How do I store cryptocurrency and what is a Bitcoin wallet?

Bitcoin wallet

After being dismissed as a passing fad by finance pundits across the world, the growing interest in Bitcoin and cryptocurrency points to evidence that the digital assets industry is here to stay. The adoption rate of cryptocurrency as of December 2021 rose by over 178% and that’s projected to exponentially increase by the end of 2022.

While crypto (as Bitcoin) started as a peer-to-peer payment method, the industry now has tokens that serve a myriad of purposes such as anonymity, exchange of information, automation, and security.

What are cryptocurrency assets?

A cryptocurrency is a digital currency which lives on a digital ledger known as the blockchain. A blockchain is immutable which means it cannot be altered or deleted because it doesn’t rely on a central server. Cryptocurrencies were created as an alternative to the centralised system governments practice today. It was founded upon the idea that anonymity and privacy are fundamental parts of human nature.

Why use a cryptocurrency wallet?

Some new investors or speculators of cryptocurrency leave their cryptocurrencies on crypto exchanges. These can be described as a marketplace for selling and buying cryptocurrencies. True crypto purists tend to keep their cryptocurrencies in an offline crypto wallet. This is because a wallet guarantees that your funds cannot be accessed without your approval. If a user of cryptocurrencies intends to actively buy and sell cryptocurrencies, a crypto wallet is recommended for security and accessibility. Wallets can also house digital valuables such as NFTs.

How does a crypto wallet work?

Though each cryptocurrency wallet works slightly differently, they are all meant to provide safe access to whatever cryptocurrency you hold. A cryptocurrency wallet doesn’t actually contain any cryptocurrency. Instead, it stores the private key that gives access to a person’s cryptocurrency. The cryptocurrency itself is held on the blockchain.

The private key is the critical information that requires safe-keeping because of the access it grants to cryptocurrency.

Features of a cryptocurrency wallet

Simple and extremely secure

It works much like any other piece of software or wallet you use for day-to-day transactions. It is just a matter of safeguarding your private key. Depending on your wallet, type, the most secure offline wallet is immune to hackers (hackers tend to target exchanges because they are online and see large amounts of crypto transacted).

Allows for immediate cross-border transactions

Because of the nature of cryptocurrency, crypto wallets offer a way for people to make borderless transactions. With no intermediaries, like banks, there is no delay in the transactions.

Low transaction fees

The cost of moving funds is significantly lower than with traditional banks.

Decentralised

Crypto wallets are resistant to government overreach (the government cannot just have the firm or platform hand them your crypto).

Classes of wallets: Custodial and non-custodial wallets

A public key is essentially your crypto wallet’s address. This is a public data point, similar to your home address. To deposit cryptocurrency into a wallet, you simply need to enter the public key as the deposit address. The two keys are used in tandem to transfer crypto from one wallet to another. This is analogous to using your handle in a service like Venmo or CashApp.

Custodial wallets are financial services provided by a centralized organization, for example a cryptocurrency exchange. With the escalation of the war in Ukraine, several governments have prohibited custodial wallets from completing transactions for individuals in specific locations.

Because non-custodial wallets do not necessitate the delegation of trust to an institution, no institution may refuse to perform transactions.

Recommended crypto wallets on the market

  • Ledger is a well-known brand in the world of cryptocurrency wallets. It is an offline wallet that has crypto security as one of its fundamental pillars. Your account can be integrated with a variety of popular software wallets, including Crypto.com and Guarda through its Ledger Live platform. Ledger also supports 2FA and supports more than 5500 assets.
  • Atomic Wallet allows users to store over 400 cryptocurrencies and it also allows users to purchase, swap, or stake digital assets straight from their wallets. Unlike some of its rivals, Atomic Wallet does not allow you to connect your holdings directly to cold storage, which means your assets stay online (which is not immune to hackers).
  • Electrum is an unusual wallet in that it only supports Bitcoin. It is an open-source, free software that supports 2FA, simple connectivity to cold storage, and multi-signature transactions. Electrum only has desktop softwareds.
  • Exodus provides a good suite of applications, including a mobile app, a desktop client, and a browser extension. Its products lets users purchase, sell, or stake cryptocurrencies straight from their wallets. It includes an interaction with the Trezor cold wallet to facilitate the transfer of cryptocurrency from hot to cold storage. Exodus supports about 150 coins, including several major assets.
  • Guarda is a free, all-purpose cryptocurrency wallet that users may access by mobile, desktop, or browser plugin. It claims to support over 400,000 digital items. Guarda users may store their cryptocurrency in cold storage thanks to an interface with the hardware wallet Ledger.
  • MetaMask is free, open-source, can store any digital asset generated on Ethereum (there are more than 500,000). It offers mobile and browser-based wallets, but no desktop software. However, you may easily stake tokens using the web applications that link to MetaMask.
  • Trust Wallet is another storage device that works in collaboration with a large cryptocurrency exchange. It is, however, completely open-source, something just a few rivals can claim. More than a million assets are supported.

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