Transferring cryptocurrency between wallets is an important part of owning cryptocurrency. This guide covers the different types of wallets, best practices for transferring your crypto to another wallet, and what you should do to secure your cryptocurrency.
There are many types of cryptocurrency wallets but this guide will focus on the most popular ones that hold the majority of a person's crypto-holdings: hot wallets, cold storage, paper wallets, and exchanges. These four main categories can be broken down further into subcategories as explained below:
Hot Wallet- A hot wallet is typically an online wallet connected to the internet. This type of wallet is considered a "hot" wallet because it is readily available online and accessible from every device that has an internet connection. Some hot wallets have an application that can be downloaded to your smartphone or computer, both of which hold the private keys needed to complete transfers between wallets. In many cases, passwords must also be added when your wallet is created.
Exchanges- Cryptocurrency exchanges are a type of hot wallet that is used to allow people to buy or sell cryptocurrencies with fiat currency (dollars, euros, etc.) or other cryptocurrencies if they choose. Exchanges may become hacked sometimes resulting in lost funds so it's important to know when transferring from
Cold Storage- A cold wallet is an offline storage, like a USB drive. A person generates their own wallet on the device which stores their private key for transfers when they are connected to the internet.
After generating this wallet, you then disconnect your device (computer or USB drive) that contains your wallet file and store it in a safe place. Only when you need to make a transaction do you need to plug it in. The downside of cold storage is the inconvenience since it requires more work on the user's end.
Paper Wallet- A paper wallet is similar to cold storage where someone will type out or print their public and private keys onto a piece of paper for safekeeping. This form of wallet exists because some believe if you don't have access to your keys, you don't truly possess your cryptocurrency either making them more secure than an online-based hot wallet.
The process for transferring between wallets can vary depending on the type of wallets or cryptocurrency that you want to use, but the general method is usually very similar.
Open the wallet you wish to receive your cryptocurrency (or simply locate the address on your cold/paper wallet). On most hot wallets & exchanges, this will be under a section titled "Receive" or "Deposit". If you're transferring to a hardware wallet, plug it into your computer. Minimum transfer sizes may also apply - check with your wallet provider for details.
Confirm that the address is correct and meant for deposits if you are transferring to an exchange. Also, ensure that you are sending funds to the correct currency's address - BTC to a Bitcoin address, etc.).
We highly recommend Copy & Pasting the wallet address or, even better, using the QR code functionality that is standard in most wallets. The COVID-19 Pandemic has made QR codes very accessible & easy to use for most consumers today.
Open the wallet that contains the cryptocurrency that you want to transfer. On this wallet, you'll look for the section titled "Send" or "Withdraw". You will be prompted to enter the address you wish to send your cryptocurrency to - this is where you will paste in the address you copied or scan the QR code from Step 3.
Double-check your receiving address one more time and confirm the transfer. You will usually receive a transaction ID or confirmation number which you can use to look up the status of your transfer on a Blockchain Explorer.Some wallets will automatically synchronize the progress of your transaction with a dedicated, real-time page or app which you can access to track the status of your transaction.
Depending on the cryptocurrency you're transferring, you'll have to wait from a few minutes to a few hours for your funds to be transferred and deposited into your account on the receiving end. If you click on the "history" tab of your sending wallet, you should be able to see the status of any recent deposits or withdrawals as well as the status of the transfer you just initiated.
Another important factor to consider when transferring cryptocurrency is the fees that are associated with the transfer. Most wallet transactions have a fee based on the amount of data being transferred, which is usually paid to miners for confirming your transaction.
In addition to paying a transfer fee, you may also have a fee imposed from the wallet that you are transferring your cryptocurrency.
By far one of the most important things to consider when dealing with any form of cryptocurrencies is how they should be secured. Cryptocurrency is just as susceptible to being stolen as physical money and must be treated with both caution and respect. In order to make sure your wallet or exchange account cannot be compromised, make sure that two-factor authentication(2FA)is enabled for these accounts.
Most wallets and exchanges require some form of verification in order to confirm the identity of users before allowing them to withdraw funds. It is also recommended that you use a unique password for each wallet or exchange account that you create since this makes it more difficult for hackers to gain access.
Also, never leave large amounts of currency on an exchange long-term unless it is absolutely necessary! Exchanges create a centralized source of risk and can become a single point of failure for your entire crypto portfolio.
Bitcoin Depot operates the largest Bitcoin ATM Networkin North America. We offer a wide variety of services to help you securely transfer your crypto between wallets, purchase Bitcoin and other cryptocurrencies with cash or card at our ATMs, or sell Bitcoin for cash. If you're looking for more information on how we can help make transferring cryptocurrency easier for you, feel free to contact us today!