What’s a Crypto Wallet and Why Do You Need One?

What’s a Crypto Wallet and Why Do You Need One?

If you’re new to the game and wondering how to buy Bitcoin you might not know that a crypto wallet is an essential element that’ll you’ll need to start buying and selling cryptocurrency. Since crypto currency like Bitcoin solely exists as data that you buy and sell online, you need a crypto wallet – or digital wallet – to store all that data.

Defining a crypto wallet as something that holds your data (coins) is the simple way put it. In more technical terms, a crypto wallet is software designed to store your private and public keys, allowing you to send and receive coins, as well as monitor your balance.

Not sure what private and public keys are? Well, the easiest way to think about it is by comparing it to how you access money in your bank. Your public key is like your bank account number, and your private key is like the PIN you use to access your account.

On a Canadian crypto exchange when selling coins to someone you are basically transferring ownership of your coins to them.The recipient’s private keys must match the public address that you sent the Bitcoins to in order for the coins to be able to be used.

You would probably never share your bank PIN with someone else, and you’d also make sure that it wasn’t easy for anyone to guess or to find (if say, you decided to write it down somewhere). That’s because knowledge of your PIN allows people to access your bank account, and thus have access to your money.

In the same way, private keys should never be shared with anyone, as they are what grants you access to your public keys (your coins) and you wouldn’t want anyone else to have that access. It’s also important to make sure that you don’t ever lose your private keys because otherwise you will not be able to access your public keys.

Crypto Wallets on a Currency Exchange

When you create a cryptocurrency exchange account, a crypto wallet is automatically created for you that is hosted by the company you sign up with. While this option offers convenience and less hassle, there is the risk of your account getting hacked or the company disappearing and with it, your funds.

That’s why it’s important to do your research about which currency exchange you want to use, and check out what kind of security measures they have in place. For the best security you will want to store your coins in a cold wallet. A cold wallet is a term used to define a digital wallet that isn’t connected to the internet, whereas a hot wallet is one that is.

Keeping your coins in a cold wallet and offline is an effective way to prevent hackers from getting into your account and stealing your funds. The thing is, though, that you will need a hot wallet in order to buy and sell Bitcoin because these transactions take place online.

So again, choosing the right currency exchange with a high level of security is important. Whatever you do, just make sure you treat your crypto wallet like it was your real wallet and keep a careful eye on it whenever you can.

Categories: Finance

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