A crypto wallet is a software program that enables you to send and receive cryptocurrencies. It has public and private keys that interact with various blockchains. As the names suggest, the public key is public facing. You show it to other people as your wallet address to which they can send crypto. However, the private is meant to be kept private. To be exact, it must be kept as a secret. You should never reveal it to anyone. The owner of the private key owns the assets in the wallet. Even if the wallet is installed on your device, if someone memorizes your private key, has a picture of it, or has access to it by any means, that person has the access to your wallet and all the assets in the wallet.
Choose a wallet that suits you best
Like a traditional digital wallet, a crypto wallet has 3 major functions: receive, store and send cryptocurrencies. And similar to a multi-currency e-wallet or an online banking app, a crypto wallet may be able to work with multiple types of cryptocurrencies. So when you are deciding which wallet product you should choose, always understand which crypto you may want to acquire in the future.
Now comes the key point: the centralized wallet vs the de-centralized wallet. The centralized wallet doesn’t give you the private key. The organization behind the product is managing it for you. The process of creating an account is similar to that of signing up on an e-wallet: creating a username, creating a password, and filling some personal information.
Pro: Easy to use. It’s more like a traditional e-wallet. It could have more features, such as bill payments, etc.
Con: You crypto is controlled by a third party. Safety is usually a concern. (But I’m not saying it’s not safe)
The other type of de-centralized wallet. Although the product is developed by an organization, no third party is controlling your assets in a de-centralized wallet. You have complete control of the wallet. The onboarding process usually starts with the seed phrase which comprises of 12 random words.
These 12 words is the key to your assets on blockchain. If your wallet breaks down, you can import it to another wallet to restore your crypto. So safe-keeping of the seed phrase is key of protecting your assets.
Pro: Under your full control. No one can freeze your account or change the ledger. Even if the app malfunctions or the developer behind it no longer exists, your assets can be restored by using the seed phrase.
Con: If you leak your seed phrase out, you may lose all your assets. And there is no way to get them back.