What is a Cryptocurrency Wallet?
Understanding How a Cryptocurrency Wallet Works
A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currencies like Bitcoin.
In order to use cryptocurrency, you’ll need to use a cryptocurrency wallet.
Some wallets are built for a single cryptocurrency, some can be used for more than one coin, some wallets you’ll manage yourself, and some (like those found on exchanges) will be custodial.
Suffice to say, there is a range of wallet types to choose from.
Below we discuss how digital wallets work, talk about the different types of wallets, and give some advice on which wallets to use in which situations.
Which Wallet Should I Use? Most coins have an official wallet, but often a multi-coin wallet like Ledger, Binance, or Coinbase is the most practical solution. If you are looking for a web3 wallet for DeFi, try MetaMask or TrustWallet. If you want a simple wallet-exchange solution (so you can jump right into trading cryptocurrency), see our page on “How to Trade Cryptocurrency – For Beginners” where we walk you through using Coinbase.
How Does a Cryptocurrency Wallet Work?
Wallets are software that can be used to view cryptocurrency balances and make transactions.
Each wallet type is a little bit different, but in general, any given wallet will work with one or more cryptocurrencies and will be able to store one or more cryptocurrency-specific “public addresses.”
Public addresses are like cryptocurrency-specific account numbers, they can be used to receive a specific type of cryptocurrency (for example, to receive Bitcoin, you need a Bitcoin address) and can be shared publicly.
Each address relates back to all transactions associated with that address on a coin’s blockchain.
A wallet lets you view balances associated with an address and lets you move funds around on the blockchain as long as you are the owner of the address.
Proving you own the address is done with a private key (a secret code associated with a public address) in non-custodial wallets. In custodial wallets, the custodian (a third party like an exchange, broker, etc) holds the key for you, and it is just a matter of inputting your password into their wallet app.
Essentially a wallet is like your online bank account platform, your address is like your account number, the blockchain is like the bank’s ledger, and with custodial wallets, the custodian is a bit like your banker.
For the details see “the technical stuff below.”
Cryptocurrency Wallets Explained | What are Crypto Wallets?. A video on cryptocurrency wallets.
Don’t share your private keys: As the name implies, you can share your public address publicly… however, you should never share your private keys and passwords with anyone. Make sure to check out the additional security suggestions below!
Crypto is a Tally on the Blockchain, it isn’t Stored in Your Wallet: Cryptocurrency itself is not actually “stored” in a wallet, it is stored on a coin’s blockchain. Your wallet is simply software designed to interact with the blockchain. Your wallet stores addresses, not crypto tokens (aka coins). For example, a Bitcoin wallet interacts with the Bitcoin blockchain, allowing Bitcoins to be moved between addresses by the owners of those addresses, and allowing users to see the balances associated with an address.
Technical stuff: Many wallets are custodial wallets. With custodial wallets, all you have to worry about is the balances displayed and your public address. However, full wallets, like the official wallet of each coin are a little more complicated. Behind every address is a private key (a secure digital code known only to you and your wallet). A private key shows ownership of a public key (a public digital code connected to a certain amount of currency). Then finally, each set of private and public keys is connected to a public address (an encrypted version of the public key). So your wallet is software that stores your private keys, public keys, and public addresses, lets you send and receive coins, and also acts as a personal ledger of balances and transactions.
The Types of Wallets
There are several types of wallets you can use including online, offline, mobile, hardware, desktop, and paper.
Each “type” refers to what type of medium the wallet is stored on, who is in control of the wallet, and whether or not the data is stored online.
Some wallets offer more than one method of accessing the wallet – for instance; Bitcoin.com’s wallet is both a desktop application and a mobile app.
Also, most wallets fit more than one category below. For example, Bitcoin Core is a full node coin-specific desktop wallet.
Here is a quick breakdown of the different types of cryptocurrency wallets:
Full Node Wallet: A wallet where you control your private keys and host a full copy of the blockchain. Essentially every coin has an official wallet of this type and that can be found on the official GitHub of the site (there is often a link on the official website). NOTE: “Official” in this sense means “put out by or endorsed by the developers who created the coin.” Many cryptos are decentralized, so there is no real official anything.
