4. What are Crypto addresses, keys, and wallets?

Monday 21st February 2022

When you buy gold, you actually get coins (or bricks) of the shiny metal. Crypto is very different. You don’t really get anything physical. Your Crypto journey starts with a "wallet".

The first thing to know is that cryptos are very different from other stuff that you invest in.

When you buy gold, you actually get coins (or bricks) of the shiny metal. You can keep these coins safe in… a safe!

When you buy a house, you actually get physical “possession” of it.

Crypto is very different. You don’t really get anything physical. Your Crypto journey starts with a "wallet".

This is what a typical Bitcoin wallet looks like:

[private] => fa9af8856397ab2fcd0546cd248791ad9a3046aa3d49fddbdc380ccbce4a5527
[public] => 03c3948b65fc5c86e74af384cd5ef965dc5bf0e940d7ecafd98dc75517a9d45efc
[address] => 1Mk13r5uu51F5jQ6yGuBPxkuZw91nM4MeY
[wif] => L5crYHJ3wP1KF88guJChXPDaqNJ6dS3WBv56JN1o491K7FdMtXdd

If you write this down on a piece of paper, it would be called a… paper wallet.

The address is similar to your bank account or UPI ID. Anyone can send crypto to your address. If you send crypto to the “wrong” address, it’s gone forever!

Also, remember that the same address doesn’t work for all cryptos e.g. a Bitcoin address won’t work for Dogecoin.

The private key is what you would need to “sign” transactions i.e. to send crypto to someone else. If someone gets hold of your private key, they can transfer all your crypto to another address. This is what happens in most crypto “hacks”.

Wallet Import Format (wif) is a shorter version of the private key.

A crypto wallet is designed to:

  • store your public and private keys,
  • send and receive cryptos,
  • monitor “balances”, and
  • interact with supported blockchains

Usually, people store their crypto in a mobile or web wallet. That’s a mobile app or web service that stores your keys and addresses.

A hot wallet is one that is connected to the Internet and is considered the most vulnerable to hacking. Examples include mobile wallets and crypto exchanges.

Metamask is a popular browser-based crypto wallet.

A cold wallet, on the other hand, is not connected to the Internet and is considered more secure. Examples include hardware wallets and paper wallets. There are many free services for generating paper wallets e.g. Future Money Wallet.

Paper wallets are inconvenient to use but are the safest option. Consider using them if you have a large amount of crypto to keep for a long period of time.

Hardware wallets are a little pricey and there’s always the risk of losing or breaking them. I am speaking from experience!

Software wallets are free and very easy to use. But if you accidentally delete them, your crypto is gone forever. Again, I am speaking from experience! So remember to back up the seed phrase - a bunch of words that you can write down.

An example of a seed phrase is:
history lumber quote board young dove robust kit invite plastic regular skull