If you’re looking to start buying cryptocurrency, you’ll have to set up a crypto wallet first. Setting up a crypto wallet might sound daunting and complicated for the uninitiated. Luckily, this guide will help break down every step of the process so that you can become a part of a global community of crypto enthusiasts.
What is a Crypto Wallet?
Before we begin breaking down the step-by-step process of creating a crypto wallet, we must understand exactly what a crypto wallet is. As the name suggests, a crypto wallet is a wallet in which you can store your cryptocurrency.
Types of Crypto Wallets
There are different types of crypto wallets, each with advantages and disadvantages. Therefore, choosing the one that’s right for you is important.
1. Hosted Wallet
Hosted Wallets are wallets that exist on a particular crypto exchange. When you buy crypto from an exchange such as Coinbase or Binance, it’s placed into your personal crypto wallet. Hosted wallets are generally the most popular type of cryptocurrency wallet and they’re considered somewhat secure depending on your goal. For example, if you forget your password, the exchange your wallet is hosted on would help you recover it. That being said, most exchanges charge a subscription fee for maintaining a wallet on their platform.
To set up a hosted wallet, you must sign up with a crypto exchange and start purchasing crypto on their platform. Before you set up a crypto wallet, ensure you partner with a crypto exchange that suits your needs and understand their policies and restrictions.
2. Self-Custody Wallets
Self-Custody wallets, like hosted wallets, are hosted on a third-party platform. The difference between self-custody wallets and hosted wallets is that the latter aren’t protected by the platform they are hosted on. In this case, you are solely responsible for safeguarding your wallet and its assets. If you were to ever lose the private key to your wallet, your crypto assets would be lost forever. If someone were to discover your private key, they would be able to steal your assets, and the platform would be under no obligation to stop them.
To set up a self-custody wallet, you first need to download an app; Coinbase offers self-custody wallets. Next, create your account. Unlike a hosted wallet, you don’t need to share personal information when setting up a self-custody wallet. This makes self-custody wallets ideal for anyone who prefers to remain anonymous. Most self-custody wallets don’t allow you to buy crypto using fiat currency. Instead, you’ll need to set up a crypto wallet and transfer crypto from one wallet to the other.
3. Hardware Wallet
As the name suggests, a hardware wallet is a physical device capable of storing crypto within it in the form of raw data. Hardware wallets usually come in a USB stick or a hard drive. The advantage of using a hardware wallet is that your crypto wallet can’t be hacked into. This means your assets are completely secure unless your hardware wallet is stolen. To set up a hardware wallet, you’ll first need to buy it. Some of the most popular hardware wallet brands include Trezor, KeepKey, and BitBox.
Once you’ve purchased your wallet, link it to your personal computer, and install the necessary software. Next, you’ll have to transfer your crypto assets from a digital wallet to your hardware wallet.
Now that you understand the different types of crypto wallets available, choosing the one that’s right for you is important. Think about your lifestyle and your particular needs. As always, do ample research and talk to other experienced crypto community members.