Custodial Wallet: Some wallets let you control your private keys, some are custodial (you don’t control your keys directly). Most exchange wallets are custodial wallets.
Desktop Wallet: The most common type of wallet. Typically an app that connects directly to a coin’s client.
Mobile Wallet: A wallet that is run from a smartphone app.
Online Wallet: An online wallet is a web-based wallet. You don’t download an app, but rather data is hosted on a real or virtual server. Some online wallets are hybrid wallets allowing encryption of private data before being sent to the online server.
Software Wallet: Any wallet that is software-based is a software wallet.
Hardware Wallet: Dedicated hardware that is specifically built to hold cryptocurrency and keep it secure. This includes USB devices. These devices can go online to make transactions and get data and then can be taken offline for transportation and security.
Paper Wallet: You can print out a QR code for both a public and private key. This allows you to both send and receive digital currency using a paper wallet. With this option, you can completely avoid storing digital data about your currency by using a paper wallet.
Coin-specific: A wallet that only works with a specific coin.
Network-specific: A wallet that can hold multiple tokens on a single network.
Universal / multi-asset / multi-coin: A wallet that can hold addresses from multiple coins. Please note that just because a wallet is “universal” doesn’t mean it literally holds every crypto asset. From exchanges to the best multi-asset wallet out there, I don’t know of any product that holds literally every crypto.
Web3 Wallet: A Web3 wallet lets you access a given cryptocurrency’s network. For example, you can use MetaMask to access the Ethereum, Binance Smart Chain, and Pologyon networks.
What Crypto Wallet Should I Use?
Putting together everything above, here are some ideas on what wallet to use.
We typically suggest using an official (or officially endorsed) wallet for any given coin. So, for Bitcoin we would suggest using the Bitcoin Core Wallet, for Litecoin we would suggest Litecoin Core, and for Ethereum we would suggest either Ethereum Wallet or MetaMask.
TIP: Check the official website of a coin for official recommendations. Please note, the full wallet of a given coin will likely require a lot of hard drive space, to avoid having to deal with this, see the other options below.
Since the full official wallets of coins can require users to download very large files, and since some people tend to own a lot of coins, it is good to look at alternatives.
For those who want to use or invest in many coins, universal wallets / multi-asset wallets / multi-coin wallets are a good choice. There are software wallets that are universal like Coinomi, Exodus, Atomic Wallet, and Ethos that typically have desktop and phone app versions and hardware wallets that are universal like TREZOR and the Ledger Nano S (hardware wallets are generally good choices for long-term storage).
In choosing a wallet you’ll also need to decide between a custodial and non-custodial wallet. That is, non-custodial wallets like Blockchain Wallet and MyEtherWallet where you control your private keys directly but use the wallet as an interface, and custodial wallets where you don’t control your private keys directly like Coinbase (although people are advised against keeping all their funds on an exchange, exchanges like Binance generally double as custodial wallets as well).
Lastly, you should also be aware there are wallets designed for specific networks and their functionalities. For example, other features aside, Coinbase Wallet (a Coinbase product), MetaMask, and TrustWallet double as Ethereum-based wallets that let you store a range of Ethereum-based tokens and also act as web browsers for the decentralized web (they allow you to interface with DApps).
In simple terms, which wallet you choose depends on your needs. Generally speaking non-custodial offline wallets like TREZOR are great for long-term storage, custodial wallets like Binance are essentially mandatory for trading, and a software wallet that you can use as an app like Coinbase, Blockchain Wallet, and Trust are solid choices for everyday use. If you stick to the big names and use best practices, it is hard to go wrong and a lot boils down to choice.
NOTE: There is overlap between the above wallet types, for example, Coinbase Wallet is a semi-custodial multi-asset software wallet with an Ethereum web browser.
TIP: Multi-asset wallets are also called multi-coin wallets. The reason asset is used instead of coin above is because not all crypto tokens that can be stored in wallets are meant to be used as currencies.
If You Are New to CryptoCurrency
With the above in mind, if you are new to cryptocurrency, we suggest doing one or more of the following:
- Download the official (or officially endorsed) wallet from the official website.
- Sign up for a custodial wallet service like Coinbase or non-custodial wallet service like Blockchain Wallet (which handles a wallet and exchange with one account).
