Reasons to buy a crypto wallet and what is the use?

When the crypto market started bussing, the value of cryptocurrencies started going up. The value of some of the cryptocurrencies in the world is in lakhs. Whether people want to donate or send to other users, the need for a secure space to operate was felt strongly. In the case of FIAT currency, it is easy to trace and protect. You either use cash withdrawn from your accounts or do bank transfers. Either way, the presence of a regulatory authority makes a lot of difference and ensures the safety of your money. On the other hand, cryptocurrency is popular for ease and anonymity. What is the correct way to ensure the complete security and protection of your cryptocurrency? The best option is to use a crypto wallet.

What is a public key and a private key?

Crypto wallets don’t hold the actual currency but the private key that allows the owner of the wallet to conduct transactions. Every cryptocurrency owner has a private key and a public key. The public key is the one used to send and receive cryptocurrency from another user. The private key is like a password to your wallet and just like a password, you should not reveal the private key to anyone. In case you lose or forget your private key, the alternative is to use a secret phrase or a string phase which can be a string of words that function as the backup password. No company or individual should ask for your private key or seed phrase. If they do, run the other way because they might be scamsters.

How does the crypto wallet work?

When someone sends you cryptocurrency, the private and public keys should match, and then the transaction gets completed. A crypto wallet is like an account for your cryptocurrency except a wallet is not backed by banks or any other financial institution. When your cryptocurrency is held on the exchange platform then the companies control your assets. However, when you move them to your wallet, they are in your control alone.

How to choose which wallet to use?

Although there are various types of wallets available in the market, you need to assess your particular need. Some wallets support only specific blockchains. For example, the Shiba Inu coin may be supported by a specific wallet that may not support your other cryptos. In such cases, looking for 2 separate wallets may be a good option. This is generally seen in hot wallets. Some of the cold wallets have limited capacities and the one with the highest capacity may not always be the right choice. It may also mean that when the wallet gets lost, stolen, or damaged, you may lose a large chunk of your investment. The most popular wallets are built for Bitcoin and most of them support this leading cryptocurrency. If you are the kind that is forgetful and cannot remember your passwords or where you write them down, cold wallets may be a risk. They do not have a backup option if you lose the password.

How to set up wallets?

Setting up wallets is a fairly easy task. All you need to do is download the app or install the browser extension. In the case of cold wallets, you will need to buy a USB or any other kind of cold wallet you’re considering at the nearest electronics store. It is advisable to buy cold wallets from official suppliers to ensure authenticity and security. Purchasing second-hand ones can be risky as they may be tampered with or may have suffered physical damage. A lot of exchange platforms are offering wallet services as well. However, since the crypto is stored on a company’s platform a third party is involved. In case of any malfunction, you end up losing your cryptocurrency.

What are the things you should bear in mind while using crypto wallets?

  1. Distributing your assets over as many wallets as possible is always a good idea. That way even if there is a situation that is out of your control and causing you to lose your digital assets, you will end up losing as little as possible.
  2. Although cold wallets are the gold standard of wallets and have the best protection, they are more cumbersome. If you plan to exchange or use your crypto for payments, you wish to consider keeping some of your cryptocurrency in a hot wallet that can be accessed on the go. For example, when you feel Tron to INR value has reached its peak you can trade immediately.
  3. Passwords should not be written down but this only applies when you have a backup. The safest way is to write them down and put them in a safe.
  4. The cold wallets should be checked from time to time to ensure they have not suffered any physical damage and they should be backed up in case of viruses.
  5. If you are using hot wallets, it is recommended that you update the software from time to time.