The popularity of cryptocurrencies is increasing, so is the demand for crypto wallets. The wallets provide ease of use and reliable protection of assets to the users.
In recent years, cyber threats have become quite common, and the number of attacks on cryptocurrencies is growing. This has emphasised the need to select the best wallet, which depends on factors, such as usability and security.
Crypto wallets have evolved over the years, and become the most trusted way to store your cryptocurrency. These wallets by offering a safe entry point or gateway, enable users to safeguard their digital assets.
In this article, we will understand what crypto wallets are, different types of wallets and their functioning. Also, learn how to create a crypto wallet.
What is Crypto Wallet?
A cryptocurrency wallet is simply a digital tool that secures and stores your crypto assets and allows only authorized persons to make transactions. Wallets contain an address and the private keys needed to sign cryptocurrency transactions. Anyone who knows the private key can control the coins associated with that address.
There are mainly two types of crypto wallets: software wallet and hardware wallet, each with its own features and levels of security. On the basis of network connection, crypto wallets can be divided into cold wallets and hot wallets. Also, there are custodial and non-custodial wallets.
How Crypto Wallet Works?
- Used to store your transaction keys and to access your crypto assets.
- Used to send, receive, and spend your crypto assets.
- Used to interact with various blockchain projects by connecting your wallet.
History of Crypto Wallets
The first wallet program, named Bitcoin, and sometimes referred to as the Satoshi client, was released in January 2009 by Satoshi Nakamoto as open-source software.
In version 0.5, the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt. After the release of version 0.9, the software bundle was renamed Bitcoin Core.
Cryptocurrency wallets have seen a long journey from Bitcoin Core to hardware wallets and the integration of crypto wallets with decentralized finance (DeFi) and non-fungible tokens (NFTs).
Software Wallet
Software wallets include applications for desktops and mobile devices. These wallets are quite common among the users. They provide a balance of security and convenience for everyday crypto transactions. To use a software wallet, a user doesn’t need any technical expertise as they are simple and easy to operate.
However, at the same time, you should know that software wallets need active internet connection, which makes them susceptible to scams and cyberattacks.
How to Set Up Software wallet?
Let us understand how we can create a software wallet with the help of a step-by-step guide.
Step 1: Choose Software Wallet
The first step is selection of a secure software wallet application, a trustworthy wallet provider for your crypto assets. For which, a user has to review the popular software wallet service providers in the market and make sure to assess their security protocols. Also, features and usability of those wallets need to be checked. Some of the options include Trust Wallet, Coinbase Wallet, Exodus and others.
Step 2: Download Software Wallet App
You have to download the chosen software wallet application on your device. A user needs to be careful about installing the application from an official app store in order to avoid fake links.
Step 3: Create Account
After downloading a certified software wallet, users can create an account. For setting up an account, a user has to fill in basic information like email address, name, and all other necessary information required. But, before starting its use, KYC procedure is important to be completed.
Step 4: Load Crypto Assets in Wallet
This is the last step which involves transferring the crypto assets to the software wallet created. A user can use different ways to transfer assets, like exchanging cryptocurrencies, receiving Bitcoin from other wallets, or depositing fiat currency from his bank account.
You can use the generated wallet address during the account creation process to send assets to the Bitcoin wallet. The user can also find options to use QR codes to transfer the assets to the wallet.
Hardware Wallet
This wallet is the best alternative of a software wallet for safely storing the users’ crypto assets. Hardware wallet is a physical device used to store assets like Bitcoin without depending on internet connection. This ensures the security of the user’s asset as it is completely safe from various cyberattacks and threats.
How to Set Up Hardware Wallet?
Let us understand how we can create a hardware wallet with the help of a step-by-step guide.
Step 1: Choose Hardware Wallet
Same as software wallet, the user has to choose hardware wallet application from the multiple hardware wallet options available in the market. It is essential to find an appropriate wallet by checking the credibility of the manufacturer, customer reviews, and notable security features. Some of the options include Trezor, Ledger Nano X and others.
Step 2: Download Hardware Wallet App
After installing the software from an official store, the user has to connect the hardware wallet to his system through Bluetooth or USB connection. Users need to follow the instructions of the manufacturer carefully during the installation process for proper configuration of the wallet.
Step 3: Load Assets in Hardware Wallet
After completing configuration of the wallet, you can start transferring your assets to the hardware wallet. The transfer method needs the user to connect the wallet to a crypto exchange or a brokerage account to load assets into the wallet. As the wallet is not dependent on internet connection, the user’s assets are safe in terms of cyberattacks.
Conclusion
Crypto wallets are the most preferred tools in the crypto industry to secure assets. But, these wallets can have known or unknown vulnerabilities. Hence, it is advisable to research and find the wallet that meets your needs and provides usability and a high level of security to your assets.
