Cryptocurrency Wallet Guide: A Step-By-Step Tutorial

16 NOV

While picking a crypto wallet can be an important choice, it’s not a permanent one. Many people create and use multiple wallets, and it can be easy to switch between wallet providers. Creating a custodial wallet at an exchange and letting a company manage the details can be easier for crypto investors, especially because CEXes often have intuitive interfaces and low fees.

what is a cryptocurrency wallet

Sending and receiving cryptocurrency payments is an important feature of crypto wallets. Crypto wallets provide users with the ability to monitor a balance for cryptocurrency assets. Buying cryptocurrency is not enough, you need a safe place to keep it.

Good balance between accessibility and security

Public and private key pairs are a core component of public key cryptography, an encryption mechanism designed to protect data from unauthorised access. Together, the keys are used to encrypt and decrypt messages and transactions. Before we dive into what exactly a hardware wallet is, we first need to discuss public and private keys. Cryptocurrency wallets are all built to be secure, but the exact security differs from wallet to wallet.

what is a cryptocurrency wallet

Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. MyEtherWallet – An online wallet specifically for Ethereum and ERC-20 tokens. is an independent comparison platform and information service that aims to provide you with information to help you make better decisions. We may receive payment from our affiliates for featured placement of their products or services.

Budgeting made easy

Custodial wallets are crypto wallets in which the custody — that is, the control and operations of the wallet — is managed by a third party. That third party is typically the cryptocurrency exchange itself, where users buy and sell cryptocurrency tokens and other crypto assets. The custodial wallet provides users an easy on-ramp for holding crypto assets and is directly offered by a custodian or exchange. A cryptocurrency wallet is a software program or device that stores public and private keys used to send and receive cryptocurrencies.

The wallet also acts as a sort of control panel, showing you exactly how much crypto you have, and allowing you to communicate with the blockchain to send or interact with that value. You might say that your crypto wallet is the bridge between you and your crypto funds on the blockchain. Our round-up of the best non-custodial crypto wallets and why they’re so important. Learn about the security features of the COLDCARD Mk4 — a Bitcoin-only hardware wallet.

what is a cryptocurrency wallet

These software wallets generally offer more freedom and features than hosted wallets. Mbers that can be shared with a third party, such as a cryptocurrency exchange, without compromising the security of your wallet. This key allows you to receive cryptocurrency in transactions—oftentimes by using a wallet address, which is essentially a compressed version of the wallet’s public key. Coinbase provides all three types of crypto wallets, including online, desktop and mobile options.

Key Takeaways:

The DeFi wallet can be synced to the centralized app to make transfers between accounts simple. Though most known for its global exchange, also offers a tailored non-custodial DeFi wallet with standout features deserving of our pick for best DeFi wallet. With over 30 million monthly active users at the time of writing, MetaMask is a crowd favorite and considered the go to for Web3 apps, making it an easy choice for best Web3 wallet. Where it really shines though is its integration with third-party apps which allows you to easily stake over 25 cryptocurrencies, including crowd favorites like Avalanche or Solana . There is also support for 1,000+ DeFi protocols through the Merlin app. The wallet was launched in 2017 by Konstantin Gladych, CEO of Changelly.

  • You can download the DeFi Wallet and use it for your day-to-day crypto activities without having to create an account on’s exchange platform.
  • If you’re planning on getting into crypto, before you decide which currencies to invest in, you’ll need to set up your crypto wallet.
  • By following the chain all the way to the present day, a wallet can figure out how many coins you have.
  • If you want a simple wallet-exchange solution , see our page on “How to Trade Cryptocurrency – For Beginners” where we walk you through usingCoinbase.
  • Private keys are similar to personal identification numbers; they allow you to access the wallet and check balances, initiate transactions, and more.

Cold storage wallets are deliberately designed to be hard to hack. Unless the wallet owner falls for some sort of phishing attack, hackers have no way of obtaining the owner’s keys remotely. For something like a hardware wallet, a thief would first have to obtain the USB drive used to access your crypto and then somehow crack its password. Exodus is one of the most visually appealing and intuitive wallets on the market.

