Blockchain Wallets

What is a crypto wallet?

In essence, a cryptocurrency wallet is a gadget that allows you to communicate with a blockchain network. There are various types of cryptocurrency wallets, which can be divided into three categories: software, hardware, and paper wallets. Depending on how they work, they may alternatively be referred to as “hot” or “cold” wallets.

Because of this, most software-based crypto wallet providers are more user-friendly than hardware wallets. Hardware wallets are the most secure choice. Paper wallets, on the other hand, are merely a sheet of paper with a printed-out “wallet” on it.

How do cryptocurrency wallets work?

Contrary to a popular misconception, crypto wallets do not actually hold digital assets. They instead supply the tools needed to communicate with a blockchain. To put it another way, these wallets can create the information required to transfer and receive money via blockchain transactions. Such information includes, among other things, one or more pairs of public and private keys.

The wallet also contains an address, which is an alphanumeric identifier formed from the public and private keys. In essence, an address is a distinct “location” on the blockchain to which bitcoin can be transmitted. This implies that while you can share your address with others in order to receive payments, you should never reveal your private key with anyone.

Regardless of whose wallet you use, the private key grants access to your cryptocurrency. As a result, even if your computer or smartphone is compromised, you can still access your assets on another device if you have the associated private key (or seed phrase). It is important to note that the coins are never completely removed from the blockchain; they are simply transferred from one address to another.

Types of wallets

Hardware wallets

Hardware wallets are devices that are made to store private keys securely. People think they are safer than desktops or phone wallets because they never connect to the internet. Malicious people have fewer ways to attack the device because of these features since they can’t access the device remotely.

A good hardware wallet makes sure that private keys never leave the device. They are usually held in place in a way that makes it impossible to export.

Hardware wallets are always offline, so they must be used with another computer. Because of how they are made, they can be plugged into PCs or phones that have been infected without leaking the private key. From there, the wallet can talk to software that lets the user check their balance or execute transactions on the blockchain.

Once a transaction is made, the user sends it to the hardware wallet. From there, the transaction is still not finished; it needs to be signed by the private key on the device. When asked by the hardware device, users make sure that the amount and address are correct. Then, it is signed and sent back to the software, which sends it to the network of the cryptocurrency.

Why you should use a hardware wallet

When users store their private keys on computers or phones that are connected to the internet, their money is open to a wide range of attacks. Malware can find crypto-related activity on these devices and steal the money of the people who use them.

A hardware wallet is like a vault with a small slot that can’t be broken into. When the user wants to make a transaction that the network will accept, they push it through the slot. Imagine that an elf does some cryptographic magic on the other side of the slot that signs the transaction. The elf can’t get out of the vault because there’s no door and it’s too big to go through the hole. It can only get the transactions and send them out again.

Even if someone gets their hands on your hardware wallet, a PIN code will give you extra security. If you enter the wrong combination a certain number of times, many devices will reset.

Money that isn’t being spent, gambled, lent, or traded should be kept in “cold storage.” Even if a user doesn’t know much about technology, a hardware wallet makes it easy for them to do this.

Hardware wallets need to have backups in case they are lost, stolen, or destroyed. During setup, the user is usually asked to write down their “seed phrase,” which is a list of words that can be used to get money back on a new device. This lets anyone spend their coins, so it should be treated as if it were something valuable. Users should write these down (or etch them into metal) and keep them in a private place where they won’t be found.

Limitations of hardware wallets

Hardware wallets have their own pros and cons. Even though they’re one of the safest methods for storing coins, there are still some problems. They find a good balance between safety and ease of use. Hardware wallets can be hard to use, but smartphone wallets and software wallets are easy to use (given that two devices must be used to actually send funds).

Still, hardware wallets aren’t 100% safe. A user could be forced to unlock their wallet for an attacker by being physically hurt, but there are other ways as well. If someone gets their hands on the device, they might be able to use it for bad purposes.

Attacks on the supply chain can also be used to break the security of a hardware wallet device. This happens when a bad person gets a wallet before it gets to the user. From there, they can change it to make it less safe and steal the user’s money after they’ve deposited coins. This is why you should never buy a hardware wallet from a third-party seller or platforms like Amazon or eBay, etc. You should only buy the hardware wallet directly from the manufacturer.

Another problem with hardware wallets is that you have custody completely in your hands. Many people see this as an advantage because no one else is in charge of managing your money. But this also means that there is no way out if something goes wrong.

Software wallets

There are many kinds of software wallets, and each one has its own special features. Most of them are linked to the Internet in some way. Here are some descriptions of web, desktop, and mobile wallets, which are some of the most common and important types.

Web wallets

Web wallets give you access to blockchains through your browser, so you don’t have to download or install anything. This includes both exchange wallets and other websites that offer wallets. Most of the time, you can set up a new wallet and protect it with a password. Some service providers, on the other hand, will keep your private keys and manage them for you. This may be easier for people who have never done it before, but it is a risky thing to do.

If you don’t have custody of your private keys, you’re entrusting your money to others, which is risky. To solve this problem, a number of online wallets now let you take care of your keys all by yourself or with the help of other people (via multi-signatures). So, it’s important to look at how each wallet uses technology before choosing the best one for you.

Desktop wallets

As the name suggests, a desktop wallet is software that you download to your computer and use there. Desktop wallets give you full control over your keys and cash, unlike web-based wallets. When you create a new desktop wallet, a file on your computer is created and saved. Because this file has the private key information you need to access your wallet addresses, it should be encrypted with a personal password.

If you encrypt your desktop wallet, you will be asked to enter your password every time you open the app so that it can read the saved file. If you lose this file or forget your password, you will most likely lose access to your money, so it’s important to have a backup of your wallet.

Keep the file in a safe place. You can also export the associated seed phrase or private key. If your computer breaks or is inaccessible for some reason, you will still be able to get to your money on other devices.

In general, desktop wallets are thought to be safer than most web wallets, but you must make sure your computer is free of viruses and spyware before installing and using a cryptocurrency wallet.

Mobile wallets

Mobile wallets work the same way desktop wallets do, but they are mostly made for smartphone apps. These are very helpful because you can use QR codes to send and receive cryptocurrency.

Because of this, mobile wallets are the best way to make daily payments and transactions. This makes them a good way to spend Bitcoin, BNB, and other cryptocurrencies in the real world. One well-known example of a mobile crypto wallet is Trust Wallet.

Like desktops, mobile devices can get messed up by rogue programs and malware. So, you should protect your mobile wallet with a password and make a copy of your private keys (or seed phrase) in case you lose or damage your phone.

The importance of backups

It might be expensive to lose access to your cryptocurrency wallet. As a result, regular backups are essential. This is frequently accomplished by simply backing up wallet.dat files or seed phrases. A seed phrase, in essence, functions as a root key, generating and granting access to all keys and addresses in a crypto wallet. Also, if you chose password encryption, keep a backup of your password.

Supported wallets for the Effect Network

You can connect to the Effect Network by using an EOS or BSC wallet address. For EOS-based accounts, we recommend Anchor for desktop/mobile and TokenPocket for mobile. For BSC-based accounts, we recommend using MetaMask.

If you need help/support with creating a wallet address or using any of these services, please visit their official help pages:

Anchor - https://support.greymass.com/support/home

TokenPocket - https://help.tokenpocket.pro/en/

MetaMask - https://metamask.zendesk.com/hc/en-us/

Alternately, for those so inclined, you can create a keypair yourself. This method is not advised for those who are brand new to blockchain.