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Crypto Wallets Explained (Beginners' Guide!) đťđ§ How to Get Crypto Off Exchange Step-by-Step đ¸âď¸ - YouTube
Channel: Crypto Casey
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Hello, Iâm Crypto Casey and in this video we are
going to break down some important information
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about cryptocurrency wallets into simple and
easy-to-understand concepts together.
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Our goal by the end of this video, is that
we will feel more comfortable transferring
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our cryptocurrency off of exchanges into our
own cryptocurrency wallets for safe-keeping.
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This weekâs episode is brought to you by
Crypto.com, an exchange with over 100 different
[22]
cryptocurrencies and over 20 different fiat
currencies.
[25]
On Crypto.comâs mobile app, you can buy
crypto with bank transfers, credit, debit
[28]
cards, or crypto at true cost with no markups.
[31]
They also have a desktop exchange that is
solely for crypto-to-crypto trading.
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If you use the link below to sign up for Crypto.com,
you will receive $25 worth of cryptocurrency
[39]
for free when you use the referral code âCryptoCasey,â
all while supporting the channel.
[43]
Also, every Wednesday I conduct a weekly AMA
or an âAsk Me Anythingâ at Instagram.com/CryptoCasey.
[48]
So use the link to my one and only official
Instagram account listed in the description
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area to follow me and ask me anything you
want, every Wednesday.
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One last thing, there is just a ton of spam
in the crypto realm on social media, Instagram,
[62]
Facebook, everywhere.
[63]
Telegram is getting progressively worse as
well.
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So Iâve started a Discord channel where
we can grow as a community, interact with
[69]
each other, and stay up to date on all things
crypto.
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So scroll down to the description area below
to access the invite.
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Awesome.
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So letâs learn about cryptocurrency wallets.
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What is a Cryptocurrency Wallet?
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When we hear the word âwalletâ we immediately
think of the pocket or purse accessories that
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hold our cash, IDâs, credit and debit cards.
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However, unlike cash, digital currencies are
not stored in a specific location and do exist
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in a physical form.
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Instead, cryptocurrencies, account balances,
and transactions exist on a blockchain or
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similar technological foundation.
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What is blockchain?
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Blockchain is just a fancy term that describes
a running ledger of transactions.
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Without losing sight of this video, if you
would like to learn more about blockchain
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and why it was developed, you can check out
my video guide for beginners by clicking on
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the link above.
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Nice.
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Back to wallets.
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A cryptocurrency wallet has software that
creates and stores your private and public
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keys, interacts with the blockchain, monitors
your balances, and allows you to send and
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receive cryptocurrency.
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So, to send, receive, store, and monitor your
cryptocurrency balances, you need to use cryptocurrency
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wallets.
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Instead of thinking of a wallet in the traditional
sense, where cash is actually inside of your
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wallet or your credit cards actually being
inside of your wallet,
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A better way to think about a cryptocurrency
wallet, is as a key to access your funds.
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Because your cryptocurrencies on the blockchain,
which is a running ledger of transactions
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distributed all over the world, are basically
just assigned to your private key, so your
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wallet gives you access to the funds assigned
to your âaccountâ of sorts.
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Letâs explore how.
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So How do Cryptocurrency Wallets Work?
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We are going to go through a very simplified
analogy to help us wrap our heads around how
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cryptocurrency wallets work together.
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Please note this is not exactly how the technology
works, itâs just an analogy.
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A simplified way to understand how cryptocurrency
wallets work, is to consider how your traditional
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online banking applications work.
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Imagine your bank is the blockchain, your
bank account number is the public key, your
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crypto wallet is your online banking app,
and your online banking app login credentials
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are your private key.
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So, your bank records and tracks all of the
transactions going to and from your bank account,
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just like the blockchain records and tracks
all of the transactions going to and from
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your public key.
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Using your online banking app, you are able
to check the balance of your bank account
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and send or receive transactions, just like
a cryptocurrency wallet allows you to check
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your balances and send or receive crypto.
