Even before you get an account to buy your first cryptocurrency you need to think seriously about security and whats called your crypto wallet.
The short form is that you can leave your crypto on the exchange where you bought it but thats not the safest bet.
The best bet is to store your crypto off the internet in a device like the Trezor or some credit card storage device.
Hot wallets means that you are keeping your private and public keys on the internet which is not good.
Cold wallets or what are called hardware wallets keep the private and public keys off the internet on a device like a Trezor or on a credit card size unit or a usb looking device.
Now lets talk about security and then we’ll come back to talk about what wallets are and how to use them.
Security is extremely important because unless you’re buying your crypto from a hard to find ATM crypto machine in a grocery store in your city, you’ll be setting up an account on an internet based crypto exchange and providing them with your personal identification and in many cases a copy of your latest bank statement.
I advise people who aren’t super knowledgeable about internet security and anti virus programs to not only set up a separate bank account for their crypto activities first but to also go to a completely different bank and set up a new account so that you are totally separate from your non-crypto bank accounts.
Now you will be giving your crypto exchange service your personal information which is usually part of the regulations that banks use under a guideline called ‘KYC’, or know your client.
This verification process which does not happen at an anonymous ATM machine is a way to prove to the government that their clients weren’t doing illegal activites with their bank or now crypto accounts.
The next step that your exchange will ask you to do is for your security protection is to set up whats called a 2 factor authenication which basically makes you go to two steps to log into your account so a hacker can’t easily do it in the future.
This may involve installing a Google app on your phone which automatically generates new numbers that you use when you sign onto your service to access your crypto.
Now after you are verified, its time to worry out your money.
Because now you will be asked to transfer some of your money over and buy some crypto and this is where we’;ll now talk about wallets.
You’ll be asked to send money to your account on the exchange using your debit/credit card or by doing an etransfer or a wire transfer.
Hopefully you have a secure internet connection and aren’t doing this in a coffee shop using your cell and a wifi spot.
If you’ve never done online banking before then I’d suggest you stop and get that started first and spend a few days with that before you go to the big leagues of exposing your computer to the crypto world.
Now we will talk about the term wallets which are simply ways to store your crypto (you can have several different types of crypto coins stored on the same wallet), it stores all of your transaction information )
There are 3 kinds of wallets to store your crypto.
- Hosted wallet,
- a non custodial wallet and
- a physical wallet like a USB stick or card or an $80 Trezor wallet.
The easiest and least advised way is the hosted wallet which is the first place that your money gets stored when you get an account with the exchange.
If the exchange goes broke or something bad happens then your money may be gone forever.
Lets list the uses that a crypto wallet has:
- it creates and stores your private and public keys
- -keeps track of your crypto balance
- makes it possible to send and receive crypto
- works with the blockchain
You will need both the public and private key and only the private key is the one you have to be VERY careful with.
You can give out your public key which allows people to send you money but they can’t take money out if they have your public key.
If they have your private key then they could take out all of your money and you can’t get help from anyone to get it back like you could try to do if you were in a bank.
Now you must know what kind of crypto you are sending or receiving because the wallet must be technologically designed to send or receive certain cryptos and they don’t work with every type.
Yes you could have your entire bank account wiped out and you could be made homeless in the worse case scenario. (sorry to be over dramatic but sometimes this is a good way to approach things).
If you were logged into your account and you suddenly got called out of the house before you logged off or you were home invaded….then someone can get on your account and trade and suck out your money.
Same with your cellphone if you aren’t careful.
What if your loving kids suddenly developed an addiction and they need money and they have your key. (sorry but these are actual stories).