The means of storage and security of one’s finances is a core backbone of financial freedom. Banks and banking systems have traditionally kept customers’ fiats, treasures, and accessories. Going forward, banking applications have also procured measures to monitor one’s income, savings, and other expenditures. Evolutions in the financial sector, from fiat to crypto, would not cut off this important aspect of finance as there must still be a means to storing and securing one’s assets (Either as cryptos or NFTs).
Cryptocurrencies have gained significant popularity in recent years, and if you’re planning to enter the world of digital currencies, one essential step is setting up a crypto wallet. A crypto wallet is your digital vault or storage for securely storing, managing and transacting with cryptocurrencies, non-fungible tokens, and all related digital assets. This article aims to walk you through the process of seamlessly setting up a crypto wallet, ensuring that you can safely store and access your digital assets all in one spot.
Also read: Blur vs OpenSea: Which Is the Better NFT Marketplace?
Basic Introduction to a Crypto Wallet
First off, a crypto wallet is a digital tool or application that allows you to securely store, manage, and transact with cryptocurrencies. It functions similarly to a physical wallet, but instead of holding cash and cards, it holds your cryptocurrencies (Like Bitcoin and Ethereum), non-fungible tokens, or other forms of digital assets.
Most newbies are only aware of crypto wallets natively provided through crypto exchanges like Binance or KuCoin. There are about three notable forms of crypto wallets known to experienced traders. With several crypto wallets downloadable online, most of these fall under these core forms of crypto wallets, including hardware wallets, software wallets, and online wallets.
Crypto wallets are formed after the downloads, and a private key or seed phrase is generated. Each form of crypto wallet has its own advantages and potential disadvantages, which are dependent on your choice, interest, and manner of interaction with the blockchain. Some crypto wallets are blockchain-selective, whereas others are built to host several blockchains (E.g. MetaMask and Trust Wallet).
Choosing Your Wallet
Choosing your crypto wallet is an important step to setting up your crypto wallet. To make a better choice based on your preferences, here is a detailed sectioning of crypto wallets with examples under each:
1. Hardware Wallets:
Hardware wallets are physical devices that offer the highest level of security. They store your private keys offline, protecting them from potential online threats. Popular hardware wallets include Ledger, Trezor, and KeepKey. To set up a hardware wallet, you typically need to connect it to your computer or mobile device, follow the manufacturer’s instructions, and create a strong password or PIN. They are mostly purchased.
2. Online Wallets:
Online wallets, popularly known as web wallets or cloud-based wallets, are accessed through a web browser or user’s smartphone. Commonly described as hot wallets, they offer easy accessibility and are typically managed by third-party providers. However, online wallets can be less secure compared to hardware or software wallets since they store your private keys online.
Examples of online wallets include Trust Wallet, MyEtherWallet, and MetaMask. To set up an online wallet, users will need to create an account with the chosen provider, set up security measures like two-factor authentication, and create a strong password.
3. Software Wallets:
These are like applications that you install on your computer or mobile device after downloading. They provide convenient access to your crypto holdings. Examples of software wallets include Exodus, Atomic Wallet, and Electrum. MetaMask also features here, as well as Trust Wallet. To set up a software wallet, users will need to download the wallet application, create a new wallet, and secure it with a strong password.
The choice of a user’s crypto wallet is hereby defined by the level of on-chain interactions (I.e. As a DeFi trader or simply a crypto investor), level of risk and security, and wants for ease/accessibility.
Creating, Deploying, and Securing Your Wallet
For most software or online wallets, the pattern of creating their wallet is fundamentally similar. Using MetaMask as an example, here is a guide to creating, deploying, and securing your wallets;
1. Download the Software or Add It as an Extension
You can easily do this either on your smartphone or PC. For phones, head over to the Apple store or play store and install the software, while for PC, input “Download MetaMask” on Google, follow the link and add your wallet as an extension.
2. Launch and Generate Wallet
Here, you are expected to see a display “Create a new wallet” or “Import an existing wallet”, click on “Create a new wallet” after agreeing to MetaMask’s terms and conditions. Then, take note of the next display, “Create password”. Do it!
3. Backup Wallet
The security of your wallet is simply backing or keeping the provided 12-worded seed phrase (Or in other crypto wallets 24-worded) safe. After it is revealed, copy it and have it written in a safe place/vault offline. This will enable you to import and restore your wallet in the future while disallowing any potential loss of funds.
4. Secure Wallet
This is to ensure you allow a 2FA layer of security to be activated in your wallet. Two-factor authentication requires a secondary verification method, such as inputting your password or some code sent to your mobile device, to access your wallet and authorise any transaction. This adds an extra barrier against unauthorised access.
Frequently Asked Questions
What Happens if I Lose Access to My Crypto Wallet or Forget My Password?
Losing access to your crypto wallet or forgetting your password can be a serious concern. It’s crucial to emphasise the importance of backing up your wallet and storing the recovery phrase or seed securely. In the event of losing access, you can use the recovery phrase or seed to restore your wallet and regain control of your funds. It’s recommended to keep multiple copies of your recovery phrase in secure offline locations, such as a safe or a lockbox.
Which Wallet Is Safer, Online Wallets or Software Wallets?
When considering safety for your cryptocurrencies or digital assets, hardware wallets are generally considered the most secure option. Hardware wallets store your private keys offline, significantly reducing the risk of online threats. They offer a high level of protection and are often recommended for users with substantial cryptocurrency holdings. Both online and software wallets have their pros and cons, and this depends on your taste for security and convenience. Potential vulnerabilities and hacks lie with online and software wallets. Still, the security of your crypto wallet largely depends on precautions taken to protect your private keys and avoidance of phishing sites/unknown links — leading to scams.
Can I Use the Same Wallet for Different Cryptocurrencies?
Well, this depends on your preferences. As mentioned earlier, some wallets are composable with multiple blockchains and support several cryptos, while others are designed for specific digital assets. Before setting up a wallet, the onus lies with you to ensure the compatibility of your crypto with your chosen wallet. Wallets such as Trust Wallet, MetaMask, Exodus, and Atomic Wallet, for example, support a wide range of popular cryptocurrencies. However, hardware wallets like Ledger or Trezor may have limited support for specific coins.
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