General Guide to Setting Up Crypto Wallets
Generally said there are 3 steps one needs to follow when setting up a new crypto wallet. Although there are many different types of wallets and of course we decided to descripe the process of setting up those in more detail below. But let us give you a quick overview of the general process first:
Step 1: Pick a Wallet
Step 2: Create your Account
Step 3: Secure your Keys
1. Custodial Wallets
Custodial wallets, also called hosted wallets are the most popular and easiest wallets to set up. They are offered by third parties or centralized exchanges. If you’re new to this, you can read our article about crypto exchanges. When you receive or buy Bitcoin using a wallet such as a Binance wallet or Coinbase wallet, the exchange automatically keeps your coins safe. Users have less responsibility since the hosting party is partially responsible for the security of the money, and performs extra duties such as managing private keys.
Opening an account with a centralized exchange’s blockchain wallet means you’ll be using their private keys, so you trust that the institution will keep them safe. The wallet provider, in this case, will input private keys into the server whenever the user logs into a wallet and initiates a transaction. The other key benefit of these wallets is that forgetting your password will not cut you off from your crypto as it’s easy to reset it. The flip side of it is that while hosted wallets provide a simple and efficient solution for beginners, it comes with a layer of risk. First, users are susceptible to hacking. Second, the crypto exchange can get hacked too. Exchanges such as Mt. Gox and Bitstamp have been attacked by hackers in the past. Mt. Gox lost over $500M worth of Bitcoin to hackers between 2011 and 2014, while Bitstamp lost $5M worth of BTC in 2015. Lastly, governments can easily target hosted accounts. The Canadian government recently attempted to prevent supported the Canadian trucker protest from accessing their crypto in custodial wallets.
Setting up Custodial Wallets
Pros & Cons of Custodial Wallets
- Easy to reset password in case you forget.
- Easy to manage even for first-timers.
- Offer a wide range of services including a crypto exchange platform.
- They come with a unique UXD.
- Users lack total control of the money in their wallets.
- Subject to government controls.
- Users must submit KYC documents and comply with AML rules to transact.
- Susceptible to hacking.
2. Non-custodial Wallets
Non-custodial wallets, also called self-custody wallets give the user complete control of funds. These crypto wallets have zero third-party intervention, therefore the owner is responsible for the safe storage of private keys, which prove the crypto are yours and in turn authorize transactions. If investors lose or forget their passwords, there is no alternative for accessing their digital assets. Anyone can also move your crypto if they get access to your private keys. Crypto investors who want to have full control of their coins prefer these wallets. Non-custodial wallets also attract advanced investors because they come with additional features such as yield farms, staking, and peer-to-peer lending.
Setting up Non-custodial wallets
Note: Coinbase.com is a hosted wallet, while Coinbase wallet is a non-custodial one.
- Users have 100% control over funds.
- Instant withdrawals.
- Cheaper transaction fees.
- Lower risk exposure.
- Increased user responsibility.
- Hardly have an appealing UI/UX.
- Lost keys=lost money.
3. Hardware Wallets
Hardware wallets are physical devices for storing cryptocurrency; also called offline wallets or cold wallets. They come in form of small USB-like shapes and are used to keep digital assets completely offline. This adds a layer of protection to your assets since these devices are unhackable, and inaccessible remotely. The downside is that if you misplace them, your money will be lost too. While cold wallets can’t be hacked remotely, it’s still possible to physically tamper with them. So always buy new hardware wallets from trusted sources to avoid falling prey to offline crypto storage that may have been interfered with. So far very few investors use this method since it doesn’t come for free like custodial and non-custodial wallets. A proper hardware blockchain wallet goes for not less than $100. Due to their nature, these wallets suit people who want to buy and hold virtual coins for a long time. They are solely used for storage, so you won’t get extra features such as staking, trading, or exchanges.
Setting up cold Storage Wallet
- Enhanced security.
- Almost zero hacking risk.
- The user has full control.
- No third-party interference.
- Costly crypto storage solution.
- Only suitable for the tech-savvy.
- Risk of theft, loss, or destruction
Top Three Crypto Wallets
1. Coinbase: Best for Beginners
As mentioned earlier, you don’t want to start your crypto investment journey with complex wallets. Coinbase is user-friendly and can be used even by first-timers in cryptocurrency. Coinbase.com is a custodial wallet, so you don’t have to worry about private keys. Once you get your head around this stuff, you can gradually upgrade to Coinbase Wallet. This time you’ll be using a non-custodial wallet so you have to be careful and learn to be responsible. Keep your private keys safe to avoid losing your digital coins.
