numbers is automatically generated by your crypto wallet provider and can be used by other crypto traders to send your cryptocurrency directly to your wallet.

Private Keys

Alongside the public key that serves as the wallet’s unique address, every crypto wallet also has a private key. This is a string of letters and numbers that is not public, and only the owner of the crypto wallet should know. The private key is the unique address that allows you to access your wallet and interact with your cryptocurrency as the owner of your crypto wallet. 

As the name suggests, your crypto wallet’s private key should not be shared by anyone and should be noted down by the owner in a safe and secure place. If you share your private key with anyone, they could have complete access to your cryptocurrency. 

HD Wallets 

Although crypto traders have used public and private keys for many years, you won’t find many traders using these terms today. This is because these crypto wallets have been overtaken by a much more secure crypto wallet technology known as HD wallets. 

HD stands for hierarchical deterministic, and rather than making use of a string of random letters and numbers, which prove very hard to remember, an HD wallet generates what is known as a mnemonic seed. This comprises a string of common everyday English words which are much easier to remember. 

Mnemonic seeds have proven themselves to be much more secure than public and private keys, which is why most crypto traders now use this kind of crypto wallet. What’s more, multiple addresses can be created using a single mnemonic seed, and not a single one of them can be traced back to the user. 

Conclusion

Crypto wallets are a vital part of buying, trading, and selling cryptocurrency on a crypto exchange. They permit the owner of cryptocurrencies to receive crypto directly and access and interact with their crypto. 

You can use any number of available online crypto wallet providers to set up a crypto wallet in no time. Conversely, if you already have a crypto wallet, you can put it to good use on this site

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