What is a Cryptocurrency Wallet

What is a Cryptocurrency Wallet

A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin. Most coins have an official wallet or a few officially recommended third party wallets. In order to use any cryptocurrency you will need to use a cryptocurrency wallet. Below we discuss how digital wallets work and give some advice on which wallets to use.

How Does a Cryptocurrency Wallet Work

Cryptocurrency itself is not actually “stored” in a wallet. Instead, a private key (secure digital code known only to you and your wallet) is stored that shows ownership of a public key (a public digital code connected to a certain amount of currency). So your wallet stores your private and public keys, allows you to send and receive coins, and also acts as a personal ledger of transactions.

Which Cryptocurrency Wallet Should I Use

We typically suggest using an official (or officially endorsed) wallet for any given coin. So, for Bitcoin we would suggest using the Bitcoin Wallet, and for Litecoin we would suggest Litecoin-QT. There are also universal wallets that can be used like HolyTransaction. If you are new to cryptocurrency, then always download the official (or officially endorsed) wallet from the official website. If you know what you are doing there are actually a wide range of different wallets to choose from which offer varying pros and cons.


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Are Cryptocurrency Wallets Secure?

Cryptocurrency wallets are all built to be secure, but the exact security differs from wallet to wallet. Generally, like your user names 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! As a rule of thumb don’t keep more currency in your digital wallet then you would in your real one! You can learn more about securing digital wallets from bitcoin.org.

Are Bitcoin 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 backwards engineer someone’s identity (in theory). For most of us, the answer then would be, “it’s pretty darn close to anonymous”.

For further You can read our Post About Types Of Crypto Wallets

 

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