Crypto wallets
What is a Q&A? What should I do?
This Q&A is a brief introduction to elementary aspects and concepts of the fascinating world of transactions enabled by crypto wallets. If you are new to this world, you must dig deeper in order to understand how it works, the technology, developments, and associated risks. Our Q&A is not meant to cover such questions, nor does it suggest what may be an appropriate, or not appropriate decision.
What is a crypto wallet?
A crypto wallet is a program that helps you buy, sell, and store your cryptocurrency and (in many cases) your digital collectibles, or NFTs.
How do I set up a crypto wallet?
Click here for a simple step-by-step guide.
Will my wallet store my NFTs on my local computer?
No, NFTs are not stored on your local computer.
How does my wallet work?
Your wallet generates a public address and a private password, or seed phrase (usually 12 or 24 words). The public address acts like your bank account number. You can share the public address with others who can then send you cryptocurrencies or NFTs. You must know the unique seed phrase that is associated with the public address, in order to be able to move any of the NFTs that are associated with this address and therefore you own them.
Can I change the seed phrase that is associated with a public address?
No, the seed phrase is uniquely determined when the public address is created and it cannot be changed. However, you can create new public addresses with different seed phrases and one seed phrase can also generate several public addresses.
What happens if someone else learns my seed phrase?
If someone else learns the seed phrase associated with a public address, they can move all of the cryptocurrencies and NFTs to a different address, so you will lose them. That is why it is very important to store your seed phrase securely and never share it with anyone. If you think that your seed phrase has been compromised, you must take immediate action. For instance, you may consider transferring your NFTs or other assets pertaining to the affected public address to another public address (wallet) you own.
What happens if I forget my seed phrase?
It depends on whether your wallet is custodial or non-custodial. In a custodial wallet, your seed phrase is stored by a third-party company. You will have a password and they will store your seed phrase. If you forget your password, they will have a way of verifying that it is you and generate a new password. Custodial wallets require less responsibility by you, but you need to trust the third party company.
In a non-custodial wallet, you do not rely on a third-party company because you store the seed phrase yourself, either online or offline. If you forget your seed phrase or lose access to it, there is no way of retrieving it by calling someone. Non-custodial wallets require you to be more careful but give you full control. If no one has access to your seed phrase, it is mathematically impossible to steal your NFTs.
What is the difference between a hardware and a software wallet?
Non-custodial wallets allow for both types, whereas custodial wallets are only software. A software wallet is either an app on your mobile/computer or an extension on your browser. They are more convenient to use. However, because they are always connected to the internet, they are more prone to being hacked. Hardware wallets are physical devices that plug into your computer in order to complete transactions. They are less convenient to use but since they are offline most of the time, they are more difficult to hack and they may be a suitable solution for long term storage of your assets.