- Purchase a hardware wallet like TREZOR for long-term storage.
- And/or, use a universal software wallet or another wallet that suits your needs like the ones noted above (for example, TrustWallet for exploring the Ethereum ecosystem or Atomic Wallet for holding a swapping a range of coins).
Of the above Coinbase and TREZOR are good choices, since they don’t require a lot of technical know-how, have guides, can be kept safe with best practices, and don’t require you to download the full blockchain of a coin.
If you know what you are doing, there are a wide range of different wallets to choose from which offer different pros and cons.
Tips on Wallets
Below is some more helpful advice on wallets.
TIP: There is no one single wallet that stores every coin. So you’ll need to figure out which wallets you need based on which coins you want to invest in or use (or vice versa).
TIP: You can store all ERC-20 tokens (tokens created on the Ethereum platform AKA Ethereum-based tokens) in an ERC-20 friendly wallet like MyEtherWallet, Trust, or Coinbase Wallet. Many Ethereum-based tokens also have their own wallets as well (check the coin’s official Github or website for official wallets). If you are investing an an ICO, you’ll likely need an ERC-20 friendly wallet to store/send tokens.
What Is A Bitcoin Wallet? The basics of cryptocurrency wallets using a Bitcoin wallet as an example.
TIP: A full node wallet that downloads the full blockchain of a coin is called a “full node.” These wallets can take up a lot of space and use a good bit of energy since they need to download the entire blockchain and keep it updated. Bitcoin Core, Litecoin Core, and Ethereum Wallet are examples of full node wallets. If you don’t have a lot of disk space free to commit to running a node, consider one of the other wallet options instead.
TIP: Watch out for browser extension malware if you are using online wallets, you may want to use a different browser for your online wallet than you do for your day-to-day internet browsing.
TIP: The term “hot wallet” describes a wallet connected to the internet. The term “cold wallet” describes a wallet not connected to the internet (for example a hardware wallet unplugged and in a safe.) When cryptocurrency is in “cold storage” that means it is being held offline in a “cold wallet.” Funds you want to use like cash should be in hot wallets, funds you want to store long-term are best held in “cold storage” in an offline wallet. Hot wallets are considered “hot targets” (i.e., they are targets for hackers). Thus, if you have a “hot wallet,” make sure you have as many layers of protection on it as you can (two-factor, strong password, all security settings on, etc).
Are Cryptocurrency Wallets Secure?
Cryptocurrency wallets are all built to be secure, but the exact security differs from wallet to wallet. Generally, like your usernames and passwords, the security of your wallet comes from you using best practices. We suggest not keeping more currency than you need at one time in a single wallet that you use frequently, using google authenticator for extra layers of protection, encrypting your wallet, and using an official (or officially endorsed wallet). You can also use multi-signature transactions.
It’s smart to backup your wallet and private keys and to encrypt them. At least one backup should be on a CD or thumb drive to ensure that you have a “hard copy” laying around. If you lose your wallet or your keys, then you lose the currency connected to it!
Below are some additional tips for keeping your coins safe and your wallet secure.
- Some software offered as a wallet is malware trying to take advantage of those willing to download and install unofficial software off the internet. Never trust mining or wallet software that comes from a source that you don’t know and trust. Start with well-worn solutions like the ones explained above, then move onto other wallets after you know what you are doing.
- Always use a strong password and all available security measures. For example, if you can use two-factor, then use two-factor (for example Google Authenticator)!
- Never share your wallet password, seed, PIN, or private key, and make sure to store them somewhere safe (and ideally offline). To send coins and receive coins you only need to share your public wallet address (your “public key”).
- Always access your wallet offline when you can. And never enter your password, seed, or private key anywhere other than your wallet or the secure place you are storing your password.
TIP: As a rule of thumb don’t keep more currency in your digital wallet than you would in your real one! You can learn more about securing digital wallets from bitcoin.org.
TIP: If you use Coinbase, consider using their vault service to add an extra layer of protection to coins you aren’t actively trading or using.
Are Crypto Wallets Anonymous?
