Cryptocurrency wallets explaining
If you are a bit lost in the countless storage options for your Crypto, have no fear. This article will explain everything you need to know about wallets.
All Cryptocurrency wallets are just software that allows you to send and receive your coins. These days wallets can do a lot more than we could ever imagine just a few years ago.
Modern Cryptocurrency wallets can even allow you to exchange one coin for another and even stake your coins, all in one app. It enables you to have a complete BANK with infinite accounts just sitting on your pc or phone. It’s simply staggering when we stop and think about it! This wasn’t the case just a few years ago, and we have come a long way to get to this point. Let’s find out what different wallets there are living out there in the wild and how we can use the damn things to our most full advantage.
Also, remember that the most significant risk in Crypto comes from ignorance, negligence, and lack of discipline. Don’t worry. We will also cover these risks and help you become a strong, savvy, hairy-chested crypto investor. Let’s dive right in!
What is a sacred Private Key?
Remember the bald kid from The Matrix? His prophetic phrase “There is no spoon” is very accurate in Crypto. Let’s take Bitcoin, for example. It may come as a bit of shock, but there are no “coins” in Bitcoin. We have just digital entries in a long string of data called the blockchain. The balance you see on your screen is just a summary of the information that your private key controls. That’s it. Sorry for bursting your crypto bubble.
The private key is simply a long string of numbers and letters. From this remote key, you can derive an almost infinite number of public addresses (you know that other long string of numbers that you use to send some Bitcoin to your grandma), and this private key is what eventually “signs” your transaction so that it can be broadcasted to the network and go from place A to place B. In our case from you to your Crypto savvy grandma. Do you interested in this kind of learning article about Cryptocurrency wallets? Stay with Tycoon Insights to the end.
Do you like NFT news? Check “How people use NTFs for money laundering?” article
We all need a safe and comfortable home!
Every coin has a private key, and this sacred data needs a warm, safe, and cozy home to live in. This is what a wallet does. It stores your private key and scans the blockchain, searching for traces of your in- and outgoing transactions that will eventually be displayed as a total balance. Pretty simple to understand.
However, if you don’t know the private key concept, you will have a hard time understanding the importance of the safe storage of your crypto assets. This is why so many newcomers in this space fall victim to scammers and attackers. Have no fear. After this article, you will never fall into this trap. Now we understand that the private key is so damn important.
Let’s see where this magic beast can live in safety and severity. Let’s analyze all Cryptocurrency wallets starting from the safest options. Keep in mind that wallets are very different and have different purposes, just like cars. When you know all of them, you can make the right decision a lot easier.
Paper wallets Vs. Cryptocurrency wallets!
A paper wallet is the most primitive means of storing your coins. For simplicity, we will be using Bitcoin as a demonstration. A paper wallet is a physical piece of paper that holds your private key and public address. Usually, a handy QR code makes your coins “spendable.”
The process of making a paper wallet is usually straightforward. We “generate” a private key and derive your public address. After this is done, we can safely print out our paper wallets and send some coins to the public address. Now, these coins are forever stored on this wallet, and you can safely pack your bags and go on that round-world trip you always wanted to go.
Your paper Bitcoin can later be “redeemed” by importing your private key into any hot wallet ( explained later on ) and transferring it to any address you like. For example, exchange to be sold for fiat currency or any asset of your choice. Who uses a paper wallet these days? Usually, very paranoid people have endless patience and an iron discipline. They know where their paper wallets are stored at all times, and you bet your ass that they have multiple copies stashed away, “just in case.”
Reduce your risk
Of course, there are risks associated with this prehistoric storage method. The piece of paper can be lost, your pc or wifi printer can be hacked, and the attacker can access your private key. Lots of things can go wrong in this equation. Perhaps the most significant risk would be the human factor. Nobody can prevent your toddler from throwing your paper wallet into the recycle bin washing machine or going nuts with permanent markers all over your sacred data. Your mom can throw the damn thing away, or you can forget where you put it. So you see, this option is by far not the best one around. Let’s look at cold storage instead, shall we?
Do you have cold storage wallet?
You do still remember that the private key is everything. Good! Now let’s focus on the cold storage wallet, perhaps the safest storage option out there. These physical devices come in many shapes and sizes (examples are: Ledger and Trezor Cryptocurrency wallets), but they all do just one thing very well. They store your private keys inside their memory, and they NEVER let those private keys communicate with the dangerous virus-ridden internet. Remember how the private key can sign your transactions?
