What is a Cryptocurrency Wallet? Basic Knowledge of “Storage” That Beginners Should Know
Hello, I’m Wolf.
On X (@katsuhikon72938) and my blog, I share information on cryptocurrency price trends and basic knowledge for beginners.
Today is about the basics of “wallets.” I will clarify the questions that beginners first encounter, such as “Where are the coins I bought on the exchange?” and “Do I have to create a wallet?”
A wallet is something that manages “keys”
It might be a little surprising, but the cryptocurrency itself is not actually inside the wallet. The record of the coins is on the blockchain (a ledger for the entire network).
What the wallet manages is the “key (private key)” used to move those coins.
・A person who has the key = a person who can move the coins
・Wallet = a tool (app or device) for safely storing keys and performing operations such as sending money
In banking terms, it’s closer to a “set of a seal and a passbook” rather than the account itself.
How is it different from keeping it on an exchange?
Coins bought on an exchange are in a state where the exchange is holding the keys for you.
・Depositing on an exchange: The exchange manages the keys. It’s easy to trade if you can log in. On the other hand, there is a risk of trouble on the exchange side or unauthorized logins
・Holding in your own wallet: You manage the keys yourself. While you can protect them at your own responsibility, if you lose the keys, no one can recover them for you
It’s not a matter of which one is correct, but rather the difference between “the peace of mind of depositing” and “the responsibility of protecting it yourself.”
The most important thing is the “seed phrase”
When you create a wallet, 12 to 24 English words called a “seed phrase (recovery phrase)” may be displayed. This is the backup of the key itself.
・Anyone who knows this can move the coins
・Never tell anyone else, and do not send it via SNS or email
・First, suspect fraud if a site or contact asks you to “enter it for confirmation”
・The basic rule is to write it on paper and store it offline
Exchanges and support will never ask for your seed phrase. I will emphasize this as many times as necessary.
Hot and cold
There are two main types of wallets.
・Hot wallet: Used while connected to the internet, such as a smartphone app. It’s convenient, but there are risks via the internet
・Cold wallet: Stores keys while disconnected from the internet, such as using a dedicated device. It’s safer, but takes time and money
As long as the amount is small, there is no need to force yourself to get one. Just knowing that “such types exist” is enough.
Recommended order for beginners
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First, get used to buying and selling on an exchange (prioritize “security” settings like two-factor authentication)
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Once you understand how it works, try moving a small amount to your own wallet to test it out
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Do not rush to connect your wallet to sites or projects that request it. Always verify if it is official
Especially the third point. There are many scams that pressure you to connect your wallet or sign transactions by claiming “airdrops” or “winning a prize.” Whenever you feel rushed, please stop and take a moment.
Summary
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A wallet is a tool for managing “keys,” not “coins”
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Exchange = entrusting your keys to someone else; Wallet = holding your keys yourself
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Never show your seed phrase to anyone or enter it anywhere
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Beginners should first get used to exchanges and start with small amounts in their wallets
Just by knowing how it works, you can prevent many troubles. Don’t rush, and get used to it little by little.
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※ This article is for informational purposes only and is not an investment solicitation. Please make your own final decisions.