Things to Know First to Invest in Cryptocurrency
Crypto wallets are not strange words to everyone in the world of cryptocurrency. Most appear on traditional media and social media daily. Hence, they seem familiar to everyone from every walk of life. Understanding cryptocurrency is not only a piece of knowledge in your life but also a play-to-earn device besides your daily job. It helps you get some profits through digital money investment or digital token trading. However, to develop a digital token portfolio, you must discover them to know them well before starting a journey into the world of digital assets. Since the introduction of crypto wallets in the digital token market, cryptocurrency has experienced an up and down price. This practice leads to a win or loss for crypto fans. Thus, learning about cryptocurrencies gives you the experience and knowledge to start this type of trading.
Additionally, most employ celebrities in various fields to promote them in fancy ads. Others use cryptocurrency influencers to promote digital tokens on social media to impact the user. Thus, deciding on the best crypto wallet with much extravagant hype and fancy marketing is strenuous. Nonetheless, it’s overwhelming for you to find the best crypto wallets in a sea of 20,000+ cryptocurrencies. Hence, the writing provides you with essential information about digital money. It goes from the definition of cryptocurrency wallets and the reason for use to the types of wallets. Also, it would be best if you didn’t miss the factors that define the best crypto wallets. After getting basic information about cryptocurrency, the next step is how to get started with an e-wallet by opening a digital account to start a business with electronic tokens.
Now, it’s time for you to begin a path in the digital money portfolio.
What Is a Crypto Wallet?
To put it simply, it’s a type of wallet. Instead of putting in fiat money, you safely store a private key and digital tokens. A private key may be the password that allows you to access your digital assets safely. And it permits you to receive or send your digital money like Bitcoins or Etherium. In digital token wallets, you have two kinds: a software wallet and a hardware wallet. What is the difference between them? The software wallet gives you a solution to interact with the blockchain system. It is a digital wallet you store on your computer or local drive. It is a software program you can download to keep your keys. In some cases, it’s free. Consequently, they are susceptible to online hackers; these wallets are easy to be connected remotely.
While the other is a physical wallet, it stores a private key. The private key or the investor’s password includes a string of numbers and letters you can keep in a file. Thus, it’s safer than the software wallet because you can control them on a physical device; online hackers can’t connect them online. To access your digital assets, you need the support of the wallet. First of all, you discern the ownership of cryptocurrency is different from that of traditional money. The digital cash includes a set of blockchain codes and concrete addresses. Next, sending cryptocurrency to someone doesn’t mean sending it from your mobile to another. You send a private key as a sign for the token transaction and inform the blockchain system. The system performs your transaction by updating your and the recipient’s balance.
Public Key and Private Key
Two keys ensure the security and safety of digital transactions. When you do a digital money transaction, you get a pair of keys: a public key and a private key. The public key goes along with a unique private key that looks like a front door to the business. The public key is like a business address on the website; everybody can look it up and share it widely. For instance, a sender picks your public key on the website and uses this public key to encrypt their messages. For your part, you use the private key to decrypt the message. The picture below illustrates the process of using public and private keys.
Custodial and Non-Custodial Wallets
A crypto wallet includes a custodial wallet and a non-custodial wallet. As the name suggests, the custodial wallet is a wallet that is under custody. It means that you don’t have control of your wallet. Instead, the third party has the responsibility of yours; they manage your assets and hold your private key. In other words, the custodial wallet doesn’t give you access to the private key; you entrust the investment to the third party. However, it is not a bad thing. If your private key gets lost, you can get access to your funds with the support of third-party customer service.
Meanwhile, the non-custodial wallet is the one that gives you direct access to the private key. You are the only person who takes care of your funds and directly sends your token to another crypto wallet. It’s an ideal option for those with a lot of cryptocurrency experience.
Why Do You Need a Crypto Wallet?
Unlike a physical wallet that keeps your actual money, the crypto wallet doesn’t hold your cryptocurrencies technically. Your funds stay on the blockchain; you can access your holdings via a private key. It proves your ownership of cryptocurrencies and authorises you to realise any crypto transaction. To find the best crypto wallet, you should focus on three crucial factors: storage and the ability to send and receive digital tokens. For example, when you get a bitcoin purchase on an online exchange, you can receive these tokens on your web wallet as soon as the transition is complete. In turn, you have two options: the first is to leave your tokens at the online exchange, and the second is to send them to the wallet you are controlling. The latter requires your private key to receive your cryptocurrency.
In this process, you see the crypto wallet works very much like a banking checking account. For instance, you need to open a banking account at a financial institution to get money transactions. After receiving your money, you can leave it in a checking account as long as you wish safely. In contrast, if you want to send US dollars to another person, they must open a banking account to receive it. In a word, a crypto wallet is much the same as a banking account. The only difference is that the funds you keep in a checking account are fiat money and cryptocurrency in a wallet. And sending and receiving funds is a wallet instead of a checking account.
How Do Crypto Wallets Work?