Now, imagine you want to send your granny some more coins for her birthday ( Goddamn it, that woman sure loves her Crypto! ). You open up your wallet app. You type in her public address and the number of coins you like to send. From the moment you hit “send,” your cold storage wallet (usually a physical device that looks like a flash drive or a small phone) will very politely ask your private key; “Dude, sorry to bother you, but could you please authorize this transaction?”.
The private key will say, “Sure!”.
And just like magic, the coins will leave your wallet and will end up in your cyber-granny’s wallet after just a few seconds. All of this will happen WITHOUT your private key having to make any connection with the internet. This is precisely where the magic happens. If you thought self-isolation for the quarantine was a good idea, your private keys never even step outside to breathe in the fresh air of the internet. That’s how a cold storage wallet works.
Never share your digital assets!
Even if you lend out your PC to your younger brother, and he ends up giving your device digital AIDS and leaving backdoors wide open to attackers, they will NEVER have access to your sacred private keys. Now, who can benefit the most from owning cold storage wallets?
The answer to this is; Everyone! It’s inexcusable NOT to own a cold storage wallet if you dabble in the crypto space. It will be the best 50 to 100 USD purchase you ever make. You may be a long-term holder or a lightning-fast trader with fire in your ass. A cold storage wallet is a must-have item that will save you from losing your coins. Take it very seriously and spend time learning how to use them properly. Luckily there are excellent free courses on these Cryptocurrency wallets scattered over the internet and even Youtube. Cold storage wallets are like a fortified castle. They are safe and secure. But what if you want to do more with your coins? Here’s where Hot wallets come in. Let’s check them out.
Use multi-coin Cryptocurrency wallets
What makes a wallet “Hot”? Well, if you still remember the private keys, then it’s easy to understand. A hot wallet stores your private keys on your pc or phone. That’s it! Yes, they are encrypted and password-protected, but there is still a risk of a hacking attack that can happen at the end of the day. The natural question is; why would people use hot wallets then?
Hot Cryptocurrency wallets allow you to do so much more than what cold storage wallets can’t do ( yet ). A hot wallet is an armored personnel carrier. Fast and mobile, it can go onto any mission, carrying an enormous amount of many different coins. The best examples of easy-to-use hot multi-coin wallets are Exodus and Atomic wallet. When people only start with Crypto, a hot wallet like Exodus is ideal. It’s sleek, intuitive and it even has a built-in exchange to jump from one coin to another quickly. Yes, you do pay for this one-stop shopping experience, but if you don’t want to spend much time on your crypto needs, it’s an ok solution that will fit most casual crypto users.
Atomic wallet even allows you to stake coins
On the other hand, Atomic wallet even allows you to stake coins like Vechain, Zilliqa, ICX, Band, Canada, and many others, all from the comfort of one app. It’s extremely convenient for an avid crypto investor who has collected too many “Pokémon” along the way and wants to give all these coins a short-term home. Hot wallets are also ideal for adding ERC20 tokens that are usually not immediately available in other wallets by default. If you like to add the TYC token to the Atomic wallet. Just add the ERC20 token contract (0x3A82D3111aB5faF39d847D46023d9090261A658F), hit “add” and you’re done. There’s nothing difficult in this equation. Even your granny will figure it out in 5 minutes.
Now that you have your paper wallets printed out, your cold storage physical devices dangling from your keychain, and your hot multi-coin wallets running on your pc and phone, the next logical question is; Can I do even more with a wallet? Glad you’ve asked! Let’s take a look at the next evolution of Cryptocurrency wallets, shall we?
Advantage of web 3.0 Cryptocurrency wallets
If you haven’t been paying attention to decentralized finance, this industry has been leapfrogging exponentially for the past two years. This DEFI space is a collection of financial Lego blocks that can interact with each other and supercharge the crypto space beyond recognition. To navigate the seas of DeFi, your wallet needs to be an actual Swiss Army knife with limitless capabilities. It has to work with the most common DEFI networks such as Ethereum, Polkadot, Cosmos, Matic, Zilliqa, Binance Smart Chain, and many more.
Enter Web 3.0 wallet. For simplicity, we will focus on Metamask and Polkadot JS wallets. These Cryptocurrency wallets are nothing more than browser extensions that live inside your Chrome or Brave browser.
