Crypto Wallets
From the moment of your first transaction on a new wallet to its creation, many actions take place, behind which there are many algorithms. We believe that for a general understanding of blockchain, it is important to talk about everything from the scratch.
Introduction: the path from Seed Phrase to Ledger
When everyone talks about a wallet, they often mean a blockchain address. From this it should be clarified:
Wallet ≠ address
A cryptocurrency wallet is a tool for generating an address, as well as for convenient use of cryptocurrency address funds.
Wallet ≠ address
A cryptocurrency wallet is a tool for generating an address, as well as for convenient use of cryptocurrency address funds.
A cryptocurrency address is a unique identifier on the blockchain network that is used to send, receive, and store digital assets. It consists of a series of characters that are generated using a mathematical algorithm based on a public or private key. A cryptocurrency address can only be used once and cannot be changed, so it is important to keep it secure.
The blockchain address itself is generated based on the Seed Phrase and private key.
Seed Phrase is a unique sequence of words used to create and recover cryptocurrency wallets. Seed Phrase consists of 12, 18 or 24 words that are randomly generated and provide access to the wallet's private keys. This phrase is the only way to restore a wallet if the device on which it was created is lost or damaged. Seed Phrase should be kept in a secure place and not shared with third parties.
The blockchain address itself is generated based on the Seed Phrase and private key.
Seed Phrase is a unique sequence of words used to create and recover cryptocurrency wallets. Seed Phrase consists of 12, 18 or 24 words that are randomly generated and provide access to the wallet's private keys. This phrase is the only way to restore a wallet if the device on which it was created is lost or damaged. Seed Phrase should be kept in a secure place and not shared with third parties.
Don't ever do that! Done by professionals.
Types of cryptocurrency wallets
There are two main types of cryptocurrency wallets: cold and hot. Cold wallets are physical media that are connected to a computer, phone or any other device for the purpose of conducting transactions. Hot wallets are applications for browsers, phones or operating systems. Hot wallets have no physical counterparts.
Cold wallets are wallets that are not connected to the Internet and are therefore more secure for storing cryptocurrencies. Cold wallets can come in the form of hardware devices such as the Ledger Nano S or Trezor, or they can be paper wallets that have private keys and addresses printed on them to access cryptocurrencies. Cold wallets are generally considered the most secure for storing cryptocurrencies, as they are not susceptible to attacks by hackers over the Internet.
Cold wallets are wallets that are not connected to the Internet and are therefore more secure for storing cryptocurrencies. Cold wallets can come in the form of hardware devices such as the Ledger Nano S or Trezor, or they can be paper wallets that have private keys and addresses printed on them to access cryptocurrencies. Cold wallets are generally considered the most secure for storing cryptocurrencies, as they are not susceptible to attacks by hackers over the Internet.
Ledger Nano X
Trezor Model One
IMPORTANT! When purchasing a cold wallet, be sure to contact official sources. Buying cold wallets from third parties entails danger, since your private key could be compromised. Ownership of a private key = ownership of the cryptocurrency in the wallet.
Comparison of popular cold hardware wallets:
Hot wallets, on the other hand, are connected to the Internet and can be more convenient for transactions, but less secure. Hot wallets can come in the form of online wallets that are accessible through a web browser, or as apps for smartphones and computers. Hot wallets are usually more convenient to use as they allow you to quickly conduct transactions and access cryptocurrencies anytime and from anywhere.
Trust Wallet
Metamask
IMPORTANT! When installing a hot wallet, make sure that the download is from an official source. It happens that attackers create phishing sites (for more details, read our our article), which really allow you to create an address through your wallet, but all your wallet data will also fall into the hands of attackers. Thus, your address may be compromised
Comparison of popular hot wallets:
Advantages and disadvantages of each type of wallet
Each type of wallet has its own advantages and disadvantages, and the choice of a specific type depends on the personal preferences and needs of the user. In the next chapter we will take a closer look at the advantages and disadvantages of each type of wallet.
How to choose the right cryptocurrency wallet
Choosing a cryptocurrency wallet is an important step for any person who plans to use cryptocurrencies. Before choosing a wallet, you need to determine your needs and preferences. It is important to consider factors such as security, usability, availability and reliability.
Step 1: Determine whether you need a hot or cold wallet. If you plan to use cryptocurrency in your daily life, then a hot wallet may be the best choice. If you are looking for a more secure way to store cryptocurrency, then a cold wallet will be more suitable.
Step 2: Determine which currencies you plan to work with. Some wallets may only support certain types of cryptocurrencies, so it is important to ensure that your cryptocurrency will be supported by the wallet you choose.
