Crypto Wallets for Attorneys is yet another installment in a series to help busy executives take a dive into the new world of crypto in bite-sized chunks. Here is this week’s bulleted list for Crypto Wallets for Attorneys:
- Cryptocurrency wallets can be physical, software-based, or even hosted. Each has a different level of privacy.
- Physical crypto wallets are still technically software-based, but the assets only exist on physical media that you hold in your hand. However, providers of physical wallets offer backup software so that your assets can be recovered if the physical media is lost or destroyed.
- Most software wallets are encrypted and usually stored on a central server so that a customer can recover their assets with a passphrase, and without the need to track the whereabouts of storage media.
- Wallets are a completely separate ‘place’ than an exchange, where your assets are deposited right after you make a purchase. Think of the most popular exchanges like Coinbase or Crypto.com.
- Any wallet that is private, and not visible on an exchange is considered a DeFi (decentralized finance) wallet. This includes the wallet products sold by the exchanges themselves.
- Purchases on the Coinbase or Crypto.com exchanges are not private. That information is easily subpoenaed, similar to the balance of your bank account.
- In order for your assets to be private, you must move them into a wallet. Exchanges like Coinbase and Crypto.com provide separate wallet products, as do countless other organizations.
- Think of your wallet as a safe or a safe deposit box. A subpoena can reveal the balance of a bank account, but only the existence of a safe deposit box, not its contents. No one knows about the existence of a safe except people to whom you reveal it.
- Everyone charges a fee to move from the exchange to a wallet. For example, if you decide to move your $10K in Bitcoin from an exchange, you will likely pay a sizeable fee. Even if the wallet is branded the same as the exchange. To many people, this is called double-dipping.
- Most wallets are created to support specific blockchain-based assets, including NFT’s. For example, a Bitcoin-specific wallet will not hold NFT’s because most NFT’s are minted on other blockchains.
- Your crypto assets are only as safe as your passphrase. So you need to memorize them, print them and put them in a safe, or encrypt them. Once someone has the phrase and your wallet address, your assets are as good as theirs. Including the government. If that phrase is hidden, so are your assets.
Other articles in this series include: Web3 for Attorneys, Blockchain for Attorneys, NFT for Attorneys, Crypto Mining for Attorneys, and Metaverse for Attorneys.