When it comes to trading in cryptocurrencies, there is often talk of so-called wallets. But what is it and what do you need a wallet for?
A wallet is a kind of digital wallet for cryptocurrencies. If you have a wallet, you can use it to
- Receive cryptocurrencies (from other persons or from any stock exchanges)
- Store cryptocurrencies (whether for a few seconds or for many years)
- Send cryptocurrencies (to other people, to exchanges, to traders, etc.).
A wallet is only ever available for one currency. With a Bitcoin-Wallet you can receive Bitcoins, store Bitcoins and send Bitcoins. You can receive with a Bitcoin-Wallet, but no Ether or Litecoin. If you try this, the coins sent will most likely be lost.
Important note: The purchase of cryptocurrencies carries very high risks. Please note that you are solely responsible for trading in cryptocurrencies. If you are interested in buying cryptocurrencies or wallets for cryptocurrencies, we will only give you an orientation guide.
In this respect, a wallet is comparable to a wallet, but much more complicated than a real wallet. Inserting, storing and removing currencies is no problem with a normal wallet. However, if you want to do the same with a wallet for cryptocurrencies, it works a little differently.
To send coins to a Wallet, they must be sent to the address of the Wallet. An address is a long chain of letters and numbers and looks something like this for an Ethereum wallet: “x0r7jfngh48grjLNF8984JKLFlsdsT9890mkjKJ8495hfhr878”.
A correct address always belongs to exactly one wallet. This allows coins that you wish to transfer to be uniquely assigned to a Wallet.
You should note the following if you want to transfer cryptocurrencies, whether Bitcoin, Ethereum, Ripple, Monero, Stellar or Cardano, back and forth between wallets:
- If you send currencies to your Wallet (e.g. from a stock exchange) then send Bitcoin only to Bitcoin addresses, Ripple only to Ripple addresses, Litecoin only to Litecoin addresses etc. If you confuse the addresses, you may lose your coins.
- When sending currencies, double check that you are sending the coins to the correct address. You may not accidentally delete or add a character to the address. If you are not sure about this process, always send (as a test) only a small amount at first.
- If you want to keep currencies in your wallet for longer, choose the most secure wallet possible. And, at least as important, don’t lose your password. Because, if you no longer have a password, you no longer have access to your coins.
- If you are sending cryptocurrencies from your wallet, pay attention to the fees. Taking money out of a wallet usually costs nothing. Sending coins from your wallet sometimes costs almost nothing, but can cost 10 Euro or more (regardless of the amount sent).
But how do you get a wallet like that? There are different types of wallets. You often get online wallets without doing anything special for them. For example, if you register at a crypto exchange such as Binance, KuCoin or Poloniex, then wallets for various cryptocurrencies are immediately available to you.
The four exchanges mentioned above provide you with so-called online wallets for all cryptocurrencies that are traded there. Select coins there and buy them, then the digital coins first land in such a wallet after the purchase. This is practical and facilitates the first steps in trading with cryptocurrencies.
But unfortunately, crypto exchanges are also interesting targets for hackers. Moreover, you can never be quite sure whether you can trust every stock exchange on a long-term basis. Therefore, we recommend using the online wallets of the exchanges only for trading in cryptocurrencies.
On the other hand, online wallets are not the best solution for permanently storing purchased currencies. Instead, you should get a wallet where only you have the “private key”.
The private key (which you can imagine as a long chain of numbers and letters) is always required if you want to access the coins in a wallet. That means, in order to pay something with the coins or simply send them to another wallet, you need this key.
In the online wallets of the crypto exchanges, only the exchanges have this private key. It is better if you have the private key for your coins and of course keep it safe.
Many cryptocurrencies have their own websites where they offer software wallets for download. You can install it on your PC or smartphone and use it to receive, save or pay with your currencies. The private keys are then yours.
One variant, however, which in our view is much better protected against malware, are so-called hardware wallets. Because with these wallets you have an external device with whose help you can manage your coins completely.
The good news is that a hacker can only get to a hardware wallet if he breaks into your home. You, on the other hand, have the hardware wallet next to your laptop and can access your cryptocurrencies with the private keys stored on it and an additional pin code.
We ordered the ledger Nano S* to test such a hardware wallet, because it can manage a comparatively large number of currencies and is also attractively priced. You can use it to manage the following cryptocurrencies, among other things:
Bitcoin (BTC), Pivx, NEO, Zcash (ZEC), Stellar (XLM), Viacoin (VIA), Dash, Ripple (XRP), Expanse (EXP), Ark, Stratis (STRAT), BCash (BCH), Ethereum (ETH), Dogecoin (DOGE), Digibyte (DGB), Litecoin (LTC), Vertcoin (VTC) and Qtum
In addition, there are many ERC 20 tokens that can be accessed and used in combination with the ledger Nano S via the MyEtherWallet website. Examples of such ERC-20 tokens are (to name but a very small selection):
Feathercoin (FTC), Dragonchain (DRGN), Request Network (REQ), Tron (TRX), Chronobank (TIME), Unikoin Gold (UKG), AppCoins (APPC), WaBi, Aigang (AIX), OmiseGo (OMG), Basic Attention Token (BAT), DENT, Golem (GNT), Humaniq (HMQ) or Po.et (POE)
The hardware wallet ledger Nano S* convinced us, because it was delivered with a well understandable manual and everything worked without problems during the test with different currencies. In short, the use in everyday life looks like this:
- 1) Connect Ledger Nano S to USB port and unlock with an individual up to 8-digit pin
- 2) Open wallet matching the currency (e.g. Ethereum Wallet) on the ledger (must first be installed via Chrome’s Ledger Manager)
- 3) Open a wallet matching the currency on your PC (can also be installed as an app via Chrome for most currencies)
- 4) Send or receive coins on the PC via the Wallet (receive address will be displayed)
- 5) Disconnect Ledger Nano S from PC again
The use in the everyday life is relatively practical, since apart from the device itself and a few free Apps of the Chrome Browser you need nothing more.
In addition, the device generates an individual security key (consisting of 24 words) during the setup process. With this key it is possible to save all coins in case you forget your pin or in case the ledger Nano S should not work anymore.
Of course, you must protect both the device and the 24-word key from theft and loss. If you write down the pin to the device, this note should not get lost or fall into the wrong hands. Always remember that this is about your money, which could suddenly just be gone if you don’t pay enough attention.