What Are Crypto Wallets?
Over the last couple months we have covered a wide range of topics here at Fayre. Together we have explored everything from the basics of what an NFT is, to more complicated topics like building your own NFT community. Over the last couple of months, thousands of NFT fans have found Fayre, whether through our awesome partnerships, or exciting developments. So, as we all prepare for our highly anticipated launch of the Fayre NFT Marketplace, we wanted to make sure you are completely ready to jump right in!
Before everyone starts collecting NFTs we’re going to go back to the basics to cover a very important topic to all things crypto — wallets.
What are they? How do they work? Are there trustworthy candidates? And how can one be secure with a digital wallet? All of these are great questions that everyone in the crypto and NFT industry should have the answer to. So without further adieu, let’s jump in!
What is a Crypto Wallet?
If you have a smartphone, there is a high chance you know what a digital wallet is, or that you have at least used one. Indeed, integrations like Apple Pay, or Google Pay are digital wallets as they allow you to store payment information, passwords, and to purchase items without the need of a physical credit/debit card or cash.
Crypto wallets can provide similar functions, but are different in a few key areas. They are still a medium through which transactions can be executed by the individual. But because NFTs, cryptocurrencies and Bitcoin exist on a blockchain and require some sort of verification (like Proof-of-Work), crypto wallets only provide access to property on a blockchain through means of a private key (more on this later).
Most wallets come in the form of software solutions like Metamask or Muun Wallet. Or, they can be integrated into hardware solutions that offer private key storage functions. Products like Ledger and Trezor are considered to be some of the best hard wallets, and are generally considered to be more secure than software solutions.
Hot and Cold Wallets
Another distinction in the world of crypto wallets is between hot and cold. For example, a hot wallet is a crypto wallet that is directly connected to the internet. These are considered to be more risky and more prone to attacks that could lead to a loss in funds. But, hot wallets are also easier and faster to transact with. Cold wallets are the opposite and are not connected to the internet, which is why they are less risky, but certainly slower to operate with. Selecting between hot and cold, and software and hardware crypto wallets is a very important decision. Not only will this wallet provide you access to your digital property, it will allow you to transact with anyone else on the same blockchain.
Custodial vs. Non-Custodial Wallets
Perhaps the most important detail to pay attention to when selecting a wallet is whether or not you will be the owner of your own private keys. Custodial wallets, such as those found on exchanges, do not provide the user with their own private keys and instead ask for KYC. KYC, or “know your customer” is a compliance protocol that is meant to provide security to a system. Because custodial wallets don’t allow you to own your private keys, they are really acting like a bank and simply show you how many NFTs, cryptocurrencies, or Bitcoin you “have”.
The phrase “not your keys, not your coins” applies to any branch of crypto, including NFTs, and so non-custodial wallets are highly popular. They don’t require any KYC protocols because their sole purpose is to provide users with unique private keys and addresses to transact crypto to and from with. Depending on your privacy preferences, and your overall trust in crypto exchanges upholding user accounts and preferences will help you decide between custodial wallets and non-custodial wallets.
How do Crypto Wallets work?
Depending on the type of digital assets you want to store will determine how your wallet operates. But since we’re interested in NFTs, we’ll discuss how the ideal, autonomous and non-custodial crypto wallet should generally work.
First, when a new wallet is being created, a random number is generated that is adherent to the cryptocurrency’s algorithm and blockchain requirements. This number is translated into a private key thanks to some cryptography magic (some serious math equations that produce results that are strictly designed for a crypto’s algorithm). That private key is then translated into 12–24 regular “dictionary” words called a seed phrase. Then a public key is yielded from other information given from the private key.
Note that both keys are totally different and have entirely separate uses. The private key should be used ONLY by the owner to access their digital property. It’s a crucial component in making their crypto self-sovereign. The public key (sending and receiving address) is necessary for transactions to and from the wallet. But neither keys are ever known to the blockchain unless a transaction is made to or from the wallet. Then the public keys can be recorded in the public ledger, blockchain technology.
For the sake of your crypto or NFT security, it is absolutely imperative that you NEVER share your private key/seed phrases with anyone, and physically write them down or remember them by heart. Otherwise, you run the risk of losing your coins to theft, censorship, or digital decay. If you happen to lose your device that holds your crypto, your seed phrase acts as a recovery backup and can re-associate your wallet with a new device. In other words, your seed phrase is your NFTs, cryptos, or Bitcoin.
Looking for Reliable Wallets
As you can imagine, along with the tens of thousands of crypto projects in the world there are going to be hundreds, if not, thousands of crypto wallets to choose from. But worry not, because the cream rises to the top. When it comes to NFTs, there is one wallet in particular that we here at Fayre recommend.
Metamask is an incredibly popular wallet, and is in fact the number one wallet for NFTs users. It interacts on the Ethereum blockchain and can be used from a mobile app or on a browser. Another alluring feature of Metamask is its ability to interface with decentralized apps thanks primarily to Web3 integrations.
With Metamask, users can store, send and collect NFTs, cryptocurrencies, tokens, and can access blockchain apps. Plus, users have full autonomy over any passwords and private keys associated with the wallet.
There’s also a few extra things to keep in mind to help ensure your personal and NFT security.
- No matter which type of wallet you select, make sure to run a basic background check before sending funds to it. Read as many reviews as you can to make sure nobody has been hacked while using your chosen wallet, that the wallet is reliable and easy to use, and what functionality is supported by the software.
- Another smart thing to check is if your wallet is open source. Open source projects are often more reliable than centralized projects because they are worked on and checked constantly by developers from around the world.
- Also, it should be entirely obvious when making a new wallet which key you are being presented with. You should only ever see your 12–24 word private key once on your phone, laptop, or browser. Your send/receive addresses are completely different and are a string of mostly random letters and numbers that are unique to your wallet. If either address is confusing or nowhere to be found, it may be wise to step away from that risk.
- Be thoughtful about who and how you send your public address to. In many countries around the world, trading crypto comes with a heavy price, and can even end in a prison sentence.
- Even in Canada, a country once considered a promised land of freedom, crypto users were severely punished after being associated with the blockchain transactions. These crypto users either bought and sent KYC NFTs, cryptos, or Bitcoin, or they publicly message public keys. As a result, the Canadian government froze all of their assets (aside from the crypto protected by freedom technology).
- Keep in mind that every wallet is slightly unique. Many developers are good and striving to provide crypto users with sovereign, autonomous solutions, but there will always be bad actors so choose wisely!
When it comes down to NFT security, or any other crypto related action, make sure it has purpose and is strategic. Your hard earned money is valuable and so are your digital assets, so make sure you protect them!
Digital wallets are the way forward just as cryptocurrencies, Bitcoin and especially NFTs are also the way forward. Reliable wallets are responsible for providing anyone with the option to become financially and autonomous and responsible for their own property. Digital assets can have a proper home on a secure wallet, and collecting NFTs can be an exciting endeavor once you’ve found your trusty wallet. At Fayre we utilize the most widely adopted NFT and crypto purpose wallet, Metamask. And once the launch of our incredible NFT marketplace is live, anybody will be able to connect their Metamask wallet to the Fayre marketplace to sell and buy NFT art. Check out one of the best crypto wallets out there and see if it’s right for you!