If you’ve decided you want to buy some crypto, you’ll need to create a cryptocurrency wallet to keep your coins safe and accessible. Creating a crypto wallet is as easy as installing an app on your mobile device or desktop.
Most crypto exchanges allow you to create a wallet automatically when you buy crypto on their platform. You can then transfer the funds to a wallet you control, like MetaMask.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a software program that lets users store their crypto holdings. Crypto wallets have private keys that give users access to their coins. These keys are vital since they help secure the crypto coins in your wallet. If you lose your private keys, you lose access to your crypto.
Private keys also enable users to check their balance and send and receive cryptocurrencies quickly. Since your cryptocurrency holding live in the blockchain, it stores information about your public and private keys and the amount of crypto you own. But you would need your private keys to access the funds or execute transactions. Public keys (or wallet addresses) are what you share with others so they can send crypto to you.
Different Types of Crypto Wallets
Cryptocurrency wallets come in many forms and can serve diﬀerent purposes.
1. Hardware wallet (Cold wallet)
A hardware wallet (or cold wallet) stores your keys completely oﬄine on a device (such as a USB drive) not connected to the Internet. Because they’re oﬄine, hardware wallets are the most secure wallets for keeping your crypto holdings. They are preferred for cold or long-term storage of huge amounts of cryptocurrencies.
2. Online wallet (Hot wallet)
Also called software wallets or hot wallets. Keys are stored in an app or other software. This makes it easier to send, receive, and use your crypto. Hot wallets, however, pose a higher hacking risk since they leave your keys connected to the Internet. As a result, it is advisable to enable features like two-factor veriﬁcation to enhance your wallet’s security.
You may access an online wallet through crypto exchanges like Binance or CoinDesk or via a mobile or desktop. Exchanges oﬀer the simplest way to get involved with crypto by providing a hot wallet to store and access your coins. Desktop wallets are installed on a desktop or laptop computer and give the user complete control over the wallet. Users can run mobile-based wallets on their smartphones or tablets. Meanwhile, a web wallet like MetaMask can send and store cryptocurrency on one’s behalf. The main advantage of web wallets is that they can beaccessed anywhere and from any device.
3. Custodial Wallets
A custodial wallet is the most popular and easy to set up crypto wallet. Buying crypto using an app like hi, your crypto is automatically held in a custodial wallet, also known as a hosted wallet. A third party keeps your crypto for you hence the name hosted. This operation is similar to how a bank keeps your money in a savings account.
4. Self-custody Wallets
Also known as non-custodial wallets, these wallets support the trade, transfer, and storage of digital assets. They are required to transact with blockchain-based financial applications such as NFT, Compound Liquid Pool and other decentralized finance or DeFi applications.
5. Paper wallets
Information about your public and private keys are printed onto a sheet of paper and stored in a safe place. Paper wallets make it diﬃcult to use your crypto since you can only trade them online.
Critical Features of a Crypto Wallet
A cryptocurrency wallet is a safe place where users can store their digital assets and funds. It serves as a way the holder receives, keeps, and spends their coins easily while maintaining complete control of their crypto holdings.
Below are key features that should be integrated into a crypto wallet:
- Multi-signature (Multi-sig) support – Multi-signature wallets are crypto wallets that require two or more private keys to approve a transaction. These wallets minimize the risk of failing to recover digital assets from a sole signatory to a wallet.
- Biometric authentication – Wallets that support biometric authentication like fingerprint access are an additional layer of security as access to the wallet is only possible by the wallet owner.
- Multifactor authentication (MFA) – Wallets with MFA help to secure the wallet even more as login and access to the wallet have to be verified in multiple methods.
- Mnemonic passphrase – Wallets that generate mnemonic passphrases ensure simple backup and recovery of crypto wallets if one loses or damages their device.
- Optimal session logout – Since crypto wallets handle highly-sensitive information, wallets that connect to the internet should deploy optimal session timeouts to protect users from risks that arise with staying logged in for too long. For instance, automated session logouts after a transaction may prevent unauthorized access.
- Password-protected access – Wallets must include passwords for access to wallets, in addition to other secure login features
- Low fees – Wallets that offer affordable rates for processing transactions are preferred
- A real-time tracking facility for payments
- Real-time push notifications to view the wallet activity
- Little-to-no influence by government regulations
- Quick conversion from fiat to cryptocurrency and vice-versa
- Multiple modes of executing a transaction via NFC, QR codes, or a Bitcoin URL
How to Create a Crypto Wallet?
Setting up a crypto wallet is simple, with only a slight difference for custodial, non-custodial, hot, and cold wallets.
For hot non-custodial wallets, all you need is to download the wallet app of your choice then create your account. Unlike custodial wallets, non-custodial wallets do not require you to complete KYC requirements by sharing personal information. The sign-up generates your private keys, which you should write down and securely store.
For hardware wallets, known as cold wallets, you need to first purchase the hardware. Such wallets are available for order online and in various official dealer stores. After purchase, plug the device into your PC to install its software, then follow the manual instructions offered by the manufacturer to operate the cold wallet.
How to set up a desktop wallet?
The security of desktop wallets is usually good, but they are vulnerable to hacking when connected to the internet.
- Visit the official website of the wallet you have chosen (e.g. Exodus).
