Bites
CRYPTOCURRENCY

What's a crypto wallet?

December 01, 2021
2 mins

It seems you can't go a minute without hearing or reading about crypto these days. While some of us have already jumped on the bandwagon, others who haven't yet gotten around to it may be too uncertain about how to get started.

Well, first thing's first: buying and saving crypto is nothing like putting cash or fiat currency in a savings account at your local bank down the street. When you buy and save crypto, you need a crypto wallet that stores your private key, keeping your crypto safe and accessible.

What is it exactly? And what about those keys?

Simply put a crypto wallet is an app that allows you to store and hold your cryptos. A hot wallet is one that's accessible online, but more susceptible to online hacks. However, because it's connected to the internet, it's faster and easier to trade, receive and spend your crypto. 

On the other hand, your cold wallet is a physical device and isn't connected to the internet, making it more secure but less convenient. And regardless of your wallet type, it'll consist of two keys: a private key unique to you and a public key derived from the private key. The latter acts as the address that is needed to make crypto transactions within the wallet. A crypto wallet can have multiple public keys meaning that you can have more than one public address, which can be used to receive crypto into the same wallet.  

Your private key is your own private password that gives you access to your funds. Unlike a bank password, you can’t reset your private key. If you lose your private key, you may lose access to your funds altogether, unless your exchange platform can help restore it (but don't bank on it). 

How a crypto wallet works   

All transactions are recorded on the blockchain, a public ledger, in the form of "blocks." A crypto wallet allows key holders to interact with their crypto held on the blockchain. When you need to receive funds in your crypto wallet, get your public key and share it with the person you need to receive cryptocurrency from. To unlock the funds and use them, you need to match your private key with your public key. On the other hand, you need the receiver's public key to send money from your wallet.  

Some parting tips

Crypto wallets are a convenient way of sending or receiving crypto. While making a crypto transaction, make sure you are sending money to the wallet that accepts the type of currency you are sending; otherwise, your money will be lost forever.

Also, keep your private key safe at all costs. We suggest writing down your private key and keeping it somewhere safe where you won't forget it. If it ends up in the wrong hands, whoever has access to it will have complete control of your crypto. 

💡 Take Finny's bite-sized lesson on cryptocurrency basics to learn more:

Share this Bite

Calling all personal finance creators and writers

Would you be interested in writing Finny Bites, fully attributed to you? If so, we want to hear from you: send us an email and we'll be in touch!