What is a wallet and how do I set one up?
Confused about what digital wallets are? Look no further, this is your go to guide for everything wallet related in cryptocurrency!
First things first, if you want to use any cryptocurrency you need to have a wallet capable of holding cryptocurrencies. Now what exactly is a wallet? Cryptocurrency wallets are programs that store your public and private keys and allow you to interact with different blockchains. When you transfer cryptocurrencies from one wallet to another, you sign off ownership of your coins and that transaction is stored on the blockchain.
There are several different types of wallets, but the main two are hot and cold wallets. Hot wallets are wallets connected to the internet. These wallets for example are your Coinbase or Binance wallets. Since they are connected to the internet, you run a risk of getting your coins stolen through a vulnerability on the third parties end or through phishing. On the other hand, Cold Wallets, are much more secure and are supposedly hacker proof (as long as human error isn’t involved). There are a variety of cold wallets, but the main one we’re going to focus on is the hardware wallet. Hardware wallets are kept offline and require physically pressing a button with the device to confirm transactions. So as long as you don’t lose your physical wallet or private keys, your cryptocurrency should be safe. Several hardware wallet manufacturers include Trezor, Ledger, and KeepKey. Be sure you buy direct from each manufacturer’s website. Buying hard wallets off ebay or previously owned wallets without manually resetting and wiping the device can lead to stolen funds.
For simplicity’s sake, this article will focus on how to set up an Ethereum wallet, which can hold both Ether and ERC20 tokens. Wallet setups are all different, but we'll be going over a few key concepts which should apply to all wallets. Note that cold wallets can hold all types of cryptocurrencies (BTC, ETH, LTC, NEO) given that the proper applications and updates are downloaded.
The first step to setting up an internet based Ethereum wallet is going to MyCrypto.com. Once on the website, it will tell you to enter a password to create a new wallet and just like that you’ve created your first wallet! The file you download is needed to access your wallet along with the password you set. Make sure you don’t ever lose this file, because if it’s gone you can no longer access your wallet. To interact with your wallet, there’s a tab on MyCrypto that says “View Info” - you click Keystore / JSON File and you upload the same file from before. After typing in your password you now have access to your personal wallet. Upon seeing the wallet interface, you should see several pieces of information.
Your address: Should start with a 0x, is your public key. If people want to send you cryptocurrency, this is the address you give them.
Keystore File (UTC / JSON): This is the file you just downloaded.
Private Key: This is the most important part of your wallet. If you go back to the view info tab on MyCrypto, there should be an option to access your wallet via private key. The private key can access your wallet directly, so if anyone ever gets ahold of this they can go directly into your wallet - without needing your keystore file. Make sure to keep your private key safe.
The concepts of addresses along with private and public keys are applicable to cryptocurrencies of all kinds - the only difference are different interfaces to access the wallet. We hope this article gave you a better sense of what wallets were and how they worked!
Cheers,
The Blockchain Musketeers
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