Definition: “Crypto wallets store your private keys, keeping your crypto safe and accessible. They also allow you to send, receive, and spend cryptocurrencies like Bitcoin and Ethereum.”
Crypto wallets keep your private keys – the passwords that give you access to your cryptocurrencies – safe and accessible, allowing you to send and receive cryptocurrencies like Bitcoin and Ethereum. They come in many forms, from hardware wallets like Ledger (which looks like a USB stick) to mobile apps like Coinbase, which makes using crypto as easy as shopping with a credit card online.
Why are crypto wallets important?
Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money. That’s why it’s important to keep your hardware wallet safe, or use a trusted wallet provider like Coinbase.
How do you use a crypto wallet?
Crypto wallets range from simple-to-use apps to more complex security solutions. The main types of wallets you can choose from include:
Paper wallets: Keys are written on a physical medium like paper and stored in a safe place. This of course makes using your crypto harder, because as digital money it can only be used on the internet.
Hardware wallets: Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto. The idea is to try to balance security and convenience.
Online wallets: Keys are stored in an app or other software – look for one that is protected by two-step encryption. This makes sending, receiving, and using your crypto as easy as using any online bank account, payment system, or brokerage.
Each type has its tradeoffs. Paper and hardware wallets are harder for malicious users to access because they are stored offline, but they are limited in function and risk being lost or destroyed. Online wallets offered by a major exchange like Coinbase are the simplest way to get started in crypto and offer a balance of security and easy access. (Because your private info is online, your protection against hackers is only as good as your wallet provider’s security – so make sure you look for features like two-factor verification.)
Using an app like Coinbase Wallet or Exodus gives you easy access to your crypto holdings. You can:
Manage all your digital assets in one secure place
Control your own private keys
Send and receive cryptocurrency to and from anywhere in the world
Interact with usernames rather than long, hexadecimal “public key” addresses
Browse dapps (decentralized finance apps)
Shop at stores that accept cryptocurrency