Crypto1–2–3: cryptowallets

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Crypto 1–2–3 : cryptowallets

Hello Crypto Enthusiasts:

In this article we are going to explore an essential piece of technology that you will need to get familiar with: Cryptowallets. What are they?

A blockchain wallet is a piece of software that you will need to manage your cryptocurrencies and digital assets. With a wallet, you can receive, store and spend your digital funds, but also interact with smart contracts and more complex decentralized applications that run on a blockchain.

Cryptowallets don’t store your money, rather the keys to access your money

Unlike traditional (leather) wallets, crypto wallets do not store the money itself, but rather the keys that access the money. The money is decentrally stored and maintained in a public ledger like Bitcoin or Ethereum. Therefore, a more appropriate analogy for a blockchain wallet would be that of a keychain.

There are two types of keys that you will generate and manage with your wallet. The first one is a public key, from which the address is derived. The address is a unique identifier of an account. This is similar to a bank account number. Anyone who wants to send money to you, must know this number, so it is OK to disclose it. But beware, this is a public ledger, so it is recommended to keep a good address hygiene. If you link your identity to an account where you have your funds, it would be equivalent to publish your bank account for the world to see, so don’t dox yourself!

The second key stored in your wallet is a private key. This is like the password to access your funds or authorize transactions. It is important to keep this number secret, as anyone with this number can access your funds. Private key management is a sensible issue, but there are new applications, for instance the wallet Argent that does not requires users to store passwords or recovery key phrases.

Anyone who has your address can send value to your “mailbox”. The mailbox is locked and to open it you need your private key.

Blockchain wallets work like a combination of a bank account and a safe. Everybody can send funds to my public address, but the funds are locked like in a safe. Only me or whoever has the private key can access these funds.

To access your funds, you will need a private key. The private key is like the password to access your money.

Private and public keys always belong together as a pair and have several interesting cryptographic features. For now, it is important to know that you can a) randomly generate a private key, b) derive from this private key a public key and c) derive from this public key an address. It is a one way cryptographic function. You can infer an address from a private key, but you can not infer a private key from a public address (that would be dangerous!).

One of the interesting features is that one can generate as many addresses as one wants. Without intermediaries, without requiring permission or authorization of anybody. The only requisite in an Internet connection. The “account number” is not assigned by any centralized institution but rather by math and cryptography. We will talk a lot about this important feature of Ethereum applications, known as permisionlessness.

Compare this to the hassle of opening a bank account in a traditional institution!

Which wallet should I choose?

For DeFi purposes, you will need an Ethereum compatible wallet. With an Ethereum wallet, one can generate and manage one or several Ethereum addresses. With Ethereum addresses you can store or send cryptoassets to someone else or directly interact with decentralized finance protocols.

Ethereum wallets can hold Ether, the native protocol asset of Ethereum, or Ethereum compatible tokens (ERC-20 standard for fungible assets and ERC-721 standard for non-fungible assets). Ethereum wallets can’t hold and manage Bitcoin but can hold Ether and the great majority of DeFi assets, which are Ethereum compatible. You can even hold and manage Ethereum compatible versions of Bitcoin (for instance wBTC and renBTC).

There are many wallets in the market. For beginners we recommend starting with Argent Wallet as it is currently the user friendliest wallet. Argent is a wallet designed for mobile devices and has integrated many DeFi applications. Instructions for installing an Argent wallet

A second option for more advanced users is the Metamask Wallet. Metamask is a software wallet that works in your desktop but also in mobile devices.You can install a Metamask plug in in your Chrome, Firefox or Brave browser.

Next steps …

Funding your wallet

You will need to transfer your funds to your new Ethereum wallet. In case you bought the assets directly through the Argent wallet, this step is not necessary. If you bought the assets through an exchange as explained in the last tutorial, you should go to your exchange and follow the instructions for transferring the funds to an external wallet.

You are now ready to go!

P.D. We do not have commercial relationship with Argent or Metamask wallets. Any recommendation is purely based on objective criteria and conclusions based on or own testings. The author has ether and bitcoin holdings. The content of this article is for academic and educational purposes only. This is not financial, tax or legal advice. Please do your own research.

Blue Swan Academy offers webinars and online workshops to train individuals and businesses to use decentralized finance tools. The educational offers will be entry-level, with no previous knowledge required. We believe in “learning by doing”, so you will learn to use the most important protocols and applications. Please check out here our current offering.

Blue Swan Academy is an educational platform for blockchain powered economies, focused on the legal and financial industries.

Author: Juan Escallon

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Crypto1–2–3: cryptowallets was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.