They allow you to connect to DEFI applications that live in cyberspace seamlessly. Do you want to exchange your ETH to TYC token on Uniswap without having to go through a long grueling KYC process? Done! Do you want to provide liquidity to ETH / TYC pair and earn trading fees from it? Done! Do you want to purchase a non-fungible token of your favorite athlete or movie star? Why the hell not! Do you want to bet if it’s going to rain in Tanzania on the 25th of March 2023? Let’s do it! The possibilities of DEFI are genuinely endless. And this space is biting at the heels of the big financial institutions as we speak.
Know more about DeFi on Tycoon Insights
This is why it helps to spend as much time as possible to get to know the DeFi space (and the wallets that work with it) a bit better. Yes, it’s slow, clunky, and not user-friendly, but this is where the most opportunities lie. When the space of decentralized finance is as simple as the one-button order system from Amazon, it will be too late. So don’t waste any time and get cracking with self-study and discovery. Cancel Netflix, donate your TV to your friends, and work-study. You won’t regret it.
One important thing to keep in mind about Web 3.0 wallets is that many native projects also use web-based wallets that the investors can use. Examples are Theta, Tycoon, and Persistence projects. Yes, these are hot wallets, but from the standpoint of safety, they are pretty damn good because of multiple layers of security. That leads us towards the most crucial point about wallets. What’s the most significant risk?
The most significant danger when using wallets
Short answer: The Human Factor. No matter how bulletproof the software and how “space-age” the hardware can be, the most significant risk of using Cryptocurrency wallets is plain old ignorance, negligence, and lack of discipline. Let’s take the time to address these issues to transform you into a battle-hardened Crypto OG with a long white wizard’s beard. No doubt, your non-coiner friends will be impressed with your knowledge!
Always keep your passwords as bulletproof as possible. Use different combinations of words, numbers, unique signs, and other challenging to guess characters. Never use the same password twice and please, for the love of god, grab multiple notebooks and scribble the passwords there with a pen or pencil and never keep them in a digital format. Attackers love to snoop around your devices, looking for password storage files. Could you not give them that satisfaction?
Keep your seed phrase safe
Your wallet seed phrase (usually 12 or 24 random words) is THE ONLY WAY you can recover all of your coins if you blow up your pc or bathe your phone in a toilet bowl. The same logic applies here. Take the damn notebooks, write them down in multiple formats and keep these in several locations. If you are extra paranoid, you can also write down your private keys and keep them safe just in case. The mnemonic seed phrase and your private key is the only proof that you physically own your Crypto. Please treat it with the utmost care and respect, just like your bank account password or that pile of cash that you keep aside for the rainy day.
The .json wallet backup file (you usually can download it when using web-based Cryptocurrency wallets) should only live on a flash drive that is permanently detached from your pc and internet. You can even encrypt it for good measure. Never store these sensitive files on your physical device since an attack can come out of nowhere.
Wallet updates usually happen from within the wallet app itself. Nobody will ever send you any emails or links for “updating your wallet.” That doesn’t happen. So be very careful with any email you receive prompting you into hasty action. Take a deep breath, a sip of hot coffee, and do your research correctly. The chances are that you are dealing with scammers.
Pay attention to scam alerts!
The scammers and attackers usually try to bait you into giving up your private keys, mnemonic seed phrases, or wallet recovery files. Luckily, we have already covered the most common crypto scams ( here: https://tycoon.io/insights/cryptocurrency-scams-explained/ ). After reading this article, you won’t ever fall victim to one.
There are many precautions that one must use when dealing with cryptocurrency. And why the hell not? After all, you are 100% responsible for your finances here. You have a Swiss BANK on your pc or phone with as many bank accounts as you care to create. Being aware of this will help you always keep your mental radar scanning for potential threats. With time, many more Cryptocurrency wallets and storage options will be available, so it helps to point your nose towards the wind of innovation and keep your mind in tune with the latest trends. Just make sure you always use your logic and common sense when you venture through the crypto space. After all, only the paranoid survive.
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Risk note about Cryptocurrency Wallets :
Binance Copy Trading is a high-risk subject and may result in money loss. Besides, you have to fully understand the risks associated with Cryptocurrency Trading and Investing as much as you can afford to lose. Be clear about your asset objectives. And also seek advice from an independent financial advisor. It is your commitment to determine whether you have permission to use Tycoon Trading Platform services under the laws of your country of residence. Investments in Crypto have no protection by any Financial Services Compensation Scheme.
