Digital Wallets Explained
Non-Fungible Tokens are stored and traded on crypto blockchains. Therefore, for managing transactions, we will require to own a digital wallet.
Currently, the most popular blockchain for NFTs is Ethereum, a well-known NFTs trading platforms that operate and sell tokens using ETH cryptocurrency.
If you are new to the whole cryptosystem, I will do my best to provide you with a detailed explanation about digital wallets.
What is a crypto digital wallet?
A cryptocurrency wallet is a tool that allows you to interact with a blockchain network. Crypto wallet permits you to manage your cryptocurrencies, view the history of transactions and balance. The best example is to imagine online banking but without the bank itself. Some wallets allow you to keep different cryptocurrencies, while others limit you to only one.
How do crypto wallets work?
Crypto wallet has a generated public address to which people can send cryptocurrency. The digital wallet public address is similar to your bank account number. For example, if you want to receive a bitcoin, you will need to provide a public address to the sender. It is necessary to mention that digital wallets are not storing cryptocurrency. Instead, they act as a gateway to the blockchain.
(Cryptocurrencies are stored on blockchains)
Critical components of Crypto Wallets.
When you open a crypto wallet for the first time, the system will generate two unique keys - Public Key and Private Key.
Public Key - used to generate unique public addresses. Remember? You need to provide the sender with a public address to receive crypto coins.
Private Key - The private key allows you to manage transactions and access your balance. For example, if you wish to send crypto coins to someone, you will need to use your private key to authorize the transaction. In addition, you can use the private key to restore your public key and public addresses. You should never share the private key with anybody. Otherwise, your funds will be at risk of getting stolen.
If we dig deeper, the private key is a random 256-bit number, which is impossible to remember; therefore, developers invented a solution to have it in readable format for humans called Seed Phrase.
"Seed Phrase," also called- Backup Seed Phrase or Seed Recovery Phrase. The seed phrase is used to generate private keys and consists of 12 or 24 random English words. These words will be asked when you would like to recover your wallet or sign in from a new device. Backup words must be written on a piece of paper, ideally using a pencil in the same sequence as they were generated. It would be best to keep the written seed phrase with the same importance as keeping jewelry or cash. Anybody who has access to your backup seed phrase may get control over your wallet and funds. If you lose your seed phrase, you will not be able to enter your wallet anymore. Do not share the seed phrase with anybody or type it on any website.
Which crypto wallet to choose for trading NFTs?
You may have a question, so which digital wallet is the best to use? Every wallet has its PROs and CONs. The best way to decide:
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Choose the marketplace where you would like to participate in.
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Click on Sign In / Create an account and check which wallets they support.
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Conduct small research on the supported wallets.
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Hopefully, this article provided helpful information about digital wallets, and you obtained a basic idea of how crypto wallets operate.
