It’s a rare person who still thinks that making a living online is a pipe dream.
Nowadays, lots of people not only earn some extra income, but become millionaires working online.
If you’re also eager to start earning money online, you might already consider entering the crypto business.
A good many people now mine Bitcoin or other coins using dedicated software or are engaged in crypto trading, which is also quite profitable.
Whether you’re planning on getting a foot in the crypto door or already started making money trading cryptocurrency, you need to obtain a crypto wallet.
From today’s article, you’re going to learn more about crypto wallets and their use.
As for the most popular cryptocurrency wallets that are considered top picks in 2020, go visit Changevisor.com.
Hopefully, this will help you decide on the crypto wallet to store your digital gold.
What’s a Crypto Wallet?
Any person who’s using cryptocurrency needs a wallet to store their virtual coins.
It’s a device or a program that just like your bank account has a unique address. Such wallets also store your private and/or public keys wherewith you can prove your right to dispose of the virtual currency you own.
Your wallet address looks something like this:
depending on the cryptocurrency.
It seems like a randomly generated string of letters and numbers, but in reality, there is a bit more going on. So, keep on reading to learn more.
Private and Public Keys
The first thing you need to know is how cryptocurrency wallets are created.
In fact, anyone can create a new wallet by generating a public and private key pair with a certain algorithm.
In the case of Bitcoin or Ethereum that is via elliptical curve digital signature algorithm.
That’s quite a mouthful, but the takeaway is that the algorithm will split a private key and a public key.
These keys are mathematically linked to each other, which means you can take a private key and derive a public key from it. But it remains impossible to turn the public key into the private one.
A public key and a private key serve two different purposes.
The public key will become your wallet’s address. It can be compared with your bank account number.
And the private key is our way of proving that you’re the owner of the wallet and thus can spend the money inside of it.
As you might have already guessed, public keys can be shared with anyone, while their private counterparts should be kept to yourself, unless you want other people to decide what to do with your hard earned money.
The seemingly perfect system has some side effects that need to be mentioned.
For starters, anyone can generate an unlimited number of wallets, right on their own computers. It’s only limited by how fast our commuter can generate key pairs.
However, nobody will know about the existence of your wallet until it receives some coins.
A cryptocurrency only keeps track of transactions between wallets. It doesn’t have a list of all existing wallets at its disposal.
So, if your newly created wallet hasn’t been involved in any transactions, it simply doesn’t exist for the outside digital world.
Think of it this way: the blockchain is just a huge spreadsheet with transactions going from one wallet to another. But the blockchain itself doesn’t really care if these wallets exist or not.
It’s only when you want to spend some crypto in your wallet that you have to prove you’re the owner. You can do that only with the private keys associated with the address of the wallet.
Another side effect worth mentioning is that you can transfer coins to a wallet address that even doesn’t exist. Again, a blockchain doesn’t have a list of valid addresses, so it cannot check if you’re transferring coins to a valid one.
In case you transfer coins to an invalid address, they’re just lost forever, unless someone can generate a private key for that particular address.
Fortunately, it’s impossible for the time being because of how the algorithm works.
This is referred to as “coin burning,” and it’s sometimes done intentionally by cryptocurrency projects that want to reduce the total supply and therefore increase the value of their coin.
Choosing Crypto Wallets
Not to experience any side effect of the crypto wallet system, you need to be extremely careful and vigilant when transferring money and sharing keys.
And you need to make sure that you’re using a safe crypto wallet.
But what actually make a safe crypto wallet?
Let’s take a look at the options available and try to figure out which one can suit your needs best.
- A desktop wallet. If you opt for this solution you can easily install it onto your desktop and use it as any other program. Correspondingly, you can access your virtual only though this computer. This option can be quite safe. Still, once you go online you may fall victim to malware or hacker attacks that may lead to stealing your private keys.
- An online wallet. There are lots of companies that offer storing your wallet on the cloud. But be mindful that the keys provided for cloud wallets are highly centralized and thus are more vulnerable to cyber attacks.
- A hardware wallet. As its name suggests, this type of wallet allows you to store your crypto on a physical device. Hardware solutions boast improved protection against different sorts of cyber attacks, which makes it the best option if you’re planning on storing your coins long term.
- A paper wallet. If you don’t trust computers and electronic devices, you may use a paper wallet. You can use this option to store your keys on paper in printed form, usually as QR codes. The paper option is regarded as very safe as long as you keep your keys to yourself and don’t lose your code.