What is a Cryptocurrency Wallet?
Cryptocurrency wallets are secure pieces of software used to safely store your crypto just like traditional wallets store your cash and credit cards. They communicate with blockchain networks to access, send and receive crypto funds and assets, such as cryptocurrencies like Bitcoin or Ethereum and NFTs. The crypto wallet does not hold physical items but does hold the “private keys” of your digital passwords associated with your coins and digital items. For example, as you use your debit card at the ATM machine to access your cash, you can use a crypto wallet to access your crypto currencies.
When it comes to storing your crypto, there are two options: custodial or noncustodial wallets. There are pros and cons to both choices, here’s the run-down.
Custodial Wallets or “Hosted” Wallets:
Most people are familiar with custodial accounts or centralized exchanges such as Coinbase, which recently went public. For example, if you want to purchase Ethereum (ETH), you can sign up for a Coinbase account, make your purchase, and Coinbase will act as a third-party with ownership to the private keys to your ETH. By using an exchange such as Coinbase, you are trusting the platform because of their size, reputation, and track record with keeping your crypto safe. The downside with a third-party custodian is that there is a chance that your wallet can get hacked and your assets stolen. Although there is not a significant threat, it is something to consider. Furthermore, most custodial accounts do not offer a way to store NFTs on their wallets.
Non-Custodial Wallets:
For full control of your crypto assets, a non-custodial wallet is your best bet. With this choice, you hold the “private keys” to your cryptocurrencies and other digital assets. Although this is the most secure way of holding onto your assets, it comes with great responsibility. Private keys are used to digitally sign a transaction and authenticate them on the blockchain. One private key can generate several wallet addresses. A seed phrase of approx. 12-24 words is generated within the wallet software and is linked to your private key. Thus, keeping your seed phrase safe is critical. Think of your private key and seed phrase as your PIN code that is attached to your debit card. That PIN code gives anyone who attains it access to your money just like the private key and seed phrase do with your digital assets, but unlike a bank, there is no way to track down a theft or get reimbursed.
Some NFT Wallet Choices:
MetaMask is an Ethereum wallet available as a browser extension on the web and mobile app. It generates seed phrases and keys on your device, so you are in full control of your account and you can choose to keep private or share what you like. However, it only stores Ethereum native currencies and NFTs.
The Enjin blockchain wallet provides a secure, easy to use dual encryption protection shield. Enjin has partnered with Samsung so that it seamlessly integrates with the Galaxy S series smartphones. The mobile app includes a marketplace for claiming, linking, and trading in-game NFTs and other digital collectibles. It also has a customer support desk which is a great plus and unique to the industry!
Hardware Wallets:
Many believe a hardware wallet is the only way to go. As the saying goes: “not your keys, not your coins”. These are typically the safest way to store your digital assets, especially if you own a significant amount of cryptocurrency or highly valuable NFTs. Often referred to as “Cold” storage as they are off the internet and the most secure option. These are physical devices such as a USB drive which you connect to your computer when making a transaction and then remove it once it is finished. In this way, your private keys are stored on the device itself and not on an online platform making it difficult to exploit. The downside of this option is that you need to store your hardware somewhere safe and you need to keep your seed phrase in separate safe storage. Sometimes this can provide more complications and people have lost their hardware or have forgotten where their seed phrase is located. Many stories have circulated of individuals who have lost millions of dollars in such a way.
The Bottom Line:
Those of you reading this newsletter are probably better versed than most in the realm of digital art, collectibles, and cryptocurrencies, and hopefully this primer will set your minds at ease about setting up your own crypto wallets.
Stay Curious!
~NFT Art Source
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For more information about wallets:
https://www.garyvaynerchuk.com/how-to-make-a-cryptocurrency-or-nft-wallet/