Believe it or not, there’s a difference!
If you’ve tried storing any kind of cryptocurrency whether it’s Bitcoin, Litecoin, Ethereum, NEO, or an ERC 20 Token, chances are, you’ve had to handle an address. No wait — a wallet. No, wait… a wallet address. Huh? It can get confusing, but there is a difference between a wallet and an address. In this article, I’ll go into what each are and the differences between them without getting into any of the technical details.
What is an Address?
An address is a combination of random letter and number characters. Think of it similar to a physical address like 123 Fake Street, Springfield, USA. You can make as many addresses as you want to. It’s like owning different physical addresses; e.g., you can own 124 Fake Street as well. In fact, in Satoshi Nakamoto’s original Bitcoin white paper, he/she/they suggest using a new address for each Bitcoin transaction. Unlike physical addresses, owning one is free — it’s not purchased like land.
The Private Key
Imagine your home on 123 Fake Street. You own that home. No one can go freely go into it except you (imagine you’re single in this scenario, whether that’s for better or for worse). That’s because you have a key to the door that unlocks the home, and once you enter the home you can take things out of it as you wish. Ideally, random people without the key should not be able to enter your home and take things out.
With a cryptocurrency address (including Bitcoin, Litecoin, Ethereum, NEO and basically all other coins), it’s the same idea. Instead of calling it a key, it’s called a private key — to emphasize that you need to keep it private. You use the private key to unlock your address, where you can then go inside and send coins out of.
Just like with your house key, you can copy it. A physical key can be copied at a locksmith, and a cryptocurrency private key can be copied with, well… Copy and paste on your computer. Also, just like with a house key, you might accidentally lose your private key. Both cases are not advisable — anyone with your private key will be able to access your cryptocurrency address to send your coins out to another address, just like anyone with your house key can open your front door and steal your TV.
So, if I didn’t make it clear — keep your private key safe. Do not give it to anyone. If you want to read more about ways malicious actors steal keys or gain access to cryptocurrency addresses, and how to safeguard yourself from that, take a look at my in-depth article: 0 to Pro Crypto Trader.
The Wallet
Remember in the earlier part when I mentioned that Satoshi Nakamoto actually recommended using different addresses for each transaction? Doesn’t that sound like a headache?
That’s where the wallet comes in.
By default, a wallet comes with an address. That’s why it can get confusing for people sometimes — it confused me at first, too. But while a wallet comes with an address, it is not equal to an address. It can be an entire collection of addresses. It’s called a wallet because people imagine it like an actual wallet and each address is a credit card inside that wallet. But I don’t think that analogy is entirely accurate.
Instead, I think the wallet is more like a key ring. It holds copies of each private key and each private key’s corresponding address. That way, all you need to do is open up your wallet to access all of the addresses that are inside the wallet. It’s like the wallet is a mansion and once you’re inside, you can access any room you want.
The wallet can be a in your browser, on your computer, or a physical device. Below are just some examples of wallets I recommend for each. Ultimately, I would recommend a physical device because I personally believe it has better security than other options.
The Browser Wallet
I think the only real browser wallet available is for Ethereum and Ethereum tokens only. MetaMask is a free Chrome Extension that automatically connects your wallet and addresses to websites. Once you log in with your password, you are able to access all of the addresses that are stored in MetaMask. MetaMask handles storing your private keys locally, so you do not need to paste in your private key as you would if you were using something like an address generated from MyEtherWallet. You’re also able to import addresses as long as you can provide the private key, too. This way, next time you open the MetaMask wallet, you’ll be able to send from the address you imported.
The Desktop Wallet
Desktop Wallets offer the most robust selection of cryptocurrencies. Exodus Wallet is one example. After logging in to the wallet with your password, you have immediate access to various cryptocurrencies including Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. The private keys are encrypted and stored locally by Exodus. After logging into the wallet, you will be able to send cryptocurrency without worrying about handling the private key yourself.
The Hardware Wallet
The Ledger Nano S is an example of a hardware wallet. It’s the one that I use, and it’s a wallet I recommend for anyone holding some serious amount of cryptocurrency. Personally, I recommend buying it for whenever someone says they have over $1,000 in cryptocurrency value — at the cost of around $100, that’s about 10% of your total portfolio value. Similar to a Desktop wallet, the Nano Ledger S comes with support for a variety of cryptocurrencies.
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