A cryptocurrency wallet is a software program which is used for storing private as well as public keys. It also interacts with various blockchain to enable end users to send /receive digital currencies and monitor their balances.
Millions of people make use of cryptocurrency wallet without knowing how it works. Unlike traditional pocket wallets, digital wallets don’t store currency. In fact, currencies are not stored in any single location or exist anywhere in any physical form.
What happens instead is the record of the transactions that are stored on blockchain.
Whenever anyone sends bitcoin or other kinds of digital currency to you, he or she is essentially transferring ownership of the coins to your wallet address.
- In order to unlock these funds, the private key to your wallet must match the public address which the crypto is assigned to.
- The balance in your digital wallet will increase and that of the sender will decrease accordingly if there is no difference between the private and public keys.
- There is no actual exchange of any physical coins.
The transaction is verified by a transaction record on the blockchain as well as a change in the balance in your cryptocurrency wallet.
What are the different types of cryptocurrency wallets?
There are various kinds of wallets which provide different ways by which digital currency can be stored.
Cryptocurrency wallets can be broken down into three major categories: software, hardware as well as paper.
Software wallets can be a desktop, mobile or online.
- Desktop: Download the wallet and then install it on a laptop or PC. Desktop wallet can only be accessed from a single computer you download it to. They provide one of the best securities but there is a possibility of losing your entire fund if your computer is hacked or has a virus.
- Online: This kind of wallet run on the cloud and can be accessed from any location with a computing device. While they are more conventional to access, online wallets store your private keys online and are controlled by a third party which exposes you to vulnerabilities such as theft and hacking.
- Mobile: wallets run on an application on your mobile device and are useful because they can be used anywhere including the retail stores. Mobile wallets are mostly smaller and simpler than desktop wallets because of the limited space which is available on the mobile device.
Hardware: The difference between hardware and software wallets is that the hardware software stores the private keys of the user on a hardware device such as USB.
Because cryptocurrencies are now stored offline, security is increased. There is a tendency for hardware wallet to support different currencies and have several interfaces but this depends on the type which is chosen. This will make transaction easy, what is required of a user is to plug in their device to any internet enabled computer or device, enter a pin, send currency and then confirm it.
Having a successful transaction and keeping your money from the reach of hackers is possible with the aid of hardware wallets.
Paper: This kind of wallet can be used easily and also provides a very high level of security. However, paper wallet refers to a printout of your private and public keys, a physical copy or software which can be used to generate a pair of keys which are printed out in a secure manner.
The use of paper wallet is very easy, transferring of Bitcoin or any other currency to your paper wallet can be accomplished by the transfer of funds from your software wallet to the public address which is shown on the paper wallet.
Also, if you aim to withdraw or spend currency, what is required of you is to transfer the fund from your paper wallet to your software wallet. Sweeping is the name of this process and can be achieved manually by entering private keys or scanning QR code which is on the paper wallet.
So which type of cryptocurrency wallets should you choose? Some of the points to consider include:
- Do you need the wallet for everyday purchase? Or are you just buying and holding digital currency as an investment?
- Do you want to use a single or multiple currencies?
- Do you want to access the wallet from your home or anywhere around the world?
Take some time to assess your requirements. And then choose the most suitable wallet.
IKIGUIDE’s Recommendation of Cryptocurrency wallet: Jaxx
In our view, Jaxx is a very user-friendly crypto-wallet. And no, we are not paid to say this. 🙂 Now, we will guide you on how to install the Jaxx wallet and how it can be used.
The Jaxx wallet is a common wallet for Bitcoin and Ethereum because it is easy to use and supports many cryptocurrencies. This means all coins will be in a single place.
Download the latest version of the Jaxx wallet on Jaxx.io. You can either choose a desktop version of Window or the Google Chrome extension. Here, we would be using the desktop version for windows.
Use the executable installation file. You will be greeted with the latest release notes. On the bottom right, click ‘continue’.
You will then see a screen with the terms and conditions which you will have to accept. After going through the terms, click ‘accept’.
Now you will have two options available:
1. Create new wallet;
2. Pair/restore wallet.
Choose option 1, ‘create new wallet’. Then click on the bottom right button, ‘continue’.
You are now presented with the two options ‘custom’ and ‘express’. Choose ‘express’ and click ‘continue’ on the bottom right.
You can now select which wallets you want Jaxx to support. You can choose Bitcoin, Ethereum and Litecoin. This can also be altered to suit your need.
After creating your wallet, you will see the next screen. Here you can easily select the cryptocurrency wallet which you want to open. You will see the ‘send’ and ‘receive’ buttons for sending and receiving the said currency.
Each wallet will show your current address on the blockchain of that coin; this is your public key.
So if you want to secure your private key. Click on the menu button at the top right.
The next menu will be shown where you can add cryptocurrencies in currencies such as Pound Sterling or Euro.
For the next step, we are going to click on tools.
After clicking tools follows a screen which has four options.
The first option backup wallet is to back up the Jaxx wallet. Through the option display private keys, you will see the private keys of all the address of each coin which is connected to your wallet. We likewise advise you to go through both options and also secure all information in a safe place. Write your keys down or print them, and place them in a secure location where it cannot be gotten by anyone. With these keys, one would have total control over the corresponding addresses on the blockchain, so ensure it is properly secured.
The wallet can now be used since you have secures your key safely. Open the menu at the top right and go to ‘settings’.
Jaxx is a wallet which can automatically adjusts the fee for you. However, you can set it to fast (high fee), ‘average’ (normal fee), or ‘slow’ (low fee).
Once this is done, you can now send or receive a transaction. On the startup screen you can select with which currency you want to make a transaction.
By sending the appropriate currency to the address which is shown underneath ‘send’ and ‘receive’, you will see this currency appear in your Jaxx wallet.
Ensure you pay attention and ensure you are sending Bitcoin to a Bitcoin address and not to your Ethereum address.
With the receive button, a new address will be made with a corresponding QR code, which you can send to someone who wants to send cryptocurrency to you.
We hope you have enjoyed today’s post! Have fun deciding on a cryptocurrency wallet!
This article is part of our “Cryptocurrency for Beginners” series. Feel free to read up on the rest of the articles! What Is Cryptocurrency? | What is a Cryptocurrency Wallet? | What Is a Cryptocurrency Exchange and how may we cash out? |FAQ: Top 5 Commonly Asked Questions About Cryptocurrency | A Brief History of Bitcoin, Ethereum and Alt-Coins