What Is a Crypto Wallet? How to Use a Crypto Wallet

A crypto wallet works sort of like a bank account and credit card rolled into one. It allows you to store cryptocurrency for transactions plus functions as your “card” to conduct these transactions. A crypto wallet does so by using encrypted keys—both public and private—to reach out to other crypto wallet users on the blockchain network. By utilizing this type of technology, you can make purchases with Bitcoin, hold Dogecoin assets, trade Ethereum for Litecoin, and more.

When it comes to cryptocurrency, there are both custodial and noncustodial wallets. A custodial wallet hosts your keys via a third-party service, whereas a noncustodial wallet stores them in your own safekeeping. In most cases, custodial wallets are primarily digital in nature, while noncustodial alternatives come on physical devices like USB drives.

Crypto wallets make it easier to utilize the blockchain to hold assets and complete transactions. Here are just a few reasons to consider using a crypto wallet:

• Easier transactions: To complete cryptocurrency transactions efficiently, you need a wallet complete with both public and private keys to your account. This allows you to engage in crypto exchanges where you can buy and sell goods with digital currency. You can also use DeFI (decentralized finance) apps or Dapps to expedite this process.
• Increased security: Crypto wallets come with built-in security features. To utilize cryptocurrency, you need a wallet address (or public key) other users can interact with on the blockchain. Your private key, however, must remain secret to prevent hackers from stealing your digital currency. Hardware wallets achieve this by staying analog, whereas digital or software wallets use sophisticated encryption technology.
• User-friendly interfaces: Cryptocurrency is complex, but using a wallet—especially a digital one—can make it much more intuitive and easy to understand for beginners. Both desktop and mobile wallets like these come with user-friendly interfaces capable of guiding you when it comes to crypto practices like staking or trading.

There are numerous different types of crypto wallets you can use to store your digital currency. Consider these options:

1. 1. Digital wallets: These software wallets allow you to connect directly to blockchain apps and marketplaces while encrypting your personal data. Both mobile and desktop wallets utilize graphical interfaces that make crypto transactions easier to understand. Some might charge you transaction fees to use their services or only allow you to store a certain type of cryptocurrency.
2. 2. Hardware wallets: Also known as cold wallets, hardware crypto wallets keep your data off networks to keep them safe. This “cold storage” is possible because these wallets store your crypto information on a physical device like a USB drive. These options almost always allow you to store multiple different types of cryptocurrency, whereas, a digital wallet might only serve as a BTC or Bitcoin wallet.
3. 3. Paper wallets: Sometimes, you can achieve the highest level of security by using the simplest possible technology: writing on a piece of paper. Some people opt to simply write down all their crypto keys and store them in a safe place offline rather than expose them to digital hacking of any kind. Others might use QR codes to the same effect.

There’s a learning curve with crypto wallets, but it’s well worth it to persist in educating yourself. Keep these tips in mind as you acclimate to using your own cryptocurrency wallet:

1. 1. Exercise caution. Be careful when using your crypto wallet. Refrain from giving out any private information to anyone but a trusted and encrypted source. Hot wallets—or crypto wallets linked up to networks directly—run a higher risk of exposure to malware than cold ones do. People have lost large amounts of cryptocurrency through improper care of their wallets’ security.
2. 2. Find what works for you. Any kind of crypto wallet will allow you to participate in cryptocurrency exchanges, so take some time trying to decide which type suits your purposes and security needs the best. There are many different wallet providers from which to choose, many of which link directly with major crypto exchanges.
3. 3. Implement additional security measures. Utilize all the security features available to protect your crypto wallets. Think about using a seed phrase (a long password featuring multiple different words), two-factor authentication, and other forms of protection and encryption to keep your data and money safe from hackers and malware.

From the rise of blockchain technology to the dawning of NFTs and Web3, the world of cryptocurrency has undergone dynamic changes and continues to innovate. With the MasterClass Annual Membership, get access to exclusive lessons from Hunch cofounder Chris Dixon, Binance cofounder Changpeng Zhao, Coinbase’s Emilie Choi, and economist Paul Krugman to learn about the ever-changing landscape of cryptocurrency and its place in the global economy.