Crypto Wallets – Common Misconceptions by Sarah Kutu

A crypto wallet is one of the most essential tools a trader or investor should consider when venturing into the crypto market. Though it’s possible to buy and sell cryptocurrencies without an external crypto wallet, having one makes it easier to store and manage crypto assets in one place. 

So, instead of holding assets in different wallets across various blockchain networks, a single external or non-custodial wallet can hold several types of crypto coins. However, many misconceptions about crypto wallets exist nowadays. Let’s see some of them in this article. 

Crypto Wallets Hold Users’ Coins 

When speaking of digital wallets for storing cryptocurrencies, many assume that the storage tool holds users’ Bitcoin and other cryptocurrencies directly. But here’s a shocker! Your crypto wallet doesn’t actually hold your coins. Instead, it stores your private keys, which give you access to your crypto balance on the blockchain. 

Think of your private keys as the password to your phone. With a password, you can’t check your messages and other information on the phone. Similarly, a private key allows wallet owners to check their crypto balance information. So, it’s more like a pass to a safety deposit box at a bank and not the funds.

Where is your money then? It’s still on the blockchain. For instance, if you have BTC, it’s stored on the Bitcoin blockchain. Your wallet connects to the blockchain to access what you have stored on it. Then, it secures your keys for executing transactions. So, if you lose your keys, you may lose your coins forever. 

All Crypto Wallets Are Safe

While crypto wallets offer a decent level of security to their users, they come in different types and with different levels of security. There are majorly two types of wallets: hot wallets (or software wallets) and cold wallets (or hardware wallets). Hot wallets operate online through an internet connection, while cold wallets store private keys offline. 

Cold wallets are considered more secure than hot variants because they operate offline, making them less prone to hacks and other cyber attacks. Conversely, hot wallets are easier to infiltrate by malicious actors once the user connects to a vulnerable network like public WiFi. 

In other words, wallets are generally safe, but cold or hardware wallets are more secure than hot or software wallets. Moreover, your crypto wallet is as secure as you. Whether you use a hot or cold wallet, without adequate security measures from your end, there’s only so much your wallet can do. 

Custodial Wallets and CEX Do Not Hold Assets 

Custodial wallets have that name for a reason. They hold crypto assets in their custody. The same applies to centralized exchanges (CEXs), which take control of the users’ private keys. That means when using custodial wallets, you don’t have complete control over your wallet. 

As a result, a CEX can freeze your account or limit access to your funds at any time. For instance, there have been reports of top cryptocurrency exchanges like Binance and Coinbase locking users’ accounts or outrightly closing them without prior notice. 

Besides, if the CEX goes bankrupt due to funds mismanagement or hacks, you may lose your money. That’s why many investors prefer non-custodial wallets like the Zypto DeFi Wallet, which gives them access to their private keys and funds at any time. 

Losing Your Wallet Means Losing Your Coins

Though losing your wallet or private keys can make accessing your crypto funds challenging, there’s still a way to recover your keys and ultimately, your funds. That’s by using your seed phrase. When setting up a hardware or software wallet, the device generates an automatic seed phrase combination as a backup. These are usually some words, which can be up to twelve, and they are arranged in a particular order. 

Without remembering your seed phrase and the pattern of its associated details, you are unlikely to recover a missing wallet forever. The best way to secure your seed phrase is to back it up manually. You can write the word combinations and their arrangements in a physical journal and securely keep it somewhere out of reach for others.  

All Cryptocurrencies Can Be Stored in a Wallet

While it’s mostly true that you can securely store any kind of crypto using a digital wallet, it’s not as straightforward. That’s because wallets differ in the blockchains they support. For example, an Ethereum-based wallet cannot store BTC unless it has a multi-chain transfer feature.

Similarly, some wallets were built for only Ethereum and its ecosystem tokens. A good example is theMetaMask Wallet. However, investors have now upgraded to a more convenient DeFi Wallet from Zypto, which supports a large range of blockchains, over 24,000 different cryptocurrencies and more are being added all the time. This means you can hold different assets on different blockchain platforms, all in one single wallet app.

What is a DeFi Crypto Wallet App?

A DeFi crypto wallet app is a self-custodial platform where users can connect with blockchains and DeFi platforms simultaneously. Its difference lies in its simplicity. It runs on a mobile app, making the experience less cumbersome for users. 

Additionally, it allows users to store, send, receive, and manage cryptocurrencies while interfacing with DeFi applications simultaneously. These include decentralized exchanges (DEXs), crypto lending platforms, staking protocols, and yield farming protocols.

So, instead of transferring cross-chain assets one after the other, you can use the DeFi Wallet to execute such transactions. 

Conclusion 

Having a crypto wallet can make it easier to manage your assets, store them, or even trade with them. We’ve debunked the common myths surrounding cryptocurrency wallets in this article Now, you’re equipped with more knowledge to avoid potential mistakes. 

Always remember to do your own research before choosing any crypto wallet. 

Closing Zypo Promotion

DeFi traders and investors looking to store or manage their assets in a very convenient way can consider the DeFi Crypto Wallet App from Zypto. With the support of thousands of cryptocurrencies, the crypto app is ideal for traders across all experience levels.

Visit the Zypto website to check out the wallet app or other features suitable for Web3 traders and investors. 

Checked out the new Zypto DeFi Crypto Wallet App? What do you like about it? Let’s have some feedback below.

FAQs