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However, in order to login to your online
banking app, you need to first type in your
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username and password, which is like using
your private key to access your cryptocurrency
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wallet.
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A public key is similar to your bank account
number, in that if you provide anyone with
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your bank account number, they can send you
funds.
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Keep in mind that public keys are also commonly
known as âwallet addresses.â
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However, having your bank account number alone
would not allow someone to take funds from
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your account.
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This is also how a public key works - people
can send you cryptocurrency using your public
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key or public wallet address, but they cannot
take funds from you using your public key.
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Giving your online banking app login credentials
to someone would allow them to send funds
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from your bank account to somewhere else.
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This is similar to a private key - if you
give someone your private key, they can access
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your cryptocurrency and send it somewhere
else.
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Unlike traditional banking, if you give away
your private key and your funds go missing,
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you will likely not be able to recover them.
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This is why it is so important to keep your
private key private.
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Before sending and receiving cryptocurrency,
you must first make sure you are sending the
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same type of currency to a wallet address,
or public key, that supports that particular
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cryptocurrency.
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For example, you can only send bitcoin to
bitcoin addresses and you can only receive
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ether from ether addresses.
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If you have another personâs public key,
or address, you can easily send them some
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corresponding cryptocurrency.
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And vice versa.
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When cryptocurrencies are sent or received,
no actual physical or digital exchange occurs
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between the wallets.
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Remember, cryptocurrency wallets interact
with the blockchain and the blockchain is
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where all cryptocurrency transactions are
logged.
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And itâs also where balances are tracked.
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So, just to recap, a cryptocurrency wallet
has software that interacts with the blockchain,
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stores your public and private keys, monitors
your cryptocurrency balances, and allows you
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to send and receive cryptocurrency.
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What are the different types of Cryptocurrency
wallets?
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There are many different types of cryptocurrency
wallets to choose from and each of them have
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their own pros and cons.
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In this video, we will break wallets down
into two categories: hot and cold.
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A hot wallet creates and stores your private
keys online, while cold wallets create and
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stores your private keys offline.
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So examples of hot wallets include desktop
or mobile app software.
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These wallets operate on your computers and
cell phones, which are connected to the internet.
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So when you set up these wallets, your private
key is generated on a âhotâ device, which
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just means it's connected to the internet,
which could be more vulnerable to being compromised.
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However, by far the least secure way to store
large investments in cryptocurrency for the
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long term is on an exchange.
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Why?
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Well, first of all, itâs online, therefore
hot, therefore more vulnerable to hacks.
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And on top of it, cryptocurrency exchanges
are HUGE targets for hackers since obviously
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thereâs a ton of potential crypto that can
be stolen.
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With any regular wallet any of us manage on
our own, a hack has no idea how much potential
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loot there is to steal.
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While crypto exchanges are a guaranteed gold
mine of sorts.
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And as if it couldnât get any more sketchy,
cryptocurrency exchanges rehypothecate crypto,
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and without going into too much detail breaking
that down, basically it means that one ether
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you are looking at in your account, could
also be the same ether 5 other people on the
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exchange are looking at.
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Meaning cryptocurrency exchanges donât actually
have all of the crypto backed one-to-one for
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all of their customers.
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So if there was a massive run on exchanges
where everyone wanted to move their bitcoin
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and ether to their own wallet, there would
not be enough to go around.
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Yeah, scary.
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So learn about the safest, most ideal way
to store significant amounts of cryptocurrency
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for the long term.
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Cold wallets.
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Cold wallets are also known as hardware wallets.
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Hardware wallets are designed to safely create
and store your private key offline.
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And when sending, receiving, or managing funds,
you will need to use the hardware device and
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go through more security steps in general,
which makes your funds less vulnerable to
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theft.
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By creating and storing private keys with
hardware wallets, your funds are safer from
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hackers and other potential security issues
that hot software wallets are more likely
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to experience.