The answer is about the same as the answer to whether cryptocurrency is anonymous or not. The answer is that cryptocurrency is “pseudonymous.” Due to the open-source and public nature of transaction blockchain ledgers, there are little bits of public data that can be used to backward engineer someone’s identity (in theory). For most of us, the answer then would be, “it’s pretty darn close to anonymous.”
I have not bought any crypto cuurency as of this date and have been searching on line for basic information. Your information is the best that I have located online. The one fact I can’t find is if I buy any currency do I need to obtain a wallet to keep it in
In general, you need some sort of cryptocurrency wallet to store cryptocurrency in.
A simple solution for a new user is Coinbase. Coinbase is a wallet/broker hybrid (where you can store and buy crypto). From there it is easy to move your coins into official wallets and top wallets like Bitcoin Core wallet, MyEtherWallet, or TREZOR (or to simply keep your coins on coinbase). Although, with that said, you can simply start with a wallet and obtain your cryptocurrency by other means as well (on an exchange, from a peer-to-peer transaction, etc).
Each wallet type has pros and cons, but the top wallets and Coinbase are all sensible choices.
See: https://cryptocurrencyfacts.com/how-to-send-and-receive-cryptocurrency/ (that explains how to get coins in and out of wallets).
Great explanation. Thanks!
I like decentralise currency.
Someone told me you need a blockchain wallet , but aren’t they all blockchain wallets ?? What did they mean by this??
Essentially all cryptocurrency wallets are “blockchain wallets.” Blockchain is a technology that that creates a digital ledger of transactions encrypted by cryptogorahy.
It is the core mechanic behind Bitcoin for example (read more here: https://cryptocurrencyfacts.com/what-is-a-blockchain/ ).
What you need for a given cryptocurrency is a wallet that can handle the specific kind of coin.
For most ICO tokens (token being a name for a cryptocurrency essentially) you need an ERC-20 friendly wallet like MyEtherWallet. For other coins you need the specific wallet for that coin or a third party wallet set up to hold that coin.
ERC-20 friendly tokens aside (for those, again, use a wallet like MyEtherWallet), always download the official wallet of a coin when you can, and always do your research before downloading. There is a lot of room to go wrong here if you don’t know what you are doing 😉
IMPORTANT: There are fake wallets out there and putting your coins in them will result in you losing your coins. This is super lame, and we want to avoid this. Thus, don’t go following random online instructions without triple checking what you are doing. When in doubt look to entities like Coinbase, official wallets like Bitcoin Core’s wallet, trusted third party wallets like MyEtherWallet, trusted hardware wallets like Trezor, etc. Those are hardly the only choices, they are just examples of upstanding wallets.
How are wallet/broker services, particularly Coinbase, fundamentally different from MtGox? Are there security issues, and how are these addressed?
So, I don’t want to act like I have done a deep study of this, but in general, Coinbase is a way more professional entity. They are licensed to operate in the U.S., insured, and keep a really tight ship from what I understand.
The business was built from the ground up to be a trusted wallet-broker-exchange for U.S.-based users.
MtGox was a Magic the Gathering exchange built and then sold to a guy who seemed at best half interested in running a tight ship (it was in his hands that the events occurred; let’s not try to pass judgement on those events here).
No exchange is 100% safe, and we still see exchanges go down these days (and with that we see funds disappear, or oddly low limit buys fill, etc). However, the major exchanges have thus far mostly avoided MtGox’s fate (GDAX, Bittrex, Binanace all have a good track record for example). Meanwhile Coinbase one-ups”sites that are exchanges only by also providing a wallet service (Coinbase is a little different than GDAX, the exchange; MtGox was an exchange).
Coinbase also offers an extra layer of security with their “vault” product.
So it is different in not just being some exchange run by a half interested guy on the internet, in having a more secure-on-paper wallet element, and in being a more established and better maintained business.
For extra security, use the vault and/or look into a long term storage option for the Bitcoin you are going long with (like TREZOR or a paper wallet, etc).
I personally wouldn’t consider Coinbase/GDAX on the same level as the exchanges from back in the day, but they are hardly fundamentally different in every respect (especially when comparing GDAX to another exchange).
All that said, my answer is I’m sure lackluster compared to an answer someone from Coinbase could give 🙂
Awesome presentation, still consider myself a beginner, although I spent probably 4 to 5 hours reading about different cryptocurrencies, wallets, and exchange services. BTW I purchased Litecoin two months ago.