Hardware vs. Software Wallets

Using a hot wallet can be risky because computer networks have hidden vulnerabilities that can be targeted by hackers or malware programs to break into the system. This ease of access makes them ideal for those who trade more often and are considering spending bitcoins. Mycelium is a well-established crypto wallet with a tenured track record and a big focus on bitcoin. That usually means you’re storing your crypto through an exchange or trading platform, like Robinhood, which are often subject to legal and regulatory requirements to protect those assets. You can then access the coins in your wallet by logging on to the exchange or platform. The other major benefit is, if you ever lose or forget your password, you won’t necessarily lose your crypto.

what is a cryptocurrency wallet

This makes them very convenient, because you the user simply need to log-in and you can easily begin interacting with online applications via the wallet interface on your computer. — Crypto wallets are broadly classified as hot wallets and cold wallets. Hot wallets store the keys to your cryptocurrencies on an internet-connected application while cold wallets keep them offline, disconnected from the internet. As well as storing your public and private keys, crypto wallets interface with the blockchains of various cryptos so that you can check your balance and send and receive funds. Hot wallets are crypto wallets that remain connected to the internet and are therefore less secure than cold wallets, which are used to store assets offline.

Why are there so many kinds of cryptocurrency?

Because of this link, data that has been encrypted with a public key can only be decrypted with its corresponding private key. You don’t NEED a software or hardware wallet if you do Bitpanda for example. You can use them as a wallet… but generally it is recommended for long term storage. Those are hardly the only ones that make sense, but the theme here is spread out your funds, and secure them to the best of your ability. Remember though, you can’t quickly trade the crypto on a paper wallet locked down across town. In general, you need some sort of cryptocurrency wallet to store cryptocurrency in.

The Future of the Cryptocurrencies in 2023

If you are not careful, you might lose the currency you are holding. The free application has some other strengths, such as mobile and browser-based connections to decentralized applications. It also lacks some functionality offered by competitors, such as a desktop app, though its browser extension connects to the Ledger hardware wallet.

You’ll typically need to install software to set up the wallet, too. Cryptocurrencies exist on a blockchain, and a wallet allows you to store and transfer your crypto securely. With Ellipal, you can convert your coins to any supported currency without needing to transfer to an online exchange.

Metamask is a browser extension software wallet for Ethereum-compatible networks that can be used with many DeFi projects. You can typically purchase a hardware wallet for between $50 and $150, although cryptocurrency wallet there are some higher-priced options, too. Other areas measured include, but are not limited to, whether the wallet provides educational resources and live charts and support for non-fungible tokens.

Users of Guarda can move crypto into cold storage through an integration with the hardware wallet Ledger. Accessing this wallet can be done from any browser or smartphone. For the browser version, users can enable two-factor authentication, while mobile users can activate a pin code requirement every time the wallet application is opened.

We compared Trezor and Ledger hardware wallets to see which has the most to offer. Learn about the similarities and differences between Ledger’s two crypto hardware wallets. Many wallets don’t charge any fees but some do – so check the fine print closely. Sending a crypto transaction from your wallet usually attracts a small network fee, which varies depending on the asset being sent. Please note that the exact process will vary depending on the type and brand of wallet you choose.

The public key is the address shared with others so that they can send you funds. The private key allows you to spend your funds, which you must keep secret. In the cryptocurrency space, smart contracts are digitally signed in the same way a cryptocurrency transaction is signed. Traditional banking apps offer a range of security options to protect your money. Each crypto wallet will have slightly different security aspects, so you should check these carefully before putting your trust—and money—into them.

There is a built-in decentralized exchange that allows you to swap your cryptocurrency without having to use a centralized service like Coinbase or Binance. The Nano S Plus provides the security of its predecessor, the Nano S, but with almost all of the capabilities of Ledger’s top-of-the-line hardware wallet, the Nano X. Ledger has a long track record of providing industry-standard level security for digital assets.