In the section above, you walk through the essential factors of how a crypto wallet works. Then, you go deep into further information on how a wallet stores digital tokens before you start. You indeed meet two terms; hot storage and cold storage. Hot storage refers to a hot wallet. When you purchase an amount of cryptocurrency to store in a hot wallet, it connects to the internet. It includes web-based wallets, mobile wallets, and desktop wallets. Hence, it is always online; you don’t need to switch between online and offline to do transactions. It’s straightforward to use. It’s vulnerable to the attack of online hackers by remotely accessing. In contrast, cold storage or a cold wallet is safer but less convenient.
A cold wallet is safe because access to it requires physical possession of a cold wallet. Or you must have a PIN or password to access your funds. Remember that most hardware wallets are cold storage that lives on devices such as small to medium-size USB sticks. Paper wallets, physical bitcoins, and offline computers are types of cold storage. Hardware wallets are immune to hacking; it’s an advantage. However, it is less convenient compared to hot storage. First, you have to pay for the use of cold storage. Next, you have control of PINs or passwords. Thus, you have a problem when losing your private key.
Now, we are looking at the security of a wallet. In the previous part, we discussed the similarity between a current account and a crypto wallet. It is the same with security. For instance, if you want to access your banking account, you must enter a password. In the case of a wallet, you must enter a PIN in a wallet to access your funds. For a banking account, if you lose your password, a good way is to contact a financial institution for help. While in the case of a wallet, you don’t have someone to ask for help. Thus, to solve this problem, you keep a backup passphrase for any emergence. It includes 64 characters in the form of upper case and lower case, along with numbers.
Most wallet providers change your private keys into backup passphrases with 12 random words. If someone finds your backup passphrase, they can access your wallet. So, it is you who has the responsibility for these backup passphrases. You should write them down on paper and keep them in a super-safe place.
Crypto Wallet Address
We discussed the ins and outs of a backup passphrase. Now we are moving into another factor: a wallet address. In a nutshell, it allows you to receive your digital money. As a comparison, for a current account, you give your sender your unique banking account number. Below is a wallet address for your reference.
Looking at the bitcoin address, you may be confused about its complexity. However, it is good news for bitcoin fans; the best bitcoin providers give QR code features. So, you only send your sender your unique bar code corresponding to the bitcoin address. The thing your sender does is scan it. You have to pay a fee when sending your funds to another person. A price is a reward for the miner who uses sophisticated software to solve computational math. And the first miner who finds a solution to the problem will win the next block of cryptocurrency. So, you must pay miners for their time and effort contributing to your bitcoin transaction. However, the fee varies depending on the types of crypto sent and how busy the system is.
How to Choose the Best Cryptocurrency Wallet
Now you have enough information to know how a crypto wallet works. With this understanding, you can start researching which of the best bitcoin providers is suitable or proper for you. That depends on your goal, plan, and experience. Also, it is time to check off every factor below before deciding what you want from a wallet.
This is the first thing on your check-off list related to your funds. These characteristics depend on the wallet you prefer.
- For example, if you choose a hardware wallet, you feel safe because this option gives the overall best security on the asset.
- However, if you prefer a web-based wallet, you should do some research.
- If it is an eToro wallet, you don’t need digging as it is under the management of SEC, ASIC, FCA, and CySEC.
- With BTC wallets such as Kucoin, you don’t have regulatory protection.
If you select the BTC wallet app, you ensure the provider offers a PIN or biometric login as a form of security. Also, another option for protection is two-factor authentication. That means you enter the code you get on your mobile or your registered email.
According to the part above, some providers provide you with custodianship. That means they safeguard your private key. However, contact them to regain access to your assets if you lose your login credentials. Thus, you have to find a trustworthy platform because they can access your digital funds. But, if you have a non-custodian service, you are responsible for your private key and backup passphrase. Nobody can access your assets, but if you lose them. You have nobody to ask for help.
First, you define the goal of the need for a crypto wallet and your experience level. A mobile app is a solution if you are concerned about convenience and security, because you send and receive digital tokens regularly. But, a hardware wallet is better if you are a newbie or prioritise safety.
Trading and Swaps
The best crypto wallet is a wallet that provides safe storage of your virtual assets and sends/ receives tokens. Additionally, it offers good transactions in the crypto market. For instance, eToro is a go-to digital wallet as it serves you in a transaction without leaving the platform.
If you are pretty new to blockchain technology, it goes without saying that you should choose a provider with user experience. eToro and Coinbase are the go-to providers that support you in this regard.
How to Get a Bitcoin Wallet
Reading to this point, you gain a full understanding of all elements around a bitcoin wallet. We walk from security, convenience, function, and user experience to regulation. Now, it’s time to create an account as follows:
- Step 1: Open an account
If you select eToro Money, go to eToro.com to register an account.
- Step 2:
Once you verify your account, download the eToro Money Crypto Wallet App. You will find this app free and available on Google Play or App Store.
- Step 3:
When you have a crypto wallet app, add your digital funds to the account to start a business on digital cryptocurrencies.