Congratulations! I think Litecoin is a solid long term investment. It hasn’t preformed like BTC has in the past few months (since the first of the year, that is another story). However, at the end of the day it has faster and cheaper transactions than other top coins AND it has longevity. I think holders will be nicely rewarded at some point.
Anyway, that is my two bits on litecoin. Thanks for the kind words! Keep learning about crypto and enjoying it!
I have LITE COIN classic, ( lcc Coin )
We hold the Coin in NOVA EXANCHANGE, now it’s move to close, unfortunately lcc Coin don’t have wallet, so we want to safe our Coin in wallet, so pls give any valubale advice to save our Coin.
A. Ananda kumar
I believe Litecoin Classic is an ethereum-based token that is not directly related to litecoin. That means you would use a ERC-20 friendly wallet like MyEther wallet and then set it up for the Litecoin Classic token. Here is an example of how this is done (you need the specific contract address, symbol, and decimal for that wallet): https://cryptocurrencyfacts.com/how-to-create-a-custom-token-in-myetherwallet-how-to-add-a-token/
I would use another source to confirm this. Assuming I am correct, start by sending a small amount and verify that it works. You wouldn’t want to test out a wallet address with a large amount of coins.
For the future, although everyone has to make their own choices, it is often wise to focus on coins that are traded on popular exchanges and have their own official wallets. Anything in the top 50 or so coins by market cap is generally a safe bet. It avoids some of the problems one can have with less traded coins such as finding buyers, finding wallets, and finding exchanges to trade them on.
I have a question:
I purchased a certain company’s cryptocurrency using the Changelly exchange. The transaction went through but it didn’t show up in my wallet. I have a wallet on an exchange’s web site. I don’t remember if my personal wallet was active at the time or not. Anyway, the message they sent me was to do this:
“Your transaction was completed successfully on our end. If you still haven’t received your money, you can sync your wallet with the blockchain, update it or contact the support team of your wallet. That should work.” The support team has been useless. How do you sync a wallet to a blockchain? Thanks in advance for your help.
So, first off, the transaction process is a multi-part thing when sending from a third party like an exchange to another one. In overly simple terms: Part 1 is the first entity completing their end, part 2 is waiting for the transaction to process, part 3 is waiting for the entity to credit the account.
If you had to change Bitcoin into Ethereum, for example, it could take hours. So that is one thing to note.
On an exchange you wouldn’t have to sync your wallet. Syncing a wallet is more something you would do if you had a wallet where you were in control of your private keys, or had a hardware wallet that was offline.
You almost certainly “just have to wait” in your case. I end up waiting all the time when sending between exchanges personally, sometimes for uncomfortably long periods of time. It is just part of the deal with some of the coins with slower speeds.
You can also check the public ledger to see if your transaction has been added, often you’ll have a transaction number. For example, you can check ether transactions here: https://etherscan.io/
Further, if you check your wallet in the exchange it may show you the status of the transaction.
It can be stressful when you send a transaction out into the void via third parties and then play the waiting game, but in general it is just a matter of waiting.
I appreciate how you’ve broken things down for the novice.
I did have a question – do we need a different wallet for different currencies? If I bought LTC and wanted to convert that to ESO for example, which wallet would I need?
Is there a universal wallet that has the ability to convert currencies?
Thank you for the compliment.
Generally speaking you need a different wallet for each coin. However, there are some universal wallets and wallets that hold more than one coin.
There is no wallet to my knowledge that literally holds every coin (especially ERC-20 tokens and all cryptos), but you could always download official wallets and store them somewhere safe offline (although there are a few steps there and it ends up being more complicated than it sounds; see for example: https://en.bitcoin.it/wiki/How_to_set_up_a_secure_offline_savings_wallet).
Or, alternatively, you could look into Coinomi, the Ledger Nano S, Trezor, or HolyTransaction. Or, for ERC-20 tokens, EthereumWallet or MyEtherWallet (those are very useful if you have a lot of different Ethereum-based tokens).
The above solutions aren’t going to store every coin, but they can store many (and perhaps the ones you own).