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So storing your cryptocurrency on a hardware
wallet is the safest, most secure way to manage
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your funds.
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So if you scroll down to the description area
below, you can access the correct and official
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sites of my recommended hardware wallets.
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BC Vault is my personal favorite, another
option is the ledger nano backup pack, so
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scroll down to check them out.
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Note there are two important things you need
to know about buying a hardware wallet.
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First, only buy hardware wallets from the
real manufacturer.
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DO NOT buy used hardware wallets and do not
buy from other companies and individuals.
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This is because hackers may buy a hardware
wallet, tamper with the software, and resell
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the hacked device to steal your funds.
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And second, as with all crypto related activities,
make sure you double and triple check the
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URL you are accessing to buy the hardware
wallet.
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Make sure the address is correct and that
it has an SSL or secure sockets layer, which
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uses the https protocol, instead of the http.
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There are a ton of phishing scams online that
pretend to be the real website you intend
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to access.
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If you access a fake website, you may lose
your funds or receive a hacked wallet.
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So again, if youâre interested in my recommendations,
using the links below gets you where you want
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to go safely, all while supporting the channel.
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Cool.
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I will link step-by-step cold wallet setup
guides here for you guys, so stay tuned for
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that.
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In the meantime, letâs set up some simple
mobile wallets together so I can further illustrate
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how private keys work.
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I think a lot of us are about to have the
eureka moment weâve all been waiting for
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about what happens if your phone dies, or
if your hardware wallet breaks, or if it's
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stolen, etc.
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Letâs hit it.
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How to Set Up Your Own Wallet
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In this video, we are going to set up the
Coinbase wallet together on our mobile device,
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step-by-step.
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Navigate to the app store or google play store
and type in âCoinbase Wallet.â
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Then download the âCoinbase Wallet App with
the blue icon with a white circle and blue
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square in the center.
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Once the download is complete, open the app.
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Next, we are going to create a new wallet
together, so tap âCreate New Wallet.â
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Next, review and accept the terms of service
by tapping âAccept.â
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Cool, now you can pick a username.
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This is one way how other Wallet users can
find you and send you payments easily, versus
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using the long string of characters or QR
codes.
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When youâre finished, tap âDone.â
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Now, you can set your privacy preferences.
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You can always change this later in settings,
but for now you can choose Public, which just
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allows other Coinbase Wallet users to search
for you by your username to send you crypto.
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Or you can choose to remain private, so people
cannot search for your username to send you
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crypto.
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Again, this is only for receiving crypto;
users cannot take funds from your wallet using
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your username.
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Make a selection, then tap âNext.â
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Now itâs time to protect your wallet by
adding an extra layer of security to keep
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your crypto safe.
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If youâre phone has it, you can choose to
use face ID, which is recommended, or you
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can choose to set up a 6 digit passcode.
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Either way, make sure you take the time to
add an extra layer of security for good measure.
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Sweet.
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Now itâs time to back up your wallet.
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This is the part where this software wallet
on your hot cell phone device, hot just meaning
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itâs connected to the internet, created
your private key in the form of a recovery
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phrase.
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You will be shown a secret recovery phrase
on the next screen.
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The recovery phrase is the ONLY key to your
wallet.
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It will allow you to recover access to your
wallet if your phone is lost or stolen.
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You will then need to tap the box acknowledging:
I understand that if I lose my recovery phrase,
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I will not be able to access my account.
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Right.
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So you canât contact Coinbase support if
you lose the recovery phrase and your phone
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is stolen or similar.
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This was a software wallet created by coinbase,
but it is just a software wallet that allows
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you to store and manage your cryptocurrency
off of the exchange for yourself.
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After these next few steps, it will become
clear how our crypto is on the blockchain
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and how private keys or recovery phrases are
merely keys to access our funds that are on
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the blockchain, and how anyone with these
words can steal all your funds if you do not
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properly secure these words.
