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How to Set up a Crypto Wallet?

Most people have interacted with a form of banking, be it a bank account in a traditional financial institution or an e-wallet. If you want to start transacting in blockchain assets, you need a crypto wallet - but which one should you choose, and how do they work?

While there are a few similarities, the reality is that digital coin protocols are totally different from the operational mechanism of Skrill and PayPal or your bank account. That is why you need to find the best crypto wallet if you are just getting started with crypto. The good news is that even though it may seem a little challenging for a newbie, this article will take you through the A to Z’s of setting up a crypto wallet.

Setting up Crypto Wallets by Type

Crypto wallets are as old as the digital coin ancestor, Bitcoin, and serve many functions. The primary purpose for all wallets is secure storage, just like we hold our funds in bank accounts. Apart from that, crypto wallets are also necessary to send funds, receive virtual money, and transfer funds or make payments. They not only hold cryptos such as BTC, ETH, and XRP, but advanced ones also facilitate transactions for newer blockchain assets like NFTs.

We cannot discuss how to set up a crypto wallet without covering the different types of wallets available for use. Mainly, you’ll come across:

1. Custodial Wallets

Custodial wallets are defined as virtual coin wallets in which the user doesn’t have access to the private keys. Typical places you’ll find custodial wallets will be exchanges like Binance and Coinbase and other platforms like Nexo or Youhodler. In most cases, the wallet provider has full custody of the private keys, and the user only has permission to transact.

Custodial wallets are the most popular crypto wallets and the easiest to set up. The main challenge is that if someone manages to hack the provider’s database, wallet holders can lose all their assets.

As mentioned, setting up these kinds of wallets is easy. Simply head to your preferred wallet providers such as Coinbase.com or Binance.com and hit the “Sign-up” button. Follow the instructions to register and start transacting. You will need a user name and password whenever you want to access your wallet. Crypto assets are hot, and scammers don’t get tired of searching for vulnerable wallets to steal from. So don’t forget to activate 2FA for an added security layer.

2. Non-custodial Wallets

Non-custodial wallets, or self-custody wallets, are the complete opposite of hosted wallets. There is no third-party “custodian,” so the wallet users are responsible for the safe storage and security of their private keys.

MetaMask

With wallets like Metamask, the user is in total control.

The wallet provider only issues you with the software, and you’re left with the full responsibility of handling and securing your funds. That means if you lose or forget your seed phrases, you may as well bid farewell to all your money.

Nonetheless, non-custodial wallets are considered safer than hosted wallets since it’s theoretically impossible for wallet users to lose funds if the provider’s server is hacked. They also give users more control and a high-level shield even from government authorities. Of course, crypto is decentralized. However, in rare cases like the ongoing war between Russia and Ukraine, some custodial wallets froze Russian-owned assets since the wallet provider has private keys. Out of tens of non-custodial wallets, the best ones include Coinbase wallet, Trust Wallet, Metamask, and Coinomi.

Setting up non-custodial wallets is more complicated than hosted wallets. First, they come as web-browser plugins, desktop, or mobile apps. So to start, you must visit your preferred wallet’s website and download the platform. For example, if you are going to use Metamask, you will need to download the web browser plugin app and install it as an extension on your browser.

Trust wallet is a mobile-based self-custody wallet, meaning you must download and install it on your Android/iOS device. Finally, Coinbase wallet users have an option for a PC app or mobile app.

Next, hit the “Create Account” button. That’s it; you won’t be required to provide personal details. Not even your email address. Instead, the wallet will present a list of 12 random words called seed phrases.

These are an encrypted form of your private keys. You need to keep them safe and never share them with anyone. You can now start using the wallet to send and receive money. Most self-custody wallets don’t have an exchange attached, although some, like Coinbase wallet and Trust Wallet, provide an easy bridge to top exchanges.

3. Cold Wallets

Cold wallets, also called hardware wallets, are a unique form of crypto storage that keep digital coins offline. They are the most secure method of crypto storage since no one can access your digital currencies when they are stored away from the internet.

Ledger Nano

Wallets like the Ledger Nano secure assets offline in ‘cold’ storage.

Cold wallets mostly come as USB-sized hardware devices compatible with USDB PORT 3.0 and, in some cases, USB PORT 3.1. Because of their hardware requirements, users must purchase a wallet if they want to own it. Typically good wallets range from about $30 to as high as $200+.

Setting up a hardware wallet could be complicated for first-timers, but that should not scare you as they all come with an installation guide. Besides, you can always get help from multiple third-party YouTube guides. The setup process could vary across different wallets, but it is usually something like this:

  • Buy the right hardware wallet
  • Read the installation manual
  • Find the associated cold wallet software
  • Install hardware crypto wallet software according to the installation guide
  • Start using your cold crypto wallet to store funds.

How to Evaluate a Crypto Wallet?

We have been there, and we understand the puzzle of trying to find the best crypto wallet from hundreds of options available on the web without knowing exactly what to look for. Worry not if you are in the same shoes; we are here for you. Everyone needs to ask some critical questions while evaluating digital coin wallets. Some fundamental queries are:

  • What currencies does it support? Make sure it’s compatible with all or as many crypto options you may want to transact in the future.

  • Is the website secured? You don’t want to share your data with a non-secure site. Make sure it’s HTTPS protected.

  • Does it offer 2FA? Hey, you want your money to be as safe as possible. So we don’t recommend going with a wallet that doesn’t provide an added security layer via two-factor authentication.

  • How transparent is the website? Find out who they are, whether the wallet provider is trustworthy, published, and mentioned by significant media companies, and, if possible, who the directors are.

  • Do they have good client support? Don’t give a second thought about dropping a crypto wallet from your list if you find out they offer poor customer support.

  • Are there any fees? The higher the transaction fees, the lower your crypto profits. Who likes paying high fees anyway? If you can find a reputable wallet with zero or considerably low fees, go for it.

  • Does the price fit within your budget? This is in regards to hardware wallets. Price is a non-issue if you have deep pockets. However, for the rest of us, it’s necessary to consider the buying price of each hardware wallet before adding it to the list of options.

There is a lot to learn about crypto wallets. We can’t exhaust the topic in one go. The good thing is you are part of our community. Feel free to flip through our website for more educational articles. For now, we have something interesting if you still have questions about crypto wallets. Follow this link to learn everything about crypto wallets and how they differ.

Parting Shot

Now that you’re a pro at crypto wallets, remember to always store your coins safely. It would be excruciating to lose weeks or even months of your crypto savings overnight to a hacker simply because you were careless. 2FAs may seem cumbersome and time-wasting until you can’t access your wallet anymore or log in to find a zero balance. For non-custodial users, find secure ways of storing your seed phrases. You may take pictures of the seed words, write them in your safest notebook, and even keep them in your email as a draft email or cloud storage.

FAQs

  1. What are crypto wallets used for?
    Crypto wallets are used to securely store crypto-assets like digital currencies and NFTs and facilitate transactions such as making payments.

  2. Where should I store my private keys?
    Store your private keys in a secure place where you can remember and access them when necessary. It’s best to store them offline.

  3. Which is the best crypto wallet?
    Most crypto wallets are good, depending on what someone is looking for. Consider your individual needs, such as the crypto you want to transact and your preferred type of wallet you want when looking for a wallet.


Editorial Note: This is a sponsored article. Opinions expressed are solely those of the sponsor and readers should conduct their own due diligence before taking any action based on information presented in this article.


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