Apart from being user-friendly, Coinbase is a stable company with a US license. It also offers exchange services. This means that you can also buy and sell your crypto within the wallet. It’s a one-stop shop available in 150+ countries and offers 119 cryptocurrencies.
2. TrustWallet: Best Non-custodial Wallet
Trust Wallet is the most convenient non-custodial wallet we can recommend. It’s easy to use and registration takes less than two minutes. You can send and receive over 10,000 digital assets with this wallet. Although it doesn’t support fiat payment, it’s connected to Moon-Pay, Ramp, Mercuryo, Simplex, and Transak where you can buy crypto with fiat and it will be automatically transferred to your Trust Wallet app for storage. Users pay zero transaction costs but are responsible for network fees. Any iOS or Android user can set up a Trust Wallet account.
3. Ledger Nano X: Best Hardware Wallet
Ledger Nano X, an upgrade of Ledger S is one of the best offline wallets available in the market. It’s a product of French company Ledger Inc, one of the first cold storage device manufacturers. You will have to endure a cost of $175 to get your hands on this product. But what makes it this expensive? Why not go for simple $40 hardware wallets? Well, Ledger Nano X gives you more than value for your money. It supports 1,800 digital assets including stable coins, altcoins, and NFTs. It’s compatible with USB port 2.0 for PCs and Type-C ports, so you can even connect it to your smartphone. Apart from that, it works over Bluetooth. This means you can connect it to any Bluetooth device including all iOS and Android devices. The wallet comes with a max storage of 100 apps. It is one hardware device that not only serves all your digital asset storage needs but also gives you unrivalled convenience. No wonder it made it on our list of best cold storage wallets.
How to Choose a Crypto Wallet
- Costs: Using crypto wallets isn’t free of charge. You may incur deposit fees, withdrawal charges, and even inactivity penalties. If you plan to use a hardware wallet, prepare enough cash to buy your preferred device. Fees for hot wallets differ depending on the provider. Note that all these changes will have an impact on the final profit you make from your crypto investment. So make sure you are aware of all the charges ahead of you, before choosing to use any crypto wallet.
- Supported coins: This is another crucial factor that you can’t ignore. Some wallets do not support all coins. You need to pick one that is compatible with all the coins you intend to store. Otherwise, you may be forced to have more than a wallet, and this will come at a cost.
- User Friendliness: The crypto industry is generally complex, so you’ll come across products for all levels, from beginners to pros. While advanced users may be comfortable with any wallet, beginners should go for easy to use wallet such as Coinbase Wallet. None tech investors may not be comfortable using hardware storage. Generally, hosted and web-based wallets are the simplest for any user.
- Security feature: Although this factor has come last, it’s one of the most critical. You don’t want to lose your Bitcoin, Ethereum, or any other virtual assets. The primary goal of acquiring a wallet is to store your coins securely. So the more security features a wallet has, the better it is for you. While looking into this determinant, keep in mind that although cold storage devices are almost unhackable, they come with a risk of theft or damage. So, look into your security need with an open mind.
Have you already figured out which wallet suits you? The recommendations in this article are based on our user experience. Feel free however to try out other options. Don’t forget to compare key features like their fees and security features. We will now sign out. Make dappGambl your crypto plug if you found our article useful.
Now you can set up your wallet like a Ninja and in case you haven’t found the best crypto wallet yet, follow this link to learn more about crypto wallets.
Custodial and Non-custodial wallets cost zero fees to set up. You may however incur transaction charges during deposits on withdrawals. Expenses for cold-storage wallets, on the other hand, vary from an average of $40 to upwards of $250 depending on their features and the provider. Our best hardware wallet is Ledger Nano X, and it only costs $175.
Setting up crypto wallets can be hard if you have never done it before. The most difficult bit for many people is selecting the best wallet out of close to 200 options. Custodial wallets are the easiest to use and set up. For beginners, we recommend Coinbase.com
Most crypto exchanges have competitive features. The best depends on your experience and needs. It would not make sense to store your coins in a cold wallet if you are actively involved in crypto trading. Similarly, if you want to buy XRP, you can’t pick a wallet that only supports BTC and ETH. Wallet fees and security features are other key factors you must factor in while trying to select a blockchain wallet for your cryptocurrency.
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