Cryptocurrency wallets come in many forms, but at their core they all provide a way to protect secret information and give you control over your digital assets. So is it worth getting a crypto wallet and how to get a crypto wallet. If you do not know yet, let’s take a look at the article below.
Is it worth getting a crypto wallet?
Technically, you don't have to keep your coins in cold storage or download a hot wallet program to your desktop. Many cryptocurrency exchanges allow you to store cryptocurrencies in a wallet on the exchange, and some do just that.
But is it possible to keep your cryptocurrencies in a wallet provided by an exchange like Coinbase or Kraken?
“Crypto purists would say no,” said Tyrone Ross, financial advisor and CEO of Onramp Invest, a financial advisor crypto investment platform. However, when it comes to encryption, there is a learning curve, and that's okay until you have a solid understanding of public and private keys, hot and cold storage, and other cryptographic security topics. “Until you know all of this, leave your coins at Coinbase, Gemini, or wherever.”
The goal is to not rely on that option and eventually move your cryptocurrency to your own form of storage, “but these exchanges go beyond security and custody,” he said. Your cryptocurrency isn’t like a bank Cash is as protected by any regulator, but in addition to security measures, many well-known exchanges such as Coinbase and Crypto.com also offer crypto asset insurance and even use cold storage methods themselves. This is another extra protection for your investment if your cryptocurrency gets hacked or the transaction fails.
Still, the risk of hacking still exists. Just last year, KuCoin (the fifth largest trading volume according to CoinMarketcap) was hacked worth more than $200