Crypto Wallets explained
Public-Private Key Encryption
- A crypto currency wallet is essentially a public-private key protected file, paired with an application that manages the keys. The app will generate both a public and a private key which are associated with one another. Here is what a key looks like (example only, not a real key):
- Wallets might be kept in a computer file or app, either on your own computer, your smartphone or tablet, or in the cloud, or on a hardware device like a thumbdrive. While the wallet file can be copied, the actual "contents" are just an address to assets stored on one or more public ledgers (a different ledger for each kind of coin), so copying a wallet, sadly, doesn't mean you are multiplying your assets. But it might be a good idea to make copies to keep in several places as long as those places are secure. If someone else can access your wallet and your private key, they can also control your crypto assets, and you probably don't want that to happen, but avoiding a single point of failure by keeping your key(s) in just one place is also smart. Using 2-factor authentication on your wallet is a good idea, too.
Private Key & Seed Phrases
- The private key, as the name implies, should not be shared with anyone and is used to open the wallet. It is very important to keep that in a secure place, like an encrypted password app (I like 1Password, but there are others). Both keys are long strings of alphanueric characters, so it's unlikely you would be able to memorize them, but the apps also usually generate a random-seeming list of human-readable words that can be used to retrieve a wallet, called the "seed phrase". This should also be kept safe since it can be used to regenerate the private key.
- This is what a seed phrase looks like. The words themselves have no particular meaning, but the order they appear in does matter. If you get them out of sequence or misspell one, they won't work. This is only an example, not a real seed phrase:
globe yellow item pool question dog bullet solve choice ray glide nominal
- The public key is a string of numbers you can give to someone else, or use at a crypto currency exchange, which is essentially an address where you can receive crypto currency. One important aspect of private keys is that most blockchains require that you can only transfer crypto currency into an account that matches the sending and receiving coin. So, if you want to transfer, say, ETH (Ethereum currency) from an exchange into your wallet, you need to use a public key that your wallet's app generates for that specific blockchain. If you try to send ETH to a wallet using a key generated for Bitcoin (BTC), it will be lost. In some cases it may be possible to retrieve incorrectly addressed currency by contacting someone who maintains the blockchain, but it is by no means guaranteed to succeed, so be careful and avoid the problem in the first place! Refer to the documentation for your wallet to see how to create a coin-specific public key to use.
- "When you generate your wallet, you’ll be asked to set a password or pin which is required to login in or access your wallet. Do not forget this password otherwise you will be locked out of your wallet. And, the only way to “reset” the password is to recover the wallet again with your seed phrase." -- DeFi Pulse
A Selection of Wallets
- A crypto currency wallet that also serves as a gateway to blockchain apps (DApps), MetaMask is available as a browser extension or a mobile app.
- A crypto wallet that also functions as an exchange for a broad selection of currencies, both crypto and fiat. Available on the Web or mobile.
- N.B. An important consideration when deciding how to fund a wallet includes processing times. The Uphold wallet currently not only holds deposits from US Banks for "up to" three business days, they then put a 65-day embargo (which they call a "cool-down period") on trading for crypto with US dollars from US banks. I got caught in this trap when this was not brought to my attention when I made a deposit from a verified US bank account, and then had to search for this information when trying to figure out why it was taking so long to process my transaction. I am planning to withdraw the funds to upload them to a more cooperative exchange, either Coinbase or Binance, and will not use Uphold to invest USD from banks again. Caveat emptor. This is not the way to build trust in crypto currency!
- Available on Samsung Galaxy devices. Now includes handling for Decentraland Marketplace DApp.
- This article lists a vast array of wallets -- hardware, software and even paper -- and compares their features.
- An article with some how-to-use information for each of nine wallets they deem the best of this year
- The official wallet of the Binance exchange.