Step 3: Check what security measures the chosen wallet provides, such as two-factor authentication, encryption, etc. Also make sure that the wallet has a backup copy so that if the device is lost or damaged, you will not lose your cryptocurrencies.
Step 4: Finally, make sure the wallet you choose is easy to use and suits your needs. Some wallets may provide additional features such as cryptocurrency exchange or integration with other services.
Registering and setting up a wallet
In general, registering and setting up a cryptocurrency wallet is not a complicated process. It is important to follow the instructions to protect your cryptocurrencies from unauthorized access.
Cold wallet
To set up Ledger Nano S or Trezor, follow these steps:
To set up Ledger Nano S or Trezor, follow these steps:
- Connect your device to your computer using a USB cable.
- Download and install the wallet management app that matches your device (Ledger Live for Ledger Nano S or Trezor Bridge for Trezor).
- Launch the application and follow the on-screen instructions to create a new wallet.
- Follow the onscreen instructions to set a PIN for your device.
- Back up your wallet by writing down the 24-word phrase in the correct order on paper.
- Complete the setup by following the on-screen instructions.
Hot wallet
To set up Trust Wallet or Metamask you will need:
It is worth noting that, unlike a cold wallet, hot wallets do not support non-native network tokens by default. To add third-party tokens, we recommend using Coinmarketcap, where you can find information about the token and manually add it to your hot wallet
To set up Trust Wallet or Metamask you will need:
- Install a wallet from official sources
- Create a Seed Phrase and remember it (it’s best to write it down on a piece of paper. Avoid storing it on unprotected devices)
- Create a password for access (Important! During installation, this password is set exclusively for a specific device. Thus, if you have access to one wallet from different devices, you can set different passwords and on each device you will be able to connect using the corresponding password )
It is worth noting that, unlike a cold wallet, hot wallets do not support non-native network tokens by default. To add third-party tokens, we recommend using Coinmarketcap, where you can find information about the token and manually add it to your hot wallet
IMPORTANT! Be careful not to share your SEED phrase with anyone, as this may result in you losing access to your funds.
What problems may arise when using cryptocurrency wallets and how to solve them
The following problems may arise when using cryptocurrency wallets:
1
Loss of access to secret keys. This can happen if the user forgets the password or loses the keystore device. Solution: Back up your keys and store them in a safe place.
2
Wallet hacking. Cryptocurrency wallets may be subject to cyber attacks, which may result in loss of funds. Solution: Use reliable hardware wallets and follow security rules or turn to AML Crypto
3
Phishing attacks. Fraudsters may try to gain access to private keys by posing as wallet officials. Solution: do not share your private keys with anyone, even official wallet representatives.
4
Incorrect transmission of transactions. The user may make a mistake when entering the recipient's address or transaction amount, which may result in loss of funds. Solution: Verify all data before sending a transaction and use two-factor authentication.
IMPORTANT! Be careful when sending a transaction. Currently, scammers are resorting to schemes in which they litter your transaction history with addresses with the same symbols (you can read more in our our article) from your history. Thus, when copying an address from your transaction history, you may think that you copied the required address starting with 0x1..., but you copied addresses that actually started with 0x1..., but with different characters at the end. This address belongs to an attacker.
5
Inconvenient to use. Some users may find using cryptocurrency wallets inconvenient and difficult. Solution: read our articles, where we talk about blockchain simply and in detail (you can read more in our blog)
Cryptocurrency wallets are a convenient and safe way to store and use cryptocurrencies
In conclusion, it is worth noting that cryptocurrency wallets are an effective tool for storing and using cryptocurrencies. They provide a high level of security and ease of use. However, like any other technology, they can have their own problems and risks.
Therefore, it is very important to follow security rules, use reliable hardware wallets and keep backup copies of keys in a safe place.
Choosing a convenient and understandable wallet and studying the instructions will also help you avoid inconvenience when using cryptocurrency wallets. In general, the right approach to using cryptocurrency wallets will allow you to get the maximum benefits from using cryptocurrencies and minimize possible risks. In cases where you were deceived and as a result funds were lost from your cryptocurrency address, please contact these details.
Therefore, it is very important to follow security rules, use reliable hardware wallets and keep backup copies of keys in a safe place.
Choosing a convenient and understandable wallet and studying the instructions will also help you avoid inconvenience when using cryptocurrency wallets. In general, the right approach to using cryptocurrency wallets will allow you to get the maximum benefits from using cryptocurrencies and minimize possible risks. In cases where you were deceived and as a result funds were lost from your cryptocurrency address, please contact these details.
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