Anyone trading cryptocurrency will need a place to store their assets safely. Unlike banks or other financial systems, crypto does not have any middle man or third party. Cryptocurrency is completely decentralized and stores all the information in the blockchain, which is open and easily available. Even though the blockchain is a robust network and allows peer-to-peer transactions, people try to hack the blockchain. So if you have invested a considerable amount, you need to be more careful. You might need a crypto wallet to secure your investment.
There are many crypto wallets available in the market. You can also send and receive a few different cryptocurrencies using wallets, including Bitcoin, Ethereum, Solana, and others. You can also use many of these crypto wallets to maintain your non-fungible digital assets portfolio. In addition, these wallets enable transactions safely and completely secure your assets.
What to consider while choosing a crypto wallet:
To prevent a possible loss of assets, it’s essential to learn how to select a crypto wallet and how that wallet operates on a technical level before setting up an account in that cryptocurrency wallet.
If you are using the crypto wallet for the first time, you must go through these five essential steps before setting up a wallet:
- Choose what kind of wallet you want to use.
- Buy or download a wallet of your choice.
- Install the software on your mobile or desktop
- Set up a crypto wallet account and check for the safety features
- Deposit your cryptocurrency in your chosen crypto wallet
Choosing the right wallet:
A robust crypto wallet should be your priority before investing in cryptocurrencies. You can use different wallets because each one has different features and usability. Choosing the wallet that corresponds to how you’ll use it with multiple cryptocurrency networks would be great.
First, know your preferences, Are you only using bitcoin for storing? How many cryptocurrencies are you planning to store in your wallet? Do you need enhanced privacy features?
Based on this, select your crypto wallet and set up a crypto wallet account.
What are the types of security crypto wallet uses?
It is a strategy in a crypto wallet for holding and protecting assets. The custody of your private keys is the main emphasis of cryptocurrency. This custody protects your asset present in the wallet.
The private key is a random four or six-digit number generated by the wallet. You can use this pin (numerical value) to accept cryptocurrency transactions or to send your cryptos to another wallet.
Consider having a secure cryptocurrency email address for sending and receiving money.
A secret key:
Usually, this consists of letters and numbers that you should never reveal to anyone. Instead, you will agree to the transactions by signing them with your private key. This way, no transactions can happen without your knowledge.
How to set up a Hosted Wallet:
A hosted wallet is the most liked and simple to set up a cryptocurrency wallet. After setting up a wallet, fund your wallet. After funding, start buying the cryptocurrency of your choice using your cryptocurrency wallet.
Connect your wallet with your existing exchange platform if you are buying cryptocurrency using other exchanges. Then your cryptocurrency will be immediately stored in a hosted wallet when you purchase it through other cryptocurrency exchanges.
The hosted wallet is named a hosted wallet because they maintain the digital assets for you by a third party, much like a bank would do with funds in a current or savings account.
You may have heard stories of people “dropping their keys” or “missing their USB wallet,” but none of that is a concern if you use a hosted wallet.
The biggest advantage of storing your cryptocurrency in a hosted wallet is that you won’t lose your asset if you forget your password.
You can’t use a hosted wallet to use all of the cryptocurrency’s features, which is one of its disadvantages.
Creating a hosted wallet account:
- Pick any hosted wallet that you can trust.Security, usability, and compliance with governmental and financial rules ought to be your top priorities.
- Set up a crypto wallet account.
- Specify your personal information, and pick a strong password.
- Using 2-step verification, also known as 2FA, adds additional protection to your asset and is advisable by many financial advisors.
- Start Buy or trade cryptocurrency.
- You may usually buy cryptocurrency with a bank account or credit card on platforms or any available crypto exchanges.
- If you already have cryptocurrency in any crypto exchanges, you can move it to your newly hosted wallet for security.
Self-Custody Wallet & Non-custodial wallets :
You have total control over your cryptocurrency with a self-custody wallet like the Coinbase Wallets.
Non-custodial wallets don’t entrust the security of your cryptocurrency to a third party, sometimes known as a “custodian.” So while they supply the software required to store your crypto, you must remember and keep it secure.
There is no way to access your crypto if you lose or forget your password, also known as a “private key” or “seed phrase.” Additionally, if a third party finds your private key, they will have complete access to your assets.
Wallet apps like Coinbase Wallet, Mycelium, or Metamask are good choices.
Register for a new account and save your recovery phrase.
You might be able to add security measures, like facial recognition or generating a passcode, with some wallet apps.
Start exchanging, sending, or trading cryptocurrency.
Difference between Custodial Wallet and Non-Custodial Wallet:
Custody wallets store your private keys on your behalf. A third party is essentially keeping your cryptocurrency in this scenario. People must therefore be more sure about who they select or trust. You should always go for reputable, regulated Non-custodial wallets.
Simply by giving their password to the wrong people, many people have lost their whole Bitcoin assets.
In contrast to Custodial wallets, Non-custodial wallets don’t store your password. Instead, they provide you with the software needed to protect your private key.
