In terms of cryptocurrency, a wallet is something that holds your digital coins. It is essentially a place of storage. Not every wallet holds every coin, so you may have multiple wallets for different coins, or share your coins across a range of wallets for security reasons.
Hot wallets allow you quick access to your coins and can either be stored online or on your computer. They should not be used to store large amounts of cryptocurrency and are best for day trading, or making small purchases online.
What types of hot wallets exist?
– Mobile wallets work as an app on your tablet or mobile device
– Desktop wallets are installed directly on your computer and can only be accessed through the device they live on
– Online wallets are stored online with a 3rd party
Pros of hot wallets:
– Easily accessible
– Usually free or inexpensive
Why avoid a hot wallet?
– An easier target for scammers to try and hack
– Often uninsured
There are lots of scams out there that target new and experienced users. They use fake websites, and wallets to steal your private keys and coins directly. You should verify wallets and URLs and always research a wallet before opening up an account.
If you do use a hot wallet, we recommend using either Jaxx or Exodus.
A cold wallet is a completely offline wallet. It does not exist on a smartphone, tablet, or the internet. They are usually used for the storage of much larger amounts of cryptocurrency, unlike hot wallets that are used for smaller amounts of cryptocurrency and are easier to access.
There are two main types of cold wallets:
– Paper wallets – a piece of paper which has your wallet private key on it, or a QR code
– Hardware wallets – a physical device which contains the private keys to your wallet addresses
Pros of cold wallets:
– Very secure and hard to hack
– You hold your private keys in your hand
Why avoid a cold wallet?
– You will need the wallet on you to access your funds
– If you damage the wallet you could lose the contents
If you do use a cold wallet, we recommend using either Trezor or a Ledger.
There are various ways to keep your digital wallet secure.
1. Make sure your device (phone, desktop, tablet) is secure to protect your wallet and payment apps. This includes measures like locking your screen with a strong password and using biometric authentication (fingerprints, face recognition).
2. You can protect your wallet by using a strong PIN and using biometric authentication
3. If your digital wallet is connected to any third-party applications or websites, make sure you set a long, complex password you don’t use for anything else.
4. Store your passwords in password managers such as OnePassowrd or LastPass.
5. Enable 2FA (two-factor authentication) for your digital wallet, if it’s possible.
What is a destination tag?
If you send Ripple (XRP), you need to use something called a destination tag. This is a unique number that is created when your wallet is created. If you do not include the destination tag, your coins may be lost.
The need for a destination tag varies, depending on where the wallet is held.
1. The Ripple wallet is on an exchange
Each user on an exchange is given a destination tag – all transactions using the tag are sent to their account. Without this destination tag, the funds sent go into a centralized exchange wallet, making it a challenge to recover your coins.
2. You created and own the wallet personally
The destination tag has less of an impact – if you send coins to the wallet address, you should always receive the coins.
3. You cannot find a destination tag anywhere
In some cases, when sending coins, you will be forced to give a destination tag but you may not have one. If you are sure you were not given one when you created the wallet, put in the tag 12345678. If you do this, you must be sure you are not sending the coins to an exchange, and that you own the private key of the wallet.
When you buy Bitcoin through Xcoins you will need to input a wallet address. This is your public key, which transaction can be sent to. We will ask you for this when you buy so that we can send you your Bitcoin. You can create your Bitcoin address for free at https://blockchain.info/wallet/, or create a wallet using a cold wallet (e.g. Trezor, Ledger) or hot wallet provider (e.g. Exodus).
A non-custodial wallet is a decentralized wallet type that can be web, paper, hardware, or desktop wallets. When you set up a non-custodial wallet you will receive a file with private keys you own and you’ll need to write down a mnemonic phrase that you will use to restore your funds.
Private keys mean having full control over your funds, which is what makes them more secure.
A private key a form of cryptography, that allows users to access their cryptocurrency. It’s like a password, but only the user knows it. It’s not shared with anyone else or anywhere else.
Private keys help to protect users from theft or unauthorized access to their funds.