Setting Up a Crypto Wallet
The first step into the crypto world is through the so-called ‘’wallet,’’ which is in effect a virtual wallet. However, you don’t need to know about the intricacies of the crypto world to get started – in fact, setting up a crypto wallet is completely free and very simple. Depending on the currency you want, there are different providers you can get started with. Today, we’re going to show you how to create wallets for the two biggest currencies, Bitcoin and Ethereum, with three types of crypto wallets.
First, let’s review the explanation of terms from our Crypto Glossary: “Your wallet stores all the private keys you need to spend cryptocurrencies. So it doesn’t contain your own assets, just access to them.”
Many different types of crypto wallets exist. However, you should know these basic types before choosing a wallet:
1) Hosted wallets (or custodial wallets)
2) Non-custodial wallets
3) Hardware wallets
You can install the hosted crypto wallets on your smartphone or laptop like an app. They work similar to a savings account, because a third party holds the assets and your private keys for you. This means that assets cannot be lost as easily, but you are still dependent on the service of this third party and cannot use all the possibilities of cryptocurrencies. You log in with a username and password, however, this makes them easier to get hacked.
Non-custodial wallets (or self-custodial wallets) do not have this problem, as you are responsible for managing your private keys yourself. However, if you lose your keys here, you also lose access to your assets – forever.
This is a physical device that looks like a USB stick that stores your key offline. This crypto wallet comes at a higher cost and requires a greater effort to access it.
How to Create a Wallet for Your Cryptocurrencies
Choose a platform you trust. On the Bitcoin or Ethereum website, you’ll find out what your ideal wallet is after some research. Most hosted wallets are cross-currency. Depending on your preferences in terms of control, validation, transparency, environment, privacy, and fees, you can choose the best wallet for yourself from the many providers here.
Hosted Wallets Require Username and Password
If you decide to use a custodial wallet, the next step is to enter your data and choose a secure password. Also, be sure to choose 2-factor authentication for more security.
Full Control with Non-Custodial Wallets
As mentioned, here you have full control over your assets, but you are also responsible for managing the keys yourself. You create an account, but you don’t have to provide any personal information or an email address. You receive a key (also called a “key phrase”), which consists of twelve words. Be sure to keep this key in writing in a safe place. Many owners of this type of wallet also keep this key phrase with a trusted person or in a safe, so that relatives can access it in case of an emergency. After that, you can buy cryptocurrency there with traditional currencies. However, this is not possible with every crypto wallet.
Buying and Setting Up a Hardware Wallet
Unlike the previous options, for this you need to buy a hardware wallet. Currently, the most popular “Ledger” (as these hardware wallets are also called) is the “Ledger Nano S,” but “Trezor” is also a well-known brand. Whichever one you choose, you will also need software to set it up. This can be downloaded from the websites of the respective providers. The software will then guide you step by step to a functioning wallet. As with the non-custodial wallet, you cannot directly buy cryptocurrencies with traditional currencies, but you can transfer your crypto holdings.
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