The resurgence of Bitcoin in the past few years has seen an increasing number of investors entering the Wealth Matrix arena. On the flip side, the number of incidents of hacking and cyber thefts, too, has been rising alarmingly. So, if you decide to invest your hard-earned money in the crypto market, one of the most important aspects that you must give your attention to is the security of your funds. To ensure the safety of your digital asset, you must know about crypto wallets.
What is a crypto wallet?
A crypto wallet is a software application or a physical device that stores the keys through which you can access your digital coins on the blockchain. Like a physical wallet, which contains your cash and cards, digital wallet stores your cryptocurrency. Since Bitcoin and other cryptocurrencies have no physical presence, they cannot be directly kept in the wallet. They are present as bits of data on the blockchain and the only way you can access them is through the keys present in the wallet. Wallets, thus, not only store your digital assets but also enable you to send and receive coins. This makes it evident that the significance of the wallets among crypto traders and investors is pretty high.
How does a crypto wallet function?
A crypto wallet consists of two pairs of keys:
- Public key
Public keys are like addresses at which you receive your coins. A wallet may have several public keys. They are used to encrypt messages and also check the validity of a digital signature. Each public key has its private key. So, you can share your public key with the person you are doing your transaction with, but definitely not the private key.
- Private key
Once you receive the coins at your public key, your assets need to be secured and that is done by your private keys. They are similar to passwords and only you have them. You must not share your private key details with anyone to ensure the safety of your coins. Also, if you happen to misplace the key, it is almost impossible to get back your assets.
The public keys are designed in such a transparent way that it allows you to check the number of cryptocurrencies available in your blockchain node. Its transparency also allows other users who have access to the public keys to see the numbers. However, it is all based on a number of sequences which does not harm your anonymity in any ways.
How to receive coins into your wallet?
To receive coins from a sender, you must send him his address. For that, you must click on the “Generate address” option in your wallet. You will receive a QR code or an alphanumeric sequence which is the address or your public key to the wallet.
How to send coins from your wallet?
You need to opt for the “send” option in your wallet, select the amount, sign it with the help of your private key, and then send the coins to the address of the recipient. You will be charged a fee as the money is used to pay the Bitcoin miners who verify the transactions.
Types of crypto wallets
There are 2 main types of wallets:
- Hot wallet
Online wallets are called hot wallets. The private keys in this type of wallet are stored in the cloud. As they are online, they are vulnerable to incidents of cyber thefts. You must store a limited amount of your assets here, only that much that is needed for trading purposes.
- Cold wallets
In a cold wallet, the keys are stored offline. This is a safer type of wallet as getting access to it is only possible for its owner. Typically, crypto owners store the majority of their coins in this wallet. These wallets are mostly a USB, CD, hard drive, an offline computer, or a piece of paper. Digital signing is done in offline mode. This makes the wallet a highly secure form of storage.
All major crypto exchanges and trading apps offer secure wallets for the storage of your assets. Crypto trader is an automatic trading app that is widely used by traders for its accessibility and user-friendly features.
The task of keeping your digital assets safe is your responsibility. Wallets are the most efficient and effective storage devices for your cryptocurrencies. You must choose the right wallet based on your requirements to ensure that your assets are safe and secure.