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Getting Started with Tokens and Wallets

NOTE: This is draft article, and will be updated soon.

Here's a brief introduction to tokens and wallets to help you get started on your cryptocurrency and NFT journey. We've also provided a list of reference articles at the end for additional reading.

Tokens

Traditional Coins or Tokens

When Bitcoin first came out, it set the standard for what it means to be a crypto coin. Coins and token have a unit of value, similar to real-world money.

A coin operates as the native 'unit of currency' on its chain and and is used to pay transaction fees, reward validators, and can be traded.

Unlike coins, tokens do not have their own blockchain. Instead, they operate on other crypto coins' blockchains, such as the Binance Smart Chain. Some of the most commonly seen tokens on the Binance Smart Chain include CAKE, BUSD, and of course GMR.

Both coins and tokens are 'fungible' - which means they can be exchanged as like-for-like, or replace each other as they are identical.

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFT) are - well, non-fungible. Each token is unique and cannot be exchanged as like-for-like with another token. The immutable and unique properties of NFTs makes them interesting in a variety of scenarios and applications - from titles, deeds, identification, and as seen recently, as collectables or artwork with built-in mechanisms for provenance and attribution.

Wallets

A cryptocurrency wallet stores the public and private keys required to buy Bitcoin or other cryptocurrencies, and provides digital signatures authorizing each transaction. These digital wallets can be a device, a program on an app or online website, a browser extension (like Metamask) or a service offered by crypto exchanges.

You’ll need to keep safe and secure your password and seed phrase that allows you to unlock your crypto wallet in order to trade or spend your cryptocurrency.

A common misconception about wallets is the belief that your tokens or coins are stored in the wallet. This isn't the case. The only thing stored in your wallet is your private / public key pairs. A specially compressed version of your public key is the ‘address’ of your wallet or an account within your wallet.

Your actual tokens or coins are stored on the blockchain from which they were purchased, and contain a cryptographic proof that identifies you (your public key address) as the owner of the token or coin. If you want to transfer or sell your tokens, you'll need to create a signed authorization request via the private key in your wallet to approve the sale or transfer. If you've lost the private key to your account, or your entire wallet and seed phrase, then you will have forever lost access to your tokens and coins that are stored on the blockchain.

So... be sure to follow the instructions for your wallet carefully, and keep safe copies of your seed phrase, or wallet recovery material.

Hot Wallets

Hot storage cryptocurrency wallets are directly connected to the internet, such as a phone app, a desktop software program or an online provider (hence “hot” storage). Most hot wallets or services are free. Because hot wallets are connected to the Internet, they are potentially susceptible to online theft, and so it's important to be aware of attempted hot wallet scams or phishing attempts. Be sure to keep your hot wallet password, seed phrase and private keys safe at all times. GMR will NEVER ask you for your wallet password.

Hot wallets are available in desktop, mobile, and web or browser-based versions

Cold Wallets

A cold wallet is a small, encrypted portable hardware device that allows you to store your private signing keys offline.

Cold wallets can cost as much as $100. They are considered much more secure than hot wallets. Cold wallet providers include:
  • Trezor: This company offers small, key-size cold wallets ranging from about $60 to $200.
  • Ledger: Designed like a thumb drive, Ledger has cold wallets ranging from about $60 to $120.

Networks

Another challenge for users new to cryptocurrency and wallets, is the concept of networks.

A network within the crypto currency world refers to a specific blockchain. Networks typically have a network ID and a blockchain ID. In many (but not all) cases the network ID is the same as the chain ID. For example the chain ID for Binance Smart Chain mainnet is 56. The chain ID for ethereum mainnet is 1.

It's important to recognize the options for connecting to a particular network from your wallet. Your account balances, including any transfer or purchase requests, must all come from an account connected to the correct network (or chain ID). A common source of confusion for new wallet users is being unable to see or find the correct token or coin balance for the account, because the wallet account is not connected to the correct network.

Further Reading

[1] An introduction to cryptocurrency wallets
[2] Cryptocurrencies: A Guide to Getting Started
[3] Metamask FAQ
[4] Cryptocurrency Wallets Course: Secure Your Cryptos Safely!