- Choose the correct version of the wallet for your device.
- Download and install the wallet.
- Once installed, enter a strong password to secure your wallet.
- Check the box next to “Encrypt Wallet.”
- Click next after choosing where you’d like your new wallet saved and wait while the application downloads all the blockchain data.
How to set up mobile wallet?
A mobile crypto wallet is an app that lets you store your crypto in a secure digital wallet. Here’s how to set up a mobile crypto wallet.
- Download the App for Your Mobile Wallet on Playstore or Apple Store.
- Create an account. It’s usually as simple as entering your name, email address, and password in the app.
- Create a secure password.
- Complete 2-step veriﬁcation. This typically involves confirming your mobile number in addition to email verification.
- Add your debit or credit card (for hosted wallets) if you want to buy crypto using fiat.
- Launch your account to purchase crypto. If you already own crypto coins, you can transfer them to your wallet and begin trading.
How to set up a web wallet?
A third party hosts the wallet, so you do not have direct access to the private keys (password) required to access your cryptocurrency holdings. Web wallets like Luno oﬀer simple ways to store your cryptocurrency.
To set up a web wallet, follow these steps:
- Go to the website of the wallet your trust.
- Click on ‘Sign Up’.
- Enter your personal details to continue.
- Choose a strong password for account security.
- Complete email and mobile verification if required.
- Buy or transfer crypto to your wallet to begin trading
How to create a cold wallet?
A cold wallet is an external device or program that does not keep on your computer or smartphone. It allows you to store your cryptocurrency securely, and it keeps it away from the prying eyes of hackers who may attempt to steal your coins online.
Investing in a hardware wallet is by far the safest way to store your coins. Even though some of these devices cost a fair amount of money, they are well worth their price.
The following steps explain how to set up a hardware wallet.
- Purchase the hardware device. Trezor and Ledger are the most popular brands.
- Download the software from the official company website and Install the software
- Follow the prompts to create your wallet
- Transfer crypto to your wallet
How to Use a Crypto Wallet?
Now that you are properly informed on what a digital wallet is and how it works let’s look at how to use one.
Firstly, download a crypto wallet. There are diverse types of wallets to choose from, so make sure you choose one that’s right for you.
Once you have downloaded the wallet, please open it and create a new account. This will generate a unique address and public key for you.
Then, you need to add some crypto to your wallet. After that, you can transfer cryptocurrency from another wallet or buy it on an exchange.
With the funds present in your wallet, you can start making payments. To do this, scan the QR code of the recipient’s address with your phone or enter it into the text field.
Once the payment is confirmed, the funds will be transferred to the recipient’s wallet. It usually takes a few minutes for the payment to be processed, but it can take up to an hour in some cases.
Which Crypto Wallet Is Best for You?
When it comes to crypto wallets, there is no one-size-fits-all solution. It would help if you chose a wallet that meets your specific needs and requirements.
Listed below are some factors to consider when choosing a crypto wallet:
- Security: How safe is your wallet? Does it have features like two-factor authentication or encryption? The best wallets oﬀer 2-factor authentication, multi-signature support, in-built exchange features, and more.
- Usability: Is the wallet easy to use? Can you easily access your funds and make transactions?
- Compatibility: Is the wallet compatible with the cryptocurrencies you want to store?
- Choose a wallet that supports multiple currencies so that you can diversify your portfolio
- .Fees: How much does the wallet charge in fees? Are the costs worth it?
- Access to DeFi products: Some of the best wallets support on-chain lending and borrowing, which helps you earn passive income by adding DeFi products to your portfolio.
Once you’ve considered these factors, you can start looking for a wallet that meets your needs.
Start your crypto journey with hi
hi makes it very easy to participate and invest in cryptocurrency. You can easily trade and transfer HI and other cryptocurrencies. Sending money via the HI wallet is also free. Also, you can earn crypto interest by holding HI on your hi wallet.
As it is earlier stated, the type of wallet you choose to create should be in line with your goal. With hi wallet you have both a wallet and a unique medium of earning. Start earning by signing up for your hi wallet today.
FAQs on Crpyto Wallet
There are many different options available on the market. It can be challenging to decide which one is right for you.
You first have to choose your prefered wallet type in line with your needs. Choosing a wallet that aligns with your goal and meets your specific needs is vital. Otherwise, you may not be able to take full advantage of all the features offered by the wallet. Furthermore, hot digital wallets are vulnerable to hacking since they keep your private keys online. As such, only physical hardware wallet can offer the best protection for your digital assets.
In addition, most crypto exchanges allow you to store your cryptocurrency within a wallet on the exchange so you can trade crypto with ease. However, because of the security dangers associated with exchanges, this approach should not be relied on solely. Instead, make it a habit to move your crypto into your wallet after trading.
Creating a “burner wallet”, a temporary second wallet for a single transaction, is a frequent practice by crypto users to avoid being exposed to some internet hijinks. A burner wallet ensures that only the funds in that wallet are at risk, rather than all of the assets in your main wallet.
Hardware wallets are a good method to ensure that your crypto wallet isn’t suddenly stolen when you’re not online, but they come with their own set of problems. Limit which sites you connect your wallet to and to whom you share your wallet address (particularly your private key—do not post it online) to keep your crypto safe.