What Is a Cryptocurrency Wallet?
Do you own a wallet? What's your wallet address?
A cryptocurrency wallet can be defined as an application that works as a digital wallet to store the passkeys for your cryptocurrency transactions and provides an interface to use your cryptocurrency. In the beginning, when cryptocurrency was in its initial state, sending cryptocurrency was a hectic task because we had to enter long keys for it. But now, this is done by crypto wallets for you.
How do these Wallets work?
In simple terms, Cryptocurrency wallets are software applications that can access the blockchain network of the cryptocurrency you are using to get the data about it. Cryptocurrencies are not stored like regular currencies, they are stored in the form of bits of data in a database. Crypto wallets help in finding all the bits associated with the public address that are scattered over the database and calculating the amount to show you in the app.
These crypto wallets have made sending and receiving crypto very easy. Usually, you require the wallet address of the receiver, enter an amount, sign with your key, including the transaction fee, and send it.
Many wallets provide QR codes that let you scan the code, select an amount, enter a key, add a transaction charge, and send it.
Receiving is even more accessible, the sender enters the address and follows the same steps above. You accept the payment and are done.
Types of Cryptocurrency Wallet
There are two types of crypto wallets, custodial and noncustodial. In Custodial wallets, a third party stores the keys for you. Some cryptocurrency exchanges even offer their users the facility of custodial wallets. In Noncustodial wallets, you are responsible for securing and storing your keys. Most of the cryptocurrency wallets of this type.
Wallets can also be categorized as hot wallets and cold wallets. A hot wallet is a wallet that has internet connectivity. On the other hand, the cold wallet has no connection. Again we have three subcategories of wallet: software, hardware, and paper.
Software Wallets
Mobile applications and Desktop applications usually come under the category of software wallets. These applications let you access your crypto wallets, transact, view balances, and more. Trezor, Electrum, and MetaMask are some of the well-known software wallets.
Hardware Wallets
The most popular types of Crypto wallets are hardware wallets because they let you store the keys on offline devices. Since it stores keys in an offline manner, it is safer than software wallets. Hardware wallets come under cold wallets because of no connectivity until they are plugged in.
Paper Wallets
Earlier, when crypto was still emerging, users used to write down or print the keys on paper which was considered a paper wallet. With time, these wallets also evolved, and now we have QR codes that we can scan by mobile devices to get the key. Nowadays, not many people use paper wallets as there is a chance of getting these papers and QR codes lost or damaged easily if not taken care of.
Crypto Wallet Security
The safety of the wallet is as important as the keys inside those wallets, so it is necessary to follow some good practices. Some practices include
- Using a strong password
- Multi-factor authentication for exchanges
- Storing large data offline (Cold storage).
In simple terms, the more steps it requires to access your wallet, the more it will be difficult for hackers to access it. By following this approach, your keys will be safer than before
What is Metamask?
Metamask is a crypto wallet that depends upon browser integration and structure to work as a channel to the universe of Web3, Non-fungible tokens, and decentralized finance. It works as an Ethereum wallet that can be installed like a regular browser plugin. Ether and other ERC-20 tokens can be stored with this plugin, enabling users to make a transaction to any Ethereum address.
MetaMask can be more productive when connected to Ethereum-based dApps; users can use their coins in apps and games for purchases and also trade with these coins on decentralized exchanges. It acts as a gateway to the world of decentralized finance and access to Defi apps.
How to get started using MetaMask?
In order to access MetaMask, you must have Chrome or a Chromium-based browser.
- First, you must download and install the Metamask extension for your browser.
- Click on the "Get Started" button to create your Ethereum wallet using MetaMask.
- Click on Create wallet.
- Agree to the terms and conditions.
- Enter a strong password for your wallet. And done.
MetaMask will then provide you with a 12-word backup phrase, which you must write down in the same order displayed on the screen. This backup phrase will come into the picture when there is a need to recover your wallet; it should be stored somewhere safe. Anyone with your 12-word backup phrase can access your funds in your MetaMask wallet, so keep it safe and private.
What are the advantages of MetaMask?
It is well known among users because it provides users with one plugin to explore a number of dApps.
Instead of managing keys, users need to remember a set of words, and transactions will be done on their behalf. We don't have to worry about downloading the Ethereum blockchain as MetaMask sends requests to external nodes.
Decentralized Apps are designed to work efficiently with MetaMask.
What are its shortcomings?
MetaMask holds keys in the user’s browser, which is less secure compared to hardware or paper wallets, but still, people use it for ease of use.
Conclusion
Cryptocurrency still has much potential; what we have learned so far is just the beginning. Crypto wallets play a crucial role in this process allowing users to dive deep into the crypto world and explore all the possibilities. One such unique Crypto wallet is MetaMask, which has many features and robust security without compromising the ease of access to users.
It is constantly developing with the developing crypto world; it has integrated with Trezor and Ledger (hardware wallets), so users can use Metamask while saving their keys in a hardware wallet.