Of course, each wallet type has its own considerations and once you find one you think you want to use, you need to do some research to triple check its the right choice and you are using the necessary layers of protection.
Then, although its not a long term storage solution, you can use exchanges as temporary universal wallets (the major crypto-to-crypto exchanges essentially double as universal wallets as you can store any coin traded on the exchange on them).
The best thing to do though, in my opinion, is to figure out what coins you want to store, and then check if the top multi-coin wallets (like the ones above) hold them. If you find one that fits, consider using that (after research).
If that doesn’t work, or perhaps even the best option of all: You can always do your own storage solution offline. All you really need to accomplish is to store your public and private keys somewhere safe (then you can use the official wallet of each coin to do transactions as needed).
Check out this article on Cold storage of Bitcoin. These are all good solutions and you can essentially just do this for every coin you have (although specifics can differ by coin): https://en.bitcoin.it/wiki/Cold_storage
NOTE: Writing this I realize that we need a more robust section on wallets on the site. I’ll put that on the to-do list. Maybe a walkthrough on different solutions for different coins. Hopefully in the meantime you should learn enough here to do the research needed to accomplish your goals.
I am new to cryptocurrency, just successfully signed up with Coinbase. But then I realised Coinbase does not actually support buy and sell service for user based in Hong Kong! I wonder if I can still use Coinbase as an exchange while using other wallet? Or is there other similar service like Coinbase which handles both wallet and exchange with just one account?
And is it a must to purchase Bitcoin first in order to purchase other coins like NEO or Steller?
Thank you so much!!
Coinbase is generally best for U.S. and Europe (although I know they are expanding).
To your other points:
You can use Bitcoin or Ether to purchase NEO or XLM.
The right exchange to use can differ by nation. I don’t specifically know the best exchanges for the Hong Kong dollar, but I’m pretty sure this list is legit: https://www.buybitcoinworldwide.com/hong-kong/
If my memory serves me OKCoin and Huobi are both valid. This guide puts Coinmama at the top of their list.
With these things you really have to do some research. I would always aim to use the most popular exchange in my region. So if you can figure out which one that is for you, start there.
The trick is converting fait currency into Bitcoin / Ethereum. Once you have those then there are a ton of options for crypto-to-crypto trading.
I’ve not purchased any cryptocurrency yet but am studying it. My question comes when I want to sell the coin and take the profit. How do I sell it and get the USD from my wallet to my bank account? Thanks
If you want to keep life simple, I suggest making your first stop Coinbase/GDAX. That will allow you to move back and forth between USD and back and forth between your bank account. Essentially every other solution is a more complex version of the same thing at best.
Hi. I am a novice to crypto investment and have started with OT Capital which I saw online. It doesn’t have a wallet. It allows you to trade online but I am unable to decipher how many coins I have. Is this a safe way of trading?
I’m not familiar with OT Capital. I always suggest picking the most popular exchange in your country. For the U.S. Coinbase/GDAX and Bittrex is a good choice (but it can differ by country). Meanwhile, the general advice for storage generally includes the official wallet of a coin, secure cold storage solutions, and hardware wallets like TREZOR.
It can be a little difficult to get a setup that works for you, but if you are using two factor and following other general best practices you are generally moving in the right direction.
With any option you pick, research is your friend. You can’t do enough research and add enough layers of security.
Hi Thomas, thanks for the valuable info you provide the newbies in getting into cryptocurrency. I’m from Australia and I tried coinbase and sent my id document but keeps saying the document is invalid where in fact those are both valid. Also i read that if you are based in Australia you can send minet but yiu cannot get it? Can you pls shed light on this? Thanks alot! AC
In AU I believe coinspot is the best choice. You might want to try that. https://www.coinspot.com.au/
Thanks a lot for the wonderful information.Its unlimited,straight to the point of interest,not leaning to favor any organisation and satisfactorily.Actually the information has moved me closer to my dreams in
cryptocurrency world even before i start it as i close in to it.
Thank you for the video. I am completely new to this. I have no wallet yet so obviously no coins. I would like to take advantage of the bitcoin craze. I like the idea of a hardware wallet. It seems the most secure since I will only be connected to the internet when I am making a transaction. If I purchase something like the Nano S, NOW WHAT? How do I begin with purchasing crypto-currencies? Please advise. I have no idea what to do. Not a lot of money to invest initially. I’m one of those little fish ( like you ). Gotta start small. Can you help me?
