Wallets: Public & Private Keys
How do Digital Wallets and Cold Storage work? Digital Wallets and Cold Storage are how and where you store the information that states you own cryptocurrency on a given block chain. This is where you can keep your Public and Private Keys. Digital Wallets and Cold Storage are important for your ability to send and receive Bitcoin and other Cryptos.
Wallets operate similar to how online banking works. With the exception that allows you to create different bank account numbers, we called them as wallet addresses. You should only use the address for each transaction once to maintain security. Each time you need to make a new transaction, generate a new address and give that to the paying party. Or vice versa someone can send you their address for you to pay them from your wallet.
There are two types of wallets, Hot wallet and Cold Wallet. Cold wallet is an offline wallet which looks like an USB. Private key will be stored inside the wallet. It will need to be plugged into your laptop or mobile in order to connect to the network. This greatly reduces the risk of hackers stealing private keys. Hot wallet is an online wallet which you can easily find on app stores or websites. Most of them are free of charge. The interface and operation are simple and easy to understand. It is also a great choice for users who frequently trade. Although hot wallets are very convenient, they are as secure as cold wallets.
NEVER DISCLOSE YOUR PRIVATE KEY TO ANYONE!
There are different brands of digital wallets. You should also understand the definition of Public and Private Keys. This will help you to evaluate whether you are comfortable with storing your private keys with the wallet provider. You may prefer to store your private key in a place where you have direct control.
Choosing The Right Digital Wallet:
We recommend using Trust Wallet which is a multi currency digital wallet that is now the official wallet for Binance. Trust Wallet is secure, allows for instant trades, is completely anonymous, and has a Web3 Browser that allows you to interact with decentralized applications (DApp) directly from inside their app.
Large exchanges like Coinbase provide multi-currency online and mobile wallet services. You can have multiple Bitcoin wallet addresses under the same account. Their Wallet supports all major cryptos like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. You can also have a fiat wallet (USD / EUR / GBP) to facilitate trading on their exchange. (Fiat deposit is not applicable to Hong Kong users)
Blockchain.com also provides online and mobile Bitcoin wallet services, it is a hybrid wallet – meaning the company stores your wallet online but they do not have access to your private keys.
Breadwallet is a digital wallet that supports both IOS and Androids.
Alternatively, you can also print out your private key on a piece of paper, some people use this method and keep the piece of paper in a safe location (e.g. deposit box / vault at a bank). However, it is important to keep in mind that if you lose your keys. Consequently, your crypto is not only out of your possession, recovery or further circulation of the cryptocurrency is impossible. The estimate is that around 30% of Bitcoin has been lost forever due to negligence, carelessness, and in some cases wilful destruction.
Thanks for reading our tutorial on How do Digital Wallets and Cold Storage work.
For more info. watch this tutorial video on how to setup a digital wallet.