Understanding the basics of a cryptocurrency wallet is the first step in mastering this technology. As with any other system that contains digital information, there are rules for how it operates that cryptocurrency investors need to understand.
For instance, crypto trading involves crypto exchange fees. A cryptocurrency wallet manages your coins, lets you send and receive them, helps you monitor your balance(s), provides transaction levels of privacy, enables various settings to control who may or may not have access to specific funds, etc. It’s a handy tool if used properly.
Stores Relevant Information
A cryptocurrency wallet is essentially a file on your computer – just like any other file on your desktop. But unlike most files which have very little monetary value attached to them, wallets are different.
The cryptocurrency wallet stores all the information you will need to manage your cryptocurrencies. The information includes private keys that provide access to your funds.
Safety and Security
The wallet is encrypted with a password known only to you, so no one else can read or use it – they would have to guess at your password to break into it!
Allows Public Keys
A wallet file allows for multiple coin addresses (also called “public keys”), which are essentially equivalent to bank account numbers for each of these different currencies. This arrangement lets others send money directly into any of these accounts – just like writing a check out to someone’s name and address.
Allows Separate Address for Different Currencies
A cryptocurrency wallet has an “address” for each type of currency you store in it. For example, if you have two separate currencies stored in the same wallet file as two separate addresses, those would be address #1 and address #2 – one for each currency.
Your wallet file keeps track of your total balance(s) for each currency that it manages – this is a running tally of how much money you have available to spend at any given time.
It also allows you to set individual “spending limits” on specific addresses within your wallet, but we’ll get into that more below.
Maintain Multiple Transactions
A cryptocurrency wallet can maintain multiple transactions from different sources/addresses for each coin type managed by it at any given time – similar to a real-world checkbook register that lists all deposits, withdrawals, and balances at any given time.
Send and Receive Coins
A cryptocurrency wallet allows you to send and receive coins – like transferring money from your bank account to someone else’s!.
You can even set limits on these transactions if you wish, such as requiring a minimum transaction value or setting specific “payment windows” (e.g., send within 24 hours) for specific addresses in your wallet file.
Manage Your Information
Your cryptocurrency wallet typically has many settings which allow you to control:
● Who may be able to manage it (e.g., only yourself),
● What types of information they may be allowed to see (e.g., history, balance), and
● Whether they can use the funds contained therein or not.
You can use your wallet to pay your crypto exchange fees and other related charges.