How to Set Up a Crypto Wallet

Daniel Zychla

Content Marketing

Understanding how to properly store crypto safely and efficiently is vital when trying to find success in the world of crypto. Furthermore, knowing how to set up a crypto wallet that fits your security, user-friendly and feasibility goals allows for full exploration of the crypto space while at the same time ensuring that your crypto assets stay safe. In today’s blog post, we’ll talk about what wallets are, the different types of wallets that exist and why wallets matter. With that said, let’s jump right in.

 

What is a Crypto Wallet and Why Do You Need One?

A crypto wallet enables you to keep your crypto holdings safe and accessible while allowing you to seamlessly send, receive, and spend cryptocurrencies. Unlike traditional wallets that hold actual cash, crypto wallets do not technically store your crypto but rather keep track of your private keys.

That’s because all your crypto holdings live on the blockchain and can be accessed using a private key. Private keys act as proof of ownership (like a password), which, if lost, lead to an inability to access your crypto holdings. 

 

Types of Crypto Wallets

Two different types of crypto wallets can be used when storing your private crypto keys, software and hardware. Both accomplish similar goals but have important differences surrounding security and accessibility.

 

Software Wallets 

Software wallets are applications that keep track of your crypto (through an app or software), which can take the form of mobile, web, or desktop wallets. Holding your crypto within a software wallet is the best way to simply send, receive, and use your cryptocurrencies, mimicking the simplicity of an online bank account. The different forms of software wallets allow investors to choose what they like best and find the easiest to use, whether it be on their mobile device, internet browser, or computer desktop.

This is why choosing a reputable and trusted crypto wallet that fits your investing strategy is important. If done correctly, a crypto wallet should remove the hassle of keeping track of private keys and allow crypto holders to rest assured knowing that their holdings are safe. 

 

 Custodial vs. Non-custodial

Whether a software crypto wallet is custodial or non-custodial is dependent on whether you have sole control of your private keys and, in turn, your cryptocurrencies. A custodial wallet involves another party controlling your private keys (like when you leave crypto in an exchange), while a non-custodial wallet gives you exclusive access to your private keys.

Custodial wallets encapsulate most web-based crypto wallets and are favoured by many crypto holders because of their convenience and ease of use. The biggest drawback regarding custodial wallets is security as you don’t own the keys, which is why choosing a reputable custodian with a solid track record of securely storing customer funds is essential.

Non-custodial wallets can be hardware or software-based and give you complete control of your private keys. These wallets are generally preferred by crypto holders who highly value security. That’s because non-custodial wallets involve much more responsibility and attention to detail while granting you the biggest ownership.

 

Hardware Wallet

A hardware wallet is similar to a USB drive and acts as a place to store your private crypto keys. Remember, cryptocurrencies are never stored on hardware wallets as they live on the blockchain. This is why hardware wallets merely act as a place to store your private keys, which can be used to interact with your crypto holdings. Hardware wallets can be accessed using a PIN or password and securely stores crypto as a non-custodial wallet. 

Although a safer option, hardware wallets do not always entice crypto investors as they involve more maintenance and costs than traditional software wallets, which are viewed as a more straightforward option. 

 

What to Consider When Choosing a Wallet?

The most significant factor to consider when choosing a wallet is risk tolerance level. Different wallets come with varying levels of security which consequently impacts the accessibility of your crypto holdings.

Hardware wallets are by far the most secure crypto-wallets. As non-custodial wallets that hold your private keys on a separate piece of hardware, they remove nearly all risks associated with the potential hack and theft of your crypto holdings. The downside is a much more meticulous process compared to software wallets which requires more attention to detail, costs, and less accessibility.

The different forms of software wallets are generally an excellent option for beginners and active crypto users. Accessibility from a mobile device, computer desktop, or internet browser makes viewing and interacting with your crypto holdings simple. Depending on your security and affordability needs, you can choose between custodial and non-custodial software wallets. Custodial software wallets are easier to use but come with risk as a custodian is in charge of and holds your private keys. Non-custodial software wallets are more secure but involve more maintenance on the user’s part.

 

How To Set Up a Crypto Wallet

 

Setting up a Mobile Wallet

  1. Choose and download a mobile crypto wallet from your device’s associated app store.
  2. Complete the setup process. This may involve creating and remembering a password or PIN.
  3. Most mobile wallets give a secret recovery phrase which is 12 or 24 unique words used in the event of account recovery. It is crucial that you write down and keep track of these words. Never share them with anyone else.
  4. You can now use your mobile wallet to store, send, and receive cryptocurrencies.

 

 Setting up a Desktop Wallet

  1. Choose and download a reputable desktop crypto wallet from the internet.
  2. Complete the setup process. This may involve creating and remembering a password or PIN.
  3. Most wallets give a secret recovery phrase which is 12 or 24 unique words used in the event of an account recovery. It is crucial that you write down and keep track of these words.
  4. You can now use your desktop wallet to store, send, and receive cryptocurrencies.

 

Setting up a Web Wallet

  1. Choose and download a reputable web crypto wallet from the internet, normally this is in the form of a browser extension.
  2. Complete the setup process. This may involve creating and remembering a password or PIN.
  3. Most mobile wallets give a secret recovery phrase which is 12 or 24 unique words used in the event of an account recovery. It is crucial that you write down and keep track of these words.
  4. You can now use your web wallet to store, send, and receive cryptocurrencies.

 

Setting up a Hardware Wallet

  1. Choose and purchase a reputable hardware crypto wallet.
  2. Plug your hardware wallet into an internet-enabled computer and follow the on-screen instructions.
  3. Complete the setup process. This may involve creating and remembering a password or PIN.
  4. Most hardware wallets give a secret recovery phrase which is 12 or 24 unique words used in the event of an account recovery. It is crucial that you write down and keep track of these words.
  5. Download any corresponding programs, apps, or browser extensions created by your hardware wallet. This makes it simpler to access your crypto and use the wallet.
  6. You can now use your hardware wallet to store, send, and receive cryptocurrencies.

 

Tips For Keeping Your Wallet Safe!

Keeping your crypto wallet safe is integral to keeping your crypto secure. Here are some things you can do to keep your wallet safe:

  • Securely store your secret recovery phrase. Ensure that your secret recovery phrase (used in the event of an account compromise or forgotten password) is securely stored in a safe or secure location.
  • Beware of phishing and make sure that sensitive information is given only to legitimate entities.
  • Separate cryptocurrency and work/personal. Use a dedicated email for your crypto and consider using a separate device.
  • Avoid public WiFi. Don’t access your crypto wallet under public WiFi, and always try to use a VPN to hide your IP address and location.

Written by: Daniel Zychla

Writer, content marketing at Netcoins.