A cryptocurrency wallet may have some similarities with an online bank. First, they both act as a store for users’ funds. Second, they allow users to interact with their funds – receive and send funds. Despite the similarities, cryptocurrency protocols work quite differently from conventional services such as PayPal and Bank’s online portals. For instance, cryptocurrency transactions are irreversible, meaning security standards has to be higher to avoid losing funds.
A cryptocurrency wallet securely stores users’ cryptocurrency and allow them to access them anytime. Crypto wallets are classified into different categories. The most popular ones include hosted wallets, non-custodial wallets, and hardware wallets. The most suitable for you depends on what you want to do.
If you are seeking an easy-to-use wallet that you can use to make daily cryptocurrency payments and even day-trading, then hosted wallet is for you. However, you would want to go for a non-custodial wallet if you are into daily crypto transactions and want full control of your private keys. Hardware wallets will be your best choice if you want to keep many cryptocurrencies that you do not intend for daily use.
What to Consider when Having Your First Crypto Wallet?
It is important to know how to choose a crypto wallet and understand how these wallets work to avoid the potential loss of funds. Additionally, you need to know how to set up crypto wallets before you begin using them. Here are the five basic steps you should take when using your cryptocurrency for the first time:
- Identify the type of wallet you want to use – Hosted Wallet, Self-custody wallet, and hardware wallet.
- Download or buy your wallet
- Install the wallet software
- Set up your account and security features
- Transfer your cryptocurrency to the wallet
Following the above process properly will allow you to use your cryptocurrency safely and securely.
Selecting the Right Wallet
The most important thing to consider when selecting a cryptocurrency wallet to use is why you are using cryptocurrency and how you want to use them. Different wallets are built for different use cases. Therefore, you should choose the option that matches your needs – how you will be interacting with different cryptocurrency networks. You can try to answer the following questions when choosing your first wallet:
- What types of cryptocurrency coins are you going to deal with?
- How many cryptocurrencies are you planning to keep in your wallet?
- What level of privacy and security do you need?
The above questions will help you understand your needs and select the right wallet from the available options. Again, security should remain a priority at any time. The hardware or software you are selecting will be controlling your private keys, which all you have as owning crypto assets is concerned. A compromise in security will mean losing everything if you can control your private keys, the better since it equates to control over your own money.
🧐 Not sure which wallet is suitable? Check these as well:
How to Set Up different Crypto Wallets?
Hosted wallets are the most popular and easy-to-set-up cryptocurrency wallets. When you buy cryptocurrency from exchanges such as Binance, Coinbase, Bittrex, and Bitflyer, your crypto assets will automatically be held in a hosted wallet. Using hosted wallet means a third party will be keeping your digital tokens for you, the way banks keep your money in a savings account.
When dealing with hosted wallets, you need not worry about losing your private keys or hardware wallets. Hosted wallets allow you to reset your password easily if you lose it. To set up your crypto wallet, follow the steps below:
1. Select a platform you trust
Some factors to consider are security, ease of use, the number and types of supported cryptocurrencies, compliance with local and international financial policies, and charges (commissions), if any.
2. Create your account
Supply the information that the platform will require. The information includes personal information such as email and password. You should add an extra layer of security by using a 2-step verification (two-factor authentication, 2FA).
3. Buy or transfer your cryptocurrency assets.
Your account is ready to receive digital tokens once you set your account. Most exchanges will allow you to connect your bank accounts and buy cryptocurrencies from the exchange. However, if you already own some crypto, you can transfer them to your new wallet.
You need to take precautions to secure your hosted crypto wallet, even when using a highly reputable crypto exchange. Here are some security recommendations to take to protect your funds when using hosted wallets:
- Use strong password
- Store your password offline or use a reputable password manager (if you have to).
- Ensure your computer is up-to-date with antivirus software to protect it from malware or virus attacks.
- Enable 2FA
- Use a new dedicated email address
Self-custody wallets such as Coinbase Wallet and Hi.com Wallet allow you to control your cryptocurrency fully. These wallets do not rely on a third party (custodians) to store your digital assets. The wallets providers only provide software necessary to store your digital assets – the responsibility of remembering and safeguarding your crypto assets is entirely on your hands. You risk losing your digital tokens if you lose your private keys or seed phrase. Additionally, someone will access your crypto assets if they discover your private key.
Custodial wallets also allow you to access more advanced crypto products such as staking, yield farming, borrowing, and lending.
Here is how to set up your non-custodial wallet:
1. Download a wallet app
Identify the wallet you want to use and download the software. Most wallets are available for download on Play Store and iOS (for mobile) and Windows and macOS (for desktop).
2. Create your account
A non-custodian wallet does not require you to supply personal details, not even an email. Go ahead to launch the wallet once you have downloaded the software. You will receive a private key.
3. Keep your private key.
Your private key is presented as a random 12-word phrase. Write down all the characters in the phrase (in order) on a piece of paper and keep it safe. You will not access your digital tokens if you lose or forget these keys.
4. Transfer crypto to your wallet
Unlike custodial wallets, it is not always possible to buy digital tokens using fiat currencies when using a non-custodial wallet. Therefore, you must transfer crypto to your wallet. You may transfer the crypto from an exchange or another wallet.
hi Wallet will allow users to choose between hosted or self-custody wallets. You can have both wallets if you want to buy crypto with fiat currency and use advanced cryptocurrency products such as staking and yield farming. Setting up both wallets is free.
Hardware wallets are basically physical devices that store cryptocurrencies offline. The wallets sign transactions offline and send them to the respective distributed networks. These wallets are the most secure since they are not prone to cyber-attacks. However, many people do not use them due to their increased complexity and cost. Some of these wallets, such as the Corazon, costs more than $1000.
To set up your crypto wallet, follow the steps below:
1. Identify the wallet you want to use
Many brands offer hardware wallets, which differ in many factors, including the size of the hardware, supported connectivity (USB and Bluetooth), the number of supported cryptocurrencies, and the price. You can compare the feature and select the one that best suits your need.
2. Buy the hardware
You can buy the wallets from the official stores or order online through the official platforms. Most of the manufacturers do international delivery. You can also order through trusted third-party online platforms such as Amazon.
3. Install the respective wallet software
Each hardware wallet hardware has its brand of software that you need to set up the wallet. You can choose to download the software from the company’s official website and follow the provided procedure to create the wallet.
4. Transfer your Crypto assets
Like non-custodial wallets, hardware wallets do not allow crypto buying using fiat currencies such as US dollar or Euro. Instead, you can only transfer digital tokens from another wallet to your hardware wallet.
There are many ways of storing cryptocurrencies. You can use an exchange wallet, a custodial hot wallet, a non-custodial wallet, or a hardware wallet. Your goal, ease of use, and security are the key factors you must consider. Your wallet should offer both convenience and security.