1
00:00:00,120 --> 00:00:02,730
so cryptocurrency has a concept of wallets.

2
00:00:02,730 --> 00:00:07,700
and obviously this name comes from like a physical wallet you might have or you store money in.

3
00:00:07,800 --> 00:00:12,870
but it's important to know wallets don't hold any cryptocurrency, your wallet doesn't have anything.

4
00:00:12,870 --> 00:00:16,270
really what your wallet is, is public and private keys.

5
00:00:16,270 --> 00:00:21,040
in public key cryptography, the concept of public and private keys is incredibly important.

6
00:00:21,180 --> 00:00:26,470
but really a wallet is the two together, but more importantly, the private key.

7
00:00:26,470 --> 00:00:32,430
the private key is what you can use to sign transactions that you put on the blockchain.

8
00:00:32,430 --> 00:00:38,440
so if someone has your private key, they can fake being you, i want to transfer this money that i have.

9
00:00:38,660 --> 00:00:40,070
and that would be it.

10
00:00:40,070 --> 00:00:44,570
so keeping your private key safe is the most important thing when it comes to a wallet.

11
00:00:44,570 --> 00:00:47,030
now wallets can be online or offline, right?

12
00:00:47,030 --> 00:00:48,290
hot or cold wallets.

13
00:00:48,290 --> 00:00:50,080
and we'll talk about the differences of those.

14
00:00:50,140 --> 00:00:54,850
but wallets are again, used to initiate the transactions and sign transactions.

15
00:00:54,850 --> 00:01:03,770
remember in an earlier video where we talked about how miners go across every block and validate the actual transaction amounts to make sure you have it, right?

16
00:01:03,770 --> 00:01:06,430
that's how they know if you have bitcoin or not.

17
00:01:06,430 --> 00:01:11,590
it's not because, it's not because it's actually stored in your wallet and you're actually transferring it.

18
00:01:11,590 --> 00:01:19,280
they just check the history on the blockchain to make sure that your wallet has that based on the origination of that crypto and did it get to you.

19
00:01:19,780 --> 00:01:23,330
so let's talk about some differences between hot and cold wallets.

20
00:01:23,330 --> 00:01:28,160
hot wallets are really software and tools that are connected to the internet and accessible from the internet.

21
00:01:28,340 --> 00:01:32,070
so coinbase, for example, their wallets are considered hot wallets.

22
00:01:32,070 --> 00:01:34,070
they really kind of own those wallets.

23
00:01:34,070 --> 00:01:42,720
so if you have all your crypto on coinbase, you should be very careful with that because they are hosting your private key somewhere and they have to keep that safe.

24
00:01:42,940 --> 00:01:45,450
if they don't keep that safe, you would lose your crypto.

25
00:01:45,450 --> 00:01:48,280
so it's important to understand that those keys aren't with you.

26
00:01:48,340 --> 00:01:53,560
on the other hand, a cold wallet though, stores the public and private keys on an actual hardware device.

27
00:01:53,780 --> 00:02:00,350
now you can have a warm wallet like electrum, which is stored on your computer, but it can connect to the internet.

28
00:02:00,350 --> 00:02:03,080
so that's considered in the middle there, a warm wallet.

29
00:02:03,100 --> 00:02:14,070
but cold wallets like a usb device that actually store the keys on the device and you have to unlock the device to get access to the keys, and then that's how you actually go about transferring or signing transactions.

30
00:02:14,070 --> 00:02:19,510
so cold wallets are much more secure because you have it, it's with you, it's not hosted anywhere else.

31
00:02:19,510 --> 00:02:20,670
it's a lot safer.

32
00:02:20,670 --> 00:02:23,320
so which one you want to use depends on what you're doing.

33
00:02:23,340 --> 00:02:26,930
hot wallets are really good for quick transfers, easy transactions.

34
00:02:26,930 --> 00:02:36,440
cold wallets are really good for long- term storage or keeping something very safe if you want to ensure you're meeting that maximum level of security and privacy.