Which cryptocurrency to invest and where to buy them are not the only essential questions you must answer while trying to enter the cryptocurrency world. Another thing you must decide on is where to keep your assets. That’s right, in case you do not know yet, there are platforms especially designed to simply hold and keep these investments.
Choosing what wallet to use and wanting to learn how to set-up a crypto wallet poses some things you must consider. What is your short-term and long-term plan with these assets? What is your immediate goal? How secured would you want them to be?
Let us tackle these factors by learning the pros and cons among wallet options. Once you have a decision, jump to the part where we share to you how to set-up crypto wallets for each type.
Choosing Among Crypto Wallet Types
There are different ways to store your cryptocurrencies. You can choose to keep in on the exchange, put in a hot wallet, or secure it on a cold wallet. You have to follow different ways on how to set-up crypto wallet for each type.
Before you decide which type to use, let us discuss each difference. Know which type most fits you.
Exchange wallets are also known as custodial wallet. They are meant to store the chunk of your investment that you would like to move immediately, may it be for trading or making payments. Popular examples are Binance and Coinbase.
With this type, you do not have the full control on your fund, so security is really an issue. The app is the one keeping the public access key. However, prior to use, both parties are in agreement that the app will only do transactions after the user gives authorization to do so.
With hot wallets, you have full control and access on your fund. The private keys are generated and stored locally, so as long as you do not share this to anyone, you can feel secured.
The drawback of this type of wallet is that although stored locally, the private keys are always connected online. With high volatility of the blockchain technology, there is always the risk to be hacked or be affected by other cyber issues. It is with this reason that some people do not fully rely on this platform to secure their long-term investments, only the chunk that you intend to move often.
Some hot wallet apps have a back-up phrase feature to help you regain access in case anything bad happens to your account.
Unlike the other two options, cold wallets store your private keys in a physical device. You completely have the control with it without the risk of having to connect it online. You are to connect it only if you want to access your fund.
The biggest drawback of cold wallets is that there is always a risk for them to be stolen, lost, or damaged. With some device, after any of these incidents happen, you just lose all your investments along with the device. Other cold wallet options have a seed back-up protocol which will give you the chance to recover your control and access to the funds.
Another reason why people do not use this as much is that they can be pricey. Hot and exchange wallets have free options, but with hot wallets, you always have to buy it. However, if we are talking about huge long-term investments here, then the security feature must overcome the price point.
Setting Up Your Crypto Wallet
Browse through the set-up guides for each type.
Leaving it on the Exchange
Here we will give you a guide on how to set-up crypto wallet for fund that you just want to leave it in the exchange.
- Choose a trusted platform. Because of the nature of this wallet, security and reliability must be your top considerations. Remember that they will be the ones to keep you access keys for your funds.
- Create your own account. Standard processes are needed for most platforms for you to create an account. Your personal information and a security password will be asked. There are those who feature a 2-step verification process as an added security.
- Fund your account. You can either buy or transfer existing cryptocurrencies from other wallets. Some exchanges also allow credit card as a method of payment, majority can do online transfer through your bank accounts.
Putting it on a Hot Wallet
If you do not feel like just leaving your crypto assets on the exchange, you can sign-up to have a hot wallet account.
- Install the app. Most platforms offer their wallet apps for mobile operating systems. Others have a desktop version, too. Some of the most trusted hot wallets are Coinbase Wallet, Trust Wallet and MetaMask.
- Create your own account. The main difference in creating a hot wallet account is that they do not require you to enter personal information and an e-mail address. Since you will have the sole possession of the private keys, that is enough for you to verify that you own these accounts.
- Write down back-up keys. If there is a feature for back-up phrase in your chosen hot wallet, prepare for the worst and write this down. Secure it on a vault or anywhere where only you can access it. Remember, this is your last chance to retrieve your fund in case anything bad happens.
- Fund the account. Accomplish your goal and either buy or transfer cryptocurrencies from other existing wallets to this new account. Most hot wallets do not allow you to directly add crypto coins through fiat currency. If this is the case, buy them from elsewhere then do a transfer.
Securing it on a Cold Wallet
Gain the maximum assurance by learning how to set-up crypto wallet with a hardware device.
- Purchase the hardware device. The top two choices for cold wallets are the Ledger Nano X ($119) and the Trezor Hardware Wallet ($59). Get them from trusted retailers only! Never purchase one from e-bay or other second-hand sources.
- Install the respective software. Each model has its own software. Get this from the company’s official website or let one of their guys assist you. Never attempt to download it from mirror and other unofficial sites. Follow the installation instruction and set-up your wallet.
- Fund your wallet. Most cold wallets will not allow you to directly add crypto coins through fiat currency, too. If this is the case, buy them from elsewhere then transfer the fund here. Learn more about cryptocurrency wallets here!
There are three options: exchange, hot, and cold wallets. The major considerations you have to think about is what your immediate plans are with those coins and how secured you want it to be.
After a plan and a decision has been made, browse through the above guidelines, and learn how to set-up crypto wallet accordingly. Manage your assets right, and be a wise investor in the cryptocurrency world.