In my opinion the best first step is Coinbase as they are a broker and wallet hybrid (you can buy and store crypto on there and then move it to your Nano S when you are ready). Other options include Kraken. Although the best answer will be dependent on where you live (as some services like this are specific to certain regions).
Check out these pages:
I love ur passion and time created to reply every comment therein. I am vera from Nigeria. I have passion for crypto trading and even want to make a career in this field, but dont know where to start even someone i know who is into trading cryto blatantly refuse to put me through. I have payed some amount on udemy online course yet i could not get anything meaningful. Pls if i can get some assistance on how to start trading on this i will be so grateful . Thank you.
If you read through our site you essentially get a crash course in everything you need to know.
To trade you need a wallet and exchange. If you trade you’ll want to know TA. If you want to trade for a living, you’ll likely want to start working with bots / apis. To properly research a coin you need to understand the basics of the technology and the environment Githubs, smart contracts, blockchain, oh my.
Cryptocurrency isn’t one thing, its an ecosystem that takes some time and effort to wrap your head around. You can use a site like ours as a jump off point, but ultimately its going to take some focused time and effort and lots of search engine queries.
Great article. One thing that would seriously help crypto newbies though is if we can start to change some misleading, but currently enshrined, terminology. As this article correctly states “Cryptocurrency itself is not actually ‘stored’ in a wallet”. So a crypto ‘wallet’ isn’t really a wallet at all. It’s most important function (it does have others) is much more analogous to a ‘key ring’.
No idea how to change this, just sayin’ 🙂
I tried to sign up on coinbase for several days (at the beginning of 2018) without success, so I finally gave up.
The problem was the acceptance of the documents I was trying again and again to send for identification, like a scanned id card which either took hours until I received the failing result, even if my internet connection is 100Mbit.
Or their system didn’t like the quality (allegedly unreadable) or the size was wrong (but without saying which is the right one)….
I’ve heard this problem before. Try taking a picture of your ID with a camera. Sometimes a web cam or scanner won’t produce a high enough quality version to be accepted.
if it reads: “Cryptocurrency itself is not actually ‘stored’ in a wallet”
my question is, where is the my cryptocurrency stored?
Is in my wallet only something like a reference to my coins?
And what happens with my coins if the financial system crashes?
Do I still have it?
In simple terms, a wallet is software (or software on hardware) that allows you to store your keys and/or move funds around on the blockchain if you have knowledge of the keys associated with the funds. NOTE: I say “and/or” because the range of softwares we call “wallets” don’t all do the same thing, for example MyEtherWallet does not store your keys, TREZOR does. Meanwhile exchanges have custodial wallets, and you can’t directly access the keys associated with the funds. Little details, but if we are going to get detailed, this sort of stuff is worth noting.
So you are essentially storing your keys in a wallet (or storing your keys elsewhere and using the wallet to create transactions with those keys), the actual cryptocurrency lives the blockchain where transactions (stored in blocks on the blockchain) are associated with public addresses, which are associated with private keys, from which balances can be tallied by the wallet software.
Only someone with knowledge of the private key can access funds, so that is… the key.
It is a lot like having coins in a wallet, it makes sense to think of it this way, but not technically how it works.
“As a rule of thumb don’t keep more currency in your digital wallet than you would in your real one! ”
So, where to store then, say bitcoins or litecoins worth $50.000, as investment for say two or three years time?
So there is no perfect answer, but the answer you might be looking for is:
1. simply split the funds between multiple wallets, and if you use a hardware wallet, consider using a backup.
Solutions I generally find smart, which can be mixed and matched, are: a few TREZORs, Coinbase Vault (they are insured, so you protect your account with 2FA, a unique email with 2FA, and a strong password, you are going a long way to protect your funds), paper wallets in safe deposit boxes, and other offline “cold storage” solutions (you can hack together some useful cold storage solutions that mimic a TREZOR if you have the knowledge).
Those are hardly the only ones that make sense, but the theme here is spread out your funds, and secure them to the best of your ability. Remember though, you can’t quickly trade the crypto on a paper wallet locked down across town.