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Okay, so tap the box and tap âback up now.â
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And here we are.
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The twelve words or recovery phrase that represents
your private key and access to funds.
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These 12 words are the keys to your wallet.
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Literally by memorizing these 12 words, you
can carry access to hundreds and thousands,
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millions and billions of dollars, right here
in your brain.
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Stay tuned for the end of this video when
I show you how it can gain access to your
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funds using these 12 words any time and any
where, regardless of whether you lose this
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particular phone or not.
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Itâs for this reason I do not recommend
backing this phrase up to iCloud, which is
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something that could also be hacked.
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I donât recommend ever storing your wallet
private key on any device connected to the
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internet, password manager or similar.
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The best way is using good old fashioned pen
and paper for now, securing it in multiple
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geographical locations in case of fire, flood,
or similar.
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In this video, since we are just doing a simple,
short term solution for storing our own crypto
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together to get it off of exchanges until
we can get a hardware wallet, Iâll save
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a more robust solution for securing our funds
for another video.
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So for now, I recommend writing your recovery
phrase on paper and storing it somewhere extremely
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secure like a safe or inconspicuous place
in your house like in a book on your bookshelf
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or similar.
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So tap âback up manuallyâ and then write
down the 12 words.
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When youâre finished, tap âNext.â
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With a manual backup, you will need to select
the words in the correct order to verify youâve
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written them down correctly.
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The spelling and order of words is extremely
important, otherwise you can lose access to
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your funds.
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Tap them in the correct order and then tap
âDone.â
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Sweet.
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Now we have our own cryptocurrency hot wallet
that is in our complete control, not the exchange.
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Before transferring our crypto for safe keeping,
first, letâs tap on the cog in the bottom
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righthand corner, then tap âApp Lock.â
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Select to require a lock to access the app,
for transactions, and biometric change protection
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to further secure your wallet.
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Then tap the back arrow in the front left
corner to go back to the main dashboard.
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Nice, and next, here comes the part that will
probably be a lot easier than you think.
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Transferring your crypto from the exchange
to your new, self-custody mobile wallet.
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For simplicity, Iâm going to assume your
crypto is on Coinbase in this guide, however
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no matter which exchange you use, you should
be able to log in, choose a âsendâ function
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and follow similar steps to move your crypto.
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On your computer or phone, log in to your
exchange.
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In this guide, Iâm accessing the Coinbase
exchange app on a mobile device.
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Tap the center blue round button to open a
menu that allows you to buy, sell, convert,
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send, or receive crypto, and tap âSend.â
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Choose the cryptocurrency you want to send
to your wallet.
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In this video, we are sending bitcoin.
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Now, I always recommend that beginners and
seasoned crypto investors alike, send a small
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amount to a new wallet first to make sure
everything goes smoothly before sending large
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amounts.
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So we are first going to send $10 worth of
bitcoin.
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Type in $10 then tap âContinue.â
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You may see an option to send crypto to a
friend, but we are going to tap ânot nowâ
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to continue.
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Next, in the âtoâ field we have several
different ways to send crypto, but for this
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new wallet we set up, we will use the QR code
or we will paste the address.
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If you are using the same phone and not a
computer, it will be easiest to copy and paste
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the address, but if you are using a separate
device, QR code is much simpler and faster.
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So letâs go back to the wallet we set up
together, unlock it, then tap âReceiveâ
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in the top center of the screen.
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You will see a list of several different cryptocurrencies,
as well as a search bar you can use to find
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a cryptocurrency.
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In this video, Iâm choosing to receive bitcoin.
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Cool, so for bitcoin you can receive bitcoin
to a segwit or legacy address, but we donât
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need to worry about that.
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If your crypto is on an exchange, use the
default segwit option.
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From here, you can either scan the QR code
or tap âshare addressâ to copy it and
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paste in the âToâ field on the exchange.
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Nice.
