Cryptocurrencies are the rage right now, propelled by the allure of high returns and disillusionment with traditional financial institutions. In the last year, cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), and Shiba Inu (SHIB) have outperformed stocks in leading companies. Concerning levels of inflation, on the other hand, have compelled investors to consider cryptocurrencies as a hedge for their assets.
The complex terms of blockchains, nodes, and crypto-wallets can easily overwhelm newcomers to the field. Not to worry! This article will walk you through one of the most important aspects of cryptocurrency investing: crypto wallets. This comprehensive guide will explain what an online cryptocurrency wallet is and how to set up a crypto wallet.
What is an Online Cryptocurrency Wallet?
A crypto wallet is a software program or hardware device that allows you to store your cryptocurrency and send and receive cryptocurrency transactions. A crypto wallet is made up of two key pairs: private and public keys. A public key is derived from the private key and is used to send cryptocurrency to the wallet.
The private key is the most important aspect of a wallet, and it is often where new users get into trouble. A private key is similar to a safe deposit box key. Anyone with access to a wallet’s private key can take control of the balance.
However, unlike a safe deposit box, crypto users who hold their own private keys and conduct transactions through non-custodial wallets (i.e., wallets not hosted by an exchange or other third party) effectively become their own banks.
How Does a Crypto Wallet Work?
Most cryptocurrency wallets allow users to receive, send, and store cryptocurrency. Some of them allow you to buy and spend cryptocurrencies.
While each wallet has its own quirks, the following are the general steps involved in sending or receiving funds via a crypto wallet:
In order to receive the funds, you should retrieve an address, which is also called a public key from your wallet. Locate and click the “generate address” feature in your wallet. Copy the alphanumeric address or QR code and distribute it to the person wishing to send you cryptocurrency.
To send funds, you will need the receiving wallet’s address. Find the “send” option in your wallet and enter the wallet address to which you want to send coins. Select the amount of cryptocurrency to send and click “confirm.” Consider sending a small test transaction before sending large amounts of cryptocurrency. It is important to note that sending coins requires a fee, which is funded to miners in exchange for the transaction being processed.
How to Create a Crypto Wallet
Setting up one of these does not require ID verification right away; that comes later when you want to put cryptocurrency into it.
Here’s how to set up a self-custody mobile wallet:
- Choose a wallet app.
- Make an account and write down your recovery phrase.
- Some wallet apps may enable you to add an additional layer of security, such as facial recognition or the creation of a passcode.
- Start sending, receiving, or trading cryptocurrency.
The best crypto wallet is determined by how you want to secure your crypto and what you intend to do with it in the long run. Fortunately, switching from a hosted wallet to a self-custody wallet does not have to be a difficult or intimidating process.
If you are looking to create your online cryptocurrency wallet, get in touch with Go Crypto NYC for a free consultation.