How To Set Up a Crypto Wallet Today

A cryptocurrency wallet is a location where you may store your cryptocurrency in a safe and secure manner. There are a great number of distinct varieties of cryptocurrency wallets; nevertheless, hosted wallets, non-custodial wallets, and hardware wallets are now the most widely used.

The answer to this question is going to rely on what you want to do with your cryptocurrency and what type of protections you want to put in place for yourself.

Hosted wallets

A hosted wallet is now the most common kind of cryptocurrency wallet since it is also the easiest to set up. When you purchase cryptocurrency via an application such as Coinbase, the cryptocurrency you get is immediately stored in a hosted wallet. A third party stores your cryptocurrency for you in a manner similar to that in which a bank stores your money in a checking or savings account, which gives hosted cryptocurrency its name. It's possible that you've heard of individuals "missing their keys" or "dropping their USB wallet," but if you use a hosted wallet, none of those things will be a concern of yours.

The most important advantage of storing your cryptocurrency in a hosted wallet is that you won't lose your cryptocurrency even if you forget the password to your wallet. Using a hosted wallet comes with the disadvantage of restricting your access to some aspects of the cryptocurrency ecosystem. This might, however, change when hosted wallets begin to enable a greater variety of functionalities.

Setting up a hosted wallet is as follows:

1. Pick a platform that you have faith in. Your primary concerns need to center around safety, accessibility, and conformity with applicable laws and guidelines, both administrative and financial.

2. Make sure you have an account. Please provide your personal information, and then choose a password that is safe. It is also advised that you employ two-step verification, which is also referred to as 2FA. This provides an additional degree of protection.

3. Purchase or send cryptographic currency. You can purchase cryptocurrency using a bank account or credit card on the majority of platforms and exchanges that deal in cryptocurrencies. If you already have cryptocurrency, you may move it to your brand-new hosted wallet to keep it in a secure location.

Self-custody wallets

You will have full command over your cryptocurrency holdings if you store them in a self-custody wallet, such as the one offered by Coinbase. Your cryptocurrency is kept secure with non-custodial wallets since they do not depend on a third party, often known as a "custodian." Even while they will provide you with the software required to store your cryptocurrency, it is completely up to you to keep track of and protect your password. There is no way to get into your cryptocurrency if you misplace or forget your password, which is also often called a "private key" or a "seed phrase." In addition, if another person finds your private key, they will have complete access to all your assets.

Why would you want a wallet that doesn't hold your money? In addition to having complete command over the safety of your cryptocurrency holdings, you also have the ability to participate in more complex crypto activities, such as yield farming, staking, lending, borrowing, and many others. However, if you want to purchase and sell cryptocurrency and send and receive it, the simplest approach is to use a hosted wallet.

How to set up a wallet that does not need a custodian:

1. Install a mobile app wallet. One of the most popular choices is the Coinbase Wallet.

2. Make sure you have an account. In contrast to a hosted wallet, a non-custodial wallet does not need you to provide any of your personal information in order to establish one. Not even an email address.

3. Make sure that your private key is written down somewhere. It is presented as a sentence consisting of 12 words chosen at random. Always remember to store it in a safe place. If you misplace or forget this phrase consisting of 12 words, you will not be able to access your encrypted information.

4. Send cryptocurrency to your own wallet. Because it is not always possible to buy cryptocurrency using traditional currencies (like US dollars or Euros) when using a non-custodial wallet, you will need to transfer cryptocurrency into your non-custodial wallet from somewhere else. This can be done by following the steps outlined in the previous section.

Coinbase customers can use either a hosted wallet or a self-custody wallet to store their digital currency. A hosted wallet is what you get when you use the Coinbase app, which lets you purchase and trade cryptocurrencies. You may also take advantage of the features of a non-custodial wallet by downloading the standalone Coinbase Wallet app, which is available for download on the Coinbase website. Some of our clients have both, which enables them to easily engage in more complicated crypto activities while also making it possible to acquire cryptocurrency using fiat cash. The creation of either wallet does not cost anything.

Hardware wallets

A hardware wallet is a physical device that maintains the private keys to your cryptocurrency offline. It is roughly the size of a thumb drive and looks like a credit card. Most users don't use hardware wallets because of their increased complexity and expense, but they offer certain advantages. For instance, they can protect your cryptocurrency holdings even if someone hacks into your computer. On the other hand, because of their increased level of protection, using one is more cumbersome than using a software wallet, and purchasing one may cost up to one hundred dollars.

How to configure a cryptocurrency hardware wallet:

1. Invest on some gear. Ledger and Trezor are the two brands that have the highest name recognition.

2. Put the program into installation. To configure your wallet, you will need to use the specific software with each brand. You may construct your wallet by downloading the software from the company's official website and then following the on-screen instructions.

3. Send cryptocurrency to your own wallet. Hardware wallets, much like non-custodial wallets, often do not let you to acquire cryptocurrency using conventional currencies (such US dollars or Euros). As a result, you will be required to move cryptocurrency to your wallet before you can use it.

There are many different methods to keep cryptocurrency, just as there are many different ways to store cash (in a bank account, in a safe, or even beneath the bed). With cryptocurrency, the option is yours: you may make things simple by using a hosted wallet, you can preserve full control of your cryptocurrency by using a non-custodial wallet, you can take further measures by using a hardware wallet, or you can even use numerous kinds of wallets.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.