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Now that we have our bitcoin address in the
âtoâ field, we can choose to type in an
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optional note in the note field.
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Iâm just going to leave it blank.
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And we are ready to tap âPreview Send.â
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Ensure the amount looks correct, check out
the fees.
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Looks like it will be about .11 cents to transfer
the $10 to our wallet.
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Finally, tap âSend Now.â
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If you have 2 factor authentication on your
exchange account, which you definitely should
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for extra security, enter the 2-step verification
code from your authenticator app, then tap
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submit to start the transfer.
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Awesome.
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It was successfully sent.
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Note that it says here this transaction usually
takes about 30 minutes.
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From here you can either view the transaction
again or tap done.
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Now, we wait a few minutes to ensure the transaction
was successful and the price of bitcoin appreciated
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a bit during the process and is now worth
$10.01.
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Hell yeah, giddy up.
[980]
So here we are: we now are in complete control
of our bitcoin and itâs stored on the blockchain
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where we are the only ones with keys to access
it, rather than it merely being in an amorphous
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pool of bitcoin controlled by the exchange.
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So secure your private key recovery phrase
and repeat these steps to transfer all of
[998]
your cryptocurrency on exchanges youâre
looking to hold for the long to your new mobile
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wallet⌠that is until your hardware wallet
arrives.
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Amazing.
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Now for the eureka, omg, âI finally get
itâ moment.
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So letâs just say I come across your 12
words and JUST your 12 words.
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Not your physical phone, not your email address
or passwords, or anything that has any connect
[1023]
with you at all.
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If I found a piece of paper in the middle
of the street with these 12 words, and I wanted
[1029]
to take your crypto.
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This is how it can be done.
[1032]
You can use almost any other mobile crypto
wallet to do this quickly.
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In this example, Iâm going to download another
great mobile wallet option called Trust Wallet.
[1041]
Next, Iâm going to open the app, but instead
of choosing to âCreate a New Wallet,â
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Iâm going to select, âI already have a
wallet.â
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Then it asks which type of wallet I want to
import.
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And since I donât know what it is, as I
just have your 12 words, Iâm going to select
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âmulti-coin wallet.â
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Iâm going to name this new wallet.
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Then Iâm going to enter in the 12 words
on this paper I found randomly the street.
[1065]
Note, that wallets like Ledger create 24 words,
and you can do the same exact thing.
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If I found your 24 word ledger private key,
I can do the exact same thing and take your
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funds.
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Also, hereâs a fun fact: notice as Iâm
typing the words, once I get to the fourth
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character, the wallet guesses the word.
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So actually, you donât really need the full
words to gain access to wallets.
[1089]
If you just use the first four letters of
words in a recovery phrase, they can be predicted.
[1093]
Full words just make it easier for memorization
and simpler to understand for most people.
[1098]
Cool.
[1099]
Okay, so all 12 words are entered and now
Iâm going to tap import.
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Hereâs a message saying your wallet was
successfully imported.
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And low and behold: the $10.
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And from here, I can simply tap the âsendâ
button and send all of your funds to another
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wallet that you donât have access to.
[1115]
That fast and that simple.
[1117]
Thatâs why itâs so important to guard
your private key, recovery phrase, 12 or 24
[1122]
words, whatever you got and to consider getting
a hardware wallet that generates a private
[1127]
key offline and stores it offline for maximum
security.
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Awesome.
[1132]
Thank you so much for taking the time to watch
this video.
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I hope you found this explanation helpful
and understand a bit more about how cryptocurrency
[1139]
wallets work.
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If you enjoyed the content, please make sure
to like this video and subscribe to my channel
[1144]
for more crypto content.
[1145]
So were you surprised at how fast and easy
it is to take someone's crypto if you have
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their 12 or 24 words?
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Are you going to take the necessary steps
to secure your private key?
[1155]
What additional questions do you have about
cryptocurrency wallets?
[1158]
Let me know in the comments below.
[1163]
Be safe out there.
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