What Is Crypto Wallet And How To Set Up Crypto Wallet?

To use cryptocurrency, you need a place to store it safely. This is where a cryptocurrency wallet comes into play. Having a crypto wallet is an integral part of cryptocurrency investment and trading. However, a crypto wallet does that and much more. 

To learn more about crypto wallets, read on. 

What Is A Crypto Wallet?

A crypto wallet is a digital wallet that stores your cryptocurrency. You can store your cryptocurrency, send and receive payments and use it to buy crypto tokens on exchange platforms. You can also browse decentralised finance apps and shop at stores accepting cryptocurrency payments. 

Unlike physical wallets, they do not hold your currency. Crypto wallets store the private keys that you need to sign your transactions. They also provide you with the interface to do so. 

Your crypto assets are not stored anywhere. It exists as bits of data saved all over the blockchain. When you log into your wallet, it finds all these data bits and sums them up in the application interface.  

These wallets also have a public address called the wallet address. This wallet address can be viewed by everyone and comes in handy while sending or receiving payments. Apart from your cryptocurrency, these digital wallets also store your NFTs (non-fungible tokens). 

Types Of Crypto Wallets

Crypto wallets can be divided into two types - hot and cold. Both have their pros and cons. 

A hot wallet is connected to the internet and is a fast and easy way to transact using your cryptocurrency. But there is always the risk of online attacks and fraud. 

A cold wallet, on the other hand, is an offline wallet. As it is not connected to the internet, it is almost impossible for a hacker to get access to your assets.

Digital wallets can also be classified into custodial and non-custodial wallets.

A custodial wallet is a web-based exchange wallet that acts as the custodian for your private keys and crypto funds. Generally, companies provide high-level security systems to store your data securely. Some cryptocurrency exchange platforms offer custodial wallets to their customers. 

In the case of a non-custodial wallet, you take full responsibility for storing your keys. You may opt for this crypto wallet if you are an investor with many assets. It is a much more secure way of storage as there is no third-party involvement.  

Crypto wallets can be further subdivided into the following categories:

1. Software wallets

You can instal these software wallets as a browser extension on your desktop or an app on your smartphone. You can access your digital currency and do the necessary transactions from literally anywhere. 

The best software wallets are:

• MetaMask
• Coisbase Wallet
• Exodus
• ZenGo
• Trust Wallet
• Trezor Wallet
• StakedWallet.io
• Ambire Wallet
• Coinomi
• MyEtherWallet and many more.

These are some of the best software crypto wallets in the market. However, you can use any other software wallet of your choice. 

2. Paper wallets

In the early days, crypto investors used to write down private keys on paper. It is very old-school, but some investors still use this method to this day. It can be a backup to access your assets if you forget your crypto wallet's private key.

However, while employing this method, ensure that the papers are stored safely in a deposit box. Moreover, you also need to check on them from time to time to ensure that the paper quality has not deteriorated.   

3. Hardware wallets 

Hardware wallets are very popular as you can safely remove them from your computer and store them away. This makes hardware wallets very secure and less prone to online attacks. They look like a USB drive and can have many features like biometric protection, smartphone compatibility, NFC, Bluetooth, and much more. You can store crypto assets from multiple blockchains on one single hardware wallet. 

There are many hardware wallets in the market that you can opt for. Some of the reputed ones are:

• Steel Bitcoin Wallet
• Trezor Model T
• Ledger Nano X
• SecuX V20
• KeepKey
• Ellipal Titan

How To Set Up A Software Crypto Wallet?

You can follow the steps below to open a crypto wallet of your choice. The setup process for any wallet is more or less the same. Let’s take the example of Coinbase wallet for your convenience:

1. Go to the Chrome web store and install the Coinbase Wallet extension
2. Click on ‘Create a new wallet’
3. Enter a username
4. Securely store your 12-word recovery phrase
5. Recheck the recovery phrase again
6. Create a strong password to access your crypto wallet

You can also install the Coinbase wallet app for android or iOS. 

There are a few points to remember regarding this matter. They are: 

• The username that you set is unchangeable. So, while choosing one, make sure that it is something you will not feel like changing. People on the network will be able to identify you with this name. You can also use the username to send funds to people instead of typing in their wallet addresses. 
• Your account password is something that you should write down or save somewhere secure. Once lost, Coinbase will not be able to recover it for you. 
• The same goes for your recovery phrase. Make sure to save it in multiple locations, as if you lose this phrase, you will not be able to withdraw cryptocurrency from your wallet.
• You can also import an existing wallet, provided you have its recovery phrase.

How To Set Up A Hardware Wallet?

You can follow these steps to set up a hardware wallet:

1. Purchase a hardware wallet from a credible source
2. Plugin to your computer and follow the on-screen instructions
3. Select between choosing a new wallet or importing an existing one
4. Enter a PIN code (make sure to write it down somewhere, as three wrong entries will reset your wallet)
5. Secure your 24-word recovery phrase (it will come in handy when you forget your PIN or if your hardware wallet is lost or stolen. Securely store it in multiple places)
6. Instal the Ledger apps (this will help you access your wallet)

After using your hardware wallet, you can store it in a safe place just for added protection. 

A crypto wallet is an essential tool in the world of cryptocurrencies. They make storing your crypto assets hassle-free. It is a good strategy to divide your assets among multiple wallets to store them safely. A hardware and software wallet will greatly help you in the long run, and you can use one according to the situation's demands.