Cryptocurrency Wallets
Secure your crypto.
A cryptocurrency wallet is like a physical wallet. It is where you store your cryptocurrency. Just like a physical wallet, if you lose your digital wallet, you cannot get it back. It is extremely important to know proper wallet maintenance to avoid losing access to your wallet or making transactions that result in lost tokens. There are a few simple steps to follow.
An exchange is not a wallet. If you store cryptocurrency on an exchange, it is not stored in a wallet. It is stored in a brokerage account. Various exchanges handle their accounts differently, and some do provide wallet functions. But to keep your wallets organized it is recommended to use a wallet that support many cryptocurrency tokens.
When making purchases with cryptocurrency, tokens should always be sent from a wallet, and never from an exchange. Although this will not cause an issue with most exchanges, it is an issue best avoided.
Before making any cryptocurrency purchases send the tokens to your wallet and send the funds from there.
Creating a Wallet:
When creating a wallet there are several crucial items to note. They are described below.
Mnemonic Phrase:
During the wallet creation process you will be given a 12-word mnemonic phrase. These 12 words, in the order they were given, can restore your wallet at any time. This is the most convenient and recommend backup of your wallet.
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- Write these words on a physical piece of paper and store it in a secure, fire-proof, location.
- Create a random password. This should be a random string of numbers, symbols, and letters, both uppercase and lowercase. It is recommended to use 32 characters.
e.g. DJKq&*#$(H\ltyKH#823hfhk1
Record this on the same paper
Private Key:
If a private key is given during wallet creation this string of characters should be written down and stored in a similar fashion. A private key is another method that can be used to restore a wallet. This requires the private key and the wallet password.
The 12-word phrase and the private key will never change. But if you change your password, it is vital to update the password in documented locations. Keeping a password history is recommended. Passwords should not be stored online, as images, or repeated. Do not use personal numbers, words, or characters.
Ledger hardware wallets have similar features to software wallets with one notable difference. When accessing your Ledger device you are required to input a pin number in to the physical device. Each transaction requires approval from the physical Ledger wallet. This adds a layer of security not available on software wallets. It is highly recommended to store all cryptocurrency on a Ledger device to avoid theft through misuse or evil-doers.
