Traditional currencies such as Pound Sterling, US Dollars and The Euro are stored in banks or in your wallet or purse.
But with Cryptocurrencies, such as the most common called Bitcoin, or our very own Scotcoin currency, these are stored in different types of wallets and can be slightly complicated for those with limited IT knowledge but I can hopefully explain it for you here.
Cryptocurrencies are stored on what is called the Blockchain which is a series of blocks which form a chain and transactions between wallets are stored on these blocks on a public ledger.
Just like banks have an account name and number, then Cryptocurrencies have addresses which correspond to their wallet which points to a location on the Blockchain. A sample address looks something like this. It is a series of letters and numbers that starts with 1XKP and ends with YLvX
Each wallet has a public address and a private address which corresponds to the public key and private key. The Public address is where you can receive coins at, while the Private address is the special key to access your wallet or to send coins. To be specific, you do not store any coins in your wallet. What you really store is the public and private keys and addresses in your wallet.
Below is an example of a Cryptocurrency wallet. In this case it is a Counterparty wallet which is used mostly by Scotcoin users because Scotcoin Version 2.0 currently sits on the Counterparty protocol on the Bitcoin network.
Next, we will see the different types of wallets……..
- Desktop Wallets — These can be downloaded and installed on a computer, however there is always a risk if your desktop computer / laptop gets hacked or gets a virus you will more than likely lose your coins. Below is an example of this type of wallet.
Next, we look at Mobile wallets………..
- Mobile Wallets — Mobile wallets are app based which are installed on smartphones and are easy to use and always accessible. Although, you may lose your funds if your phone gets stolen or hacked. It is always recommended to have a pin number on the lock screen of your phone or use biometrics such as a fingerprint or facial recognition scanner found on new models of smartphones.
We recommend Free wallet from Freewallet.io which you can see below.
Next, we look at Online wallets…….
- Online Wallets — These are possibly the easiest way to store your coins as you simply go to a web browser such as Google Chrome or Mozilla Firefox, enter the address such as https://wallet.counterwallet.io and you simply log in using a 12 word passphrase which it quotes to you when you first register for the online wallet. See below.
I cannot stress how important it is to keep this 12 word passphrase in a safe place because if you lose it then your coins are gone and cannot be retrieved !!
This is the screen you will see when using the Counterparty online wallet.
And this is what you will see after you log in using that important 12 word passphrase. It shows the coins held at that wallet address and balances.
Next, we look at a paper wallet……..
- Paper Wallets — These are one of the safest and cheapest ways to store your coins. It is simply a print out of The public and private keys usually containing QR codes.
Finally, we look at Hardware wallets……..
- Hardware Wallets — These devices are a safe and convenient way to store Bitcoin. Examples of these devices are Ledger Nano, Trezor and Digital Bitbox which are some of the the most popular and commonly used, specially designed to store the all important public and private keys. Below is an example of one of these devices which looks similar to a usb memory stick which you simply connect to your computer via the usb port, then transfer the keys securely and is protected by a passcode or PIN number.
Hardware wallets can be a bit expensive at roughly 100 pounds with some cheaper ones at 50 pounds like the Digital Bitbox. The Ledger Nano S in the photo above, works on Windows, Linux and Apple Mac operating systems and can store the most popular Cryptocurrencies such as Bitcoin, Ethereum and Ripple. NOTE – Scotcoin and many other Cryptocurrencies are not currently supported by these hardware wallets so please check with the manufacturer before buying.
Finally, before I finish, here are a few Security tips for you.
- Never give out your password or 12 word passphrase to anyone.
- Make sure all devices you use i.e. Desktop PC, laptop, smartphone or tablet has the latest anti-virus updates and operating system patches installed.
- Ensure all of your devices have a password or PIN code as a bare minimum to access your device.
- If available, please use 2FA (two factor authentication such as sending a random code to a mobile phone or using the Google authenticator app before you can log on as an extra layer of security).
- Or use biometrics such as a fingerprint or facial recognition scanner to access your device. This may only be available on newer or more advanced devices.