What you would generally be careful of is this: 1 off copies of keys stored in one place, accounts that aren’t using 2FA, too much crypto stored on anything connected to the internet, relying on a single NANO or TREZOR (or such) to store all your funds, accessing online wallets without the necessary protections in place (as even though they don’t store your keys, malware exists and thus you always have to be careful).
“IMPORTANT: Remember that with any wallet, if you lose your private key, then you lose your money. ”
Well, if I follow the advice:
“As a rule of thumb don’t keep more currency in your digital wallet than you would in your real one! ”, I’m not going to loose much, since I usually have about $20 – $30 in my real wallet.:-)
The less funds you are working with relative to what you can afford to lose, the less risk you are taking.
Its like in real life where mostly your wallet is safe 99.9% of the time, but you technically can lose it or it can be stolen, so you wouldn’t walk around with your life savings in there… and if you do, you are taking more risk and necessary and are likely to be a little nervous.
I thought your’re info was very informitabel, thanks for all the info on different types of wallets. Do you have a prefference?
TREZOR is a good wallet for long term storage, and MyEtherWallet and Coinbase are easy to use (but specifically MyEtherWallet does not help with storage). If you are dedicated to a specific coin, consider grabbing the official wallet (for example with Bitcoin, Bitcoin core).
It really depends on what coins you invest in and whether you are going long (and can thus benefit from a paper wallet in a safe deposit box or Coinbase vault) or if you are going to be moving funds around and thus need easier access.
So… no one answer… but generally, keep your keys offline (either on a locked USB or trezor or paper wallet) unless you use a secure storage service who keeps your funds offline like Coinbase Vault. 🙂
TIP: Consider keeping backups. So two USBs, two paper wallets, two TREZORs, etc.
Very well explained, thank you!
Funny girl, too.
F’n brilliant this one is ian’t it F’n hell mate
Aye, it is
i have coinbase but im not sure why. WHY should people be saving bitcoin? i dont buy or sell. i just put money in it every month because i feel like i should and its another way to save. please help me understand
Bitcoin might be the right investment for some. Some who want exposure, and want to limit the risks (even knowing how risky it can be), might choose to slowly cost average into Bitcoin over time with the hopes that their average price will be lower than some future market price.
One might do this because they want to sell later, or one might do this because they want to use Bitcoin for payments in the future.
So many aspects of this boil down to personal choice. Feel free to ask follow ups.
I think this article needs to be renovated a bit. A new class of wallets recently appeared: so-called blockchain browsers used for dApss. Metamask, Guarda or Trust are great examples for that.
Good point. There are for example Ethereum-based wallet which not only have a wallet function but also work as a browser for DAaps. The beginner friendly one that I would recommend is Coinbase Wallet. https://cryptocurrencyfacts.com/coinbase-wallet-explained/
i don’t know anything about crypto currency and i love to start but don’t have idea on how to do it.chuks from Nigeria
The best way to start learning about cryptocurrency is to read Satoshi’s white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” : https://bitcoin.org/en/bitcoin-paper
Or at least, that is I think a great answer.
To shamelessly plug our own site, I would also suggest starting here: https://cryptocurrencyfacts.com/cryptocurrency-for-beginners/
Hey! Thanks for the article, good reading! Why wouldn’t you mention Guarda Wallet as well? I guess it’s one of the best solutions on the market for now. Guarda supports 40+ blockchains, allows to exchange crypto and purchase it for fiat right within the wallet. Web, desktop, mobile and Chrome extension versions are available, give it a try! 🙂
Can’t mention every wallet in the article, but happy to check it out. 😉
Just today I found this place and it is very helpful. But I need to ask some questions: do you know why I can’t get coinbase in germany? Since I can’t get coinbase, do you have a recommendation? I found bitpanda and coinmama, but which one to take? And if I take one of those, I still need a software wallet, don’t I?
I am pretty sure Bitpanda is the way to go there. You don’t NEED a software or hardware wallet if you do Bitpanda for example. You can use them as a wallet… but generally it is recommended for long term storage. So maybe go with Trezor or Ledger for your holdings (or a software wallet stored offline with keys generated offline).