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Cryptocurrency wallets: FAQs

A cryptocurrency wallet is a software program that allows you to send and receive cryptocurrency.

A wallet can be used to store several types of tokens and coins at the same time, but most of them support a limited number of options.

Wallets are used to store secret keys - these are long hexadecimal codes known only to you and your wallet. The secret key should fit the public key to access the funds.

 

There are various types of wallets. It can be a device that is connected to the Internet only from time to time, to carry out transactions (it can be stored even in a bank safe at the rest of the time), or it can be just a sheet of paper with a key printed on it - this is an option of the "cold storage".

However online wallet services are much like usual banking applications. Access to the account can be obtained from different devices, and if you lose your phone or forget the password, you will have the opportunity to access your account.

How to open a cryptocurrency wallet?

First of all, think about how you want to use your wallet: using a mobile phone, a PC, a specific website or a device that stores keys without access to the Internet.

It's also important to keep in mind that some wallets do not work on all platforms. Make sure that the chosen wallet supports the cryptocurrency you are interested in, and a well-known and trustworthy company is behind it.

Most wallet producers offer step-by-step guides for using their applications, and the process is not too different from e-mail setting up. Remember to back up your secret key and keep it safely.

The risks of cryptocurrency wallets

Several countries have already introduced laws restricting the use of cryptocurrency, and the authorities of other countries have warned that they will do it in the near future.

Bitcoin is banned in Pakistan, Nepal, Algeria, Cambodia and Bolivia, and it is illegal to pay in it in Macedonia, Vietnam and Bangladesh. Ecuador also banned cryptocurrencies, but plans to launch its own in the future.

Can a producer of a cryptocurrency wallet steal your money?

Wallets, supported by private companies, can be a great way to store crypto currency, but you need to use them with caution.

Theoretically, a company can actually use secret keys entrusted to it and steal your funds. In addition, there have been instances where users could not withdraw their money from such wallets.

It is worth choosing well-known companies that use the latest technologies to protect their customers. There are many options: read reviews and learn the pros and cons of each provider. That is how you can make a balanced decision.

How to keep cryptocurrency safe?

Technical experts from Soft-FX recommend using "cold" storage, especially if you plan to keep your assets for a long time. "Hot" storage is only needed if the funds should be close at hand all the time.

Beware of malware that can compromise your phone or laptop. If you decided to use an online wallet, carefully study the emails that come allegedly from the wallet provider - this can be a fraud. A real message usually contains some information known only to the provider. Phishing scam emails often imitate the logos and language of official companies to bring a false sense of security to you. Pay attention to the email address - there may be some typos.

What if the cryptocurrency doesn't appear in the wallet?

This depends on how long it takes to build a transaction block in a particular cryptocurrency.

The standard for bitcoin - six confirmations before the transaction is completed; on average, it takes about an hour, but time can fluctuate depending on the network load.

Other cryptocurrencies may require more confirmations, but this does not necessarily mean that the transaction will be slower. For example, Ethereum requires 24 confirmations, but the transaction can be completed within a few minutes.

Can the cryptocurrency disappear from the wallet?

Imagine that you had  some funds on your account, but now they are gone. Where's the money? Perhaps your coins were transferred to "cold" storage.

Some providers of online wallets act in such a way to keep the clients' keys and assets safe, and once a user wants to make a payment, his/her funds are transferred from "cold" storage to the desired billing address.

How to receive new coins during a blockchain fork?

This is possible, but realized not in all wallets. In addition, the procedure may not be instant.

Typically, developers of such wallets analyze forks and check the new chain for pre-mining or other suspicious behavior. If nothing like this was found, it is possible that the wallet will support the fork and its customers who have the corresponding coins will receive a new asset.

Sometimes it happens very quickly. For example, Freewallet released a wallet for Bitcoin Cash two days after the fork of bitcoin, and its users received new coins. This provider was the first to support the fork.

 

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Sam Goffman

Sam Goffman

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Forex

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This post is from a series of posts in the group:

Fintech

Fintech discussions and conversations around the development of fintech.


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