Are you aware that in 2019, ~6% of U.S.-based adults were unbanked? This means they have no access to a checking, savings, or money market account. Not only that, but in the same year 16% of 18+ people were underbanked (had a bank account but used check-cashing facilities).
What are these people to do without being able to securely store their cash and assets? Cryptocurrencies offer a way into the financial market without needing a centralized party or legacy financial system.
How do you store crypto though? In our guide, we’ll answer the question, “what are crypto wallets?”. Read on to learn the 411.
What Are Crypto Wallets?
With cryptocurrencies, you can’t just fold them up and put them in a physical wallet. Instead, you’ll hold a pair of keys (public and private keys) with a crypto wallet.
Public and Private Keys
A public key or address is what you share with others when you wish to receive cryptocurrency. Your private key is never to be shared and secured safely. It will either look like a long string of random numbers and letters or as a seed phrase.
How Crypto Wallets Work
When learning how to store crypto, you may be surprised that you’re not storing anything in the wallet itself. The cryptocurrency resides on the blockchain—a public ledger that stores the data in “blocks”.
For example, a Bitcoin wallet allows you to interact with your bitcoin balance via the Bitcoin blockchain. Due to its public nature, this means that you can see how much crypto you have as well as other accounts (as long as you have their public key/address).
Types of Crypto Wallets
When breaking down the question, “what are crypto wallets?”, you’ll see they fall into four main subcategories—hot/cold and custodial/non-custodial. Let’s take a closer look at what these terms mean, shall we?
A hot wallet gets its name since it’s connected to the internet. You can download a hot wallet to your mobile device, or desktop, or use a web-based version. While these are more convenient, they open up security risks as they are vulnerable to online attacks.
Many people use hot digital wallets to trade, buy, or peer-to-peer (p2p) purposes. When out and about head to https://www.bytefederal.com/bitcoin-atm-near-me/ to locate a Bitcoin ATM (BTM) in your area.
Cold wallets or hardware wallets look and function a lot like USB sticks. Alternatively, you can also store your crypto on a paper wallet. A hardware wallet is seen as more secure and private since they aren’t connected to the internet and the private keys never leave the device itself.
Custodial vs Non-custodial
When you use a custodial wallet, you will not have access to the private keys. They will often feel like a wallet but in actuality be an exchange. With non-custodial digital wallets, you have access to your private keys.
Remember the mantra—not your keys, not your crypto.
Do Your Own Research
Now that we’ve answered the question, “what are crypto wallets?”, the best way to learn is to try. You can start by downloading a Bitcoin wallet to your phone today. Once you’ve learned the ropes, you can upgrade to a hardware wallet.
It can be tough to keep up with the crypto space. Fear not, our blog has everything you need to stay in the loop. Read it and share what you’ve learned with others.