When two-factor authentication is available in the wallet, you should always use it. Two-factor authentication is a feature that almost all custodial wallets provide, and the Electrum wallet even provides it in a largely decentralized fashion.
You also need to be more cautious with your computer or mobile security, which stays outside your cryptocurrency software. For example, if malicious hackers can access your desktop or mobile phone, they can also steal your virtual currency.
Finally, always back up your private keys if you use the non-custodial wallet, as you will not be able to get your money back if you lose access to these private keys. Also, make sure the backup is in physical format.
You are in full control of your cryptocurrency ownership. If you lose your private key, no one can help you.
Keep your wallet safe and secure:
Even though we use the wallet to secure your cryptocurrency and digital assets, the wallets need to be secured even more.
To protect your wallet, First, make a “burner wallet.” Burner wallet is typical among those who buy and trade NFTs. For example, if you are concerned that minting (the term for establishing a unique NFT) may expose you to some online scams, you can build a temporary second wallet for a single transaction.
By using a burner wallet, you can ensure that any money you could have in your main wallet is not at risk.
To purchase an NFT, for example, you could utilize a burner wallet. After the transaction, you could transfer the NFT and any remaining funds to your main wallet and then delete the burner wallet.
This method can also distribute your cryptocurrencies around several wallets so that you don’t put all your eggs in one basket.
Limit the websites you connect to your wallet and the people you share your wallet address with, particularly your private key; never share it online) to keep your cryptocurrency secure.
The learning curve for crypto wallets used to be extremely steep for individuals unfamiliar with cryptocurrencies, but they have become much more user-friendly in recent years.
Start little without fear. You can easily create a wallet to temporarily keep $10 worth of bitcoin until you get the hang of them.
Consider Xbo’s efforts to safeguard user privacy and data. It is an upcoming exchange with an aim to transform crypto trading. It employs military grade security to provide secure infrastructure for trading. Check out the platform, they are also running auditions to find a face for its brand so if you have a Bored Ape lying around, put it to some use here and stand a chance to win $100,000.
Setting up a crypto wallet in general:
As mentioned earlier, you need to choose your crypto wallet first. Then install it and set up a crypto wallet account. You can also download some wallets as an app or a browser extension. E.g., Metamask Wallet.
Setting up a wallet not only involves generating a password but also generating a seed phrase. A seed phrase is nothing but a string of words used to recover your wallet if you forget the password to your wallet.
This 25–30 character string can be copied and used to authorize cryptocurrency transfers or payments from other accounts.
The important thing is you should keep track of the seed phrase after generating one. You can write it on paper or print it out and keep it somewhere safe and away from hackers. Or you can also save the password in an encrypted file on a thumb drive or email it to yourself.
You can also use multi-signature wallets. It requires two or more private keys to make a transaction. That makes your asset even safer.
Once you set up your cryptocurrency wallet, you should add funds to the wallet. You can transfer cryptocurrency from a stock trading account or cryptocurrency exchange to your wallet. Some wallets enable you to immediately purchase or exchange one cryptocurrency for another, but with a fee.
For each kind of blockchain/currency, your wallet will have a special blockchain address. If you have both bitcoin and ethereum in your wallet, then your Bitcoin address won’t be the same as your Ethereum address.
Some services might require a private key address rather than a wallet address to make a purchase. Some websites have a button that lets you link your wallet to the site to perform actions like placing bids on NFTs or purchasing interest-bearing tokens.
Advanced Features of Crypto Wallet:
Add more cutting-edge features to your cryptocurrency wallet to increase its appeal to users:
- Paper wallet import
- Ability to adjust fees during transactions
- Airdrop listings
- Multiple coin addresses (to support various coins right out of the gate)
- Scheduled purchase orders
- Custom notifications on preferred price movements
- Dark mode / quick web login / direct integrations with DeFi products
Is setting up a crypto wallet hard?
Anyone new to crypto may find the process confusing, but it’s quite simple.
The first time you set up a crypto wallet may feel harder, but it becomes simpler as you grasp the concepts. Always starts with a small number of funds at first.
Once you configure your wallet, try sending and receiving cryptocurrency. To learn further how it functions, you should completely delete your wallet and restore it using a recovery seed.
Do you need a wallet?
Technically, you could just leave your cryptocurrency on any exchange and stop using a wallet. But you will be in trouble if something happens to that particular exchange that you are using.
Crypto purists support self-custody and possessing their private keys. So, naturally, that indicates that you are accountable for your password and private keys. So, you should understand if you lose your private keys, your crypto asset is also lost.
Where should I store my recovery key?
Anyplace you feel secure. Anyone who obtains your recovery seed can liquidate your cryptocurrency funds.
Make a few duplicates or copies of your recovery seed and keep it in extremely secure locations.
Extreme people who memorize their whole 24-word recovery seed exist as well. It’s referred to as a brain wallet. Bu t it is not advised.