Crypto Wallet: The Types & How to Set Up a Crypto Wallet

A crypto wallet is a secure storage location for your cryptocurrency. Hosted wallets, non-custodial wallets, and hardware wallets are the most prevalent types of cryptocurrency wallets.

What you want to do with your crypto and what sort of safety net you want to have will determine which option is best for you.

Wallets that are hosted:

A hosted wallet is the most popular and simple-to-use cryptocurrency wallet. When you purchase cryptocurrency using apps like Coinbase etc, your funds are instantly sent to a hosted wallet.

It's termed hosted because your crypto is kept for you by a third party, the same as the way a bank stores your money in a checking or savings account. You may have heard of individuals "dropping their keys" or "missing their USB wallet," but you won't have to worry about any of that with a hosted wallet.

The most significant benefit of holding cryptocurrencies in a hosted wallet is that you will not lose your cash if you forget your password. However, one disadvantage of using a hosted wallet is that you won't be able to use all of the crypto's features.

However, if hosted wallets begin to enable additional functions, this may change. To set up a hosted wallet, follow these steps:

• Select a platform that you are comfortable with: Security, simplicity of use, and compliance with government and banking rules should be your top priorities.
• Create a profile for yourself: Fill up your personal details and choose a secure password. For an added degree of protection, two-step verification (commonly known as 2FA) is advised.
• Cryptocurrency may be purchased or transferred: using a bank account or a credit card on most crypto platforms and exchanges. If you already have bitcoin, you may transfer it to your new hosted wallet for safekeeping.

Self-custody wallets:

A self-custody wallet, such as Coinbase Wallet or Meta Mask, gives you full control over your cryptocurrency. Non-custodial wallets do not rely on a third party or "custodian" to keep your cryptocurrency secure.

While they supply the software required to store your crypto, you are alone responsible for remembering and preserving your password.

There is no way to access your crypto if you lose or forget your password, also known as a "private key" or "seed phrase." If someone else finds your private key, they will have complete access to your stuff.

Why would you want a non-custodial wallet? You may access more complex crypto activities like yield farming, staking, lending, borrowing, and more, in addition to having complete control over the security of your coin.

A hosted wallet, on the other hand, is the simplest choice if all you want to do is purchase, sell, send, and receive crypto. Set up a non-custodial wallet as follows:

• Install a wallet app on your phone: Coinbase Wallet and Meta Mask are two popular choices.
• Make an account for yourself: A non-custodial wallet, unlike a hosted wallet, does not need you to submit any personal information. There isn't even a contact email address.
• Make a mental note of your private key: It's given as a 12-word sentence at random. It needs to be kept in a safe place. If you lose or forget this 12-word phrase, you won't be able to access your cryptocurrency.
• Make a transfer to wallet: You'll need to move crypto into your non-custodial wallet from somewhere else because buying crypto using traditional currencies (such as US dollars or Euros) isn't always possible with a non-custodial wallet.

A hosted wallet is the Coinbase software, which allows you to purchase and trade cryptocurrency. Some have both hosted and self custody wallets, making it simple to acquire cryptocurrency with fiat cash and engage in complex crypto activities. It costs nothing to set up either wallet.

Hardware Wallets:

A hardware wallet is a physical device the size of a thumb drive that holds your crypto's private keys offline.

Because of their increased complexity and cost, most individuals don't utilise hardware wallets, although they do offer certain advantages, such as keeping your crypto safe even if your computer is hacked.

However, compared to a software wallet, their increased security makes them hard to use, and they may cost upwards of $100 to purchase.

To set up a hardware wallet, follow these steps:

• Purchase the necessary hardware: Ledger and Trezor are the two most well-known brands.
• Install the programme on your computer: Each manufacturer has its own software that must be installed to set up your wallet. To make your wallet, go to the official company website and download the programme, then follow the instructions.
• Make a cryptocurrency transfer to your wallet: A hardware wallet, like a non-custodial wallet, does not enable you to acquire crypto with traditional currencies (such as US dollars or Euros), thus you'll have to transfer crypto to your wallet.

There are several methods to keep crypto, just as there are numerous ways to store cash (in a bank account, a safe, or under the bed). With crypto, you may keep things simple with a hosted wallet, have complete control over your crypto with a non-custodial wallet, take additional measures with a hardware wallet, or even have multiple types of wallets.

Written By- Tanya C