What is a Digital Wallet?
A digital wallet, or cryptocurrency wallet, is a secure virtual environment for storing multiple kinds of cryptocurrencies. The total number of cryptocurrencies available can be more than 1000. Cryptocurrencies are stored on the blockchain technology, which uses software called wallets to maintain your currency in an encrypted format. Your personal information remains private during transactions, and the decentralized nature of blockchain technology means there is no third party involved.
This makes cryptocurrency a popular choice for online transactions, especially in cases where customers want to remain anonymous or secure their transaction data. The most common type of digital wallet is the hardware wallet.
While having total control over your cryptocurrencies sounds like a straightforward solution to maintaining your financial privacy, it can also be challenging to access your account in the future.
What are Hardware Wallets?
A crypto hardware wallet is a device that’s designed for securely storing cryptocurrency keys and signing transactions. When you use this device to make blockchain transactions, the details of your transaction remain private. This prevents anyone from using any kind of spying or tracking software to monitor your transactions. Hardware wallets are considered one of the most secure ways to hold cryptocurrencies. They’re very similar in function and overall design to a standard USB storage device, but this is where the similarities end. They usually have an OLED screen, which makes it easy for you to verify that you’re signing off on the correct transactions.
Hardware wallets also come with a chain that you can attach to your keychain, belt loop, or anywhere else you might want to keep it stored safely. You’ll need to write down your 24 word recovery phrase when you create the wallet on the device. This allows you use this same information if something happens and you lose your hardware wallet. If you lose the hardware wallet, then you’ll be out of luck when it comes to decrypting your cryptocurrency.
How Do I Start Using a Digital Wallet?
First, visit a website like Coinbase or blockchain.info and purchase a unit. You can do this by making a bank transfer or credit card transaction for the cost of the device. You’ll then need to set up the wallet, which typically involves a few steps:
- Choosing a PIN code or password – High security wallets will give you two passwords, one for access to your account and another as an additional protection measure.
- Writing down the backup phrase – This phrase is your private encryption key that allows you to recover your funds should you lose your wallet.
- Choosing a security level – Depending on the type of cryptocurrency you want to store, you might have multiple options for retrieving information from your account or making transactions. You’ll need to choose a method that’s best suited for your needs and the cost involved.
Once everything is set up, you can begin to make transactions. To send cryptocurrency, you need the receiver’s wallet number. You can also make a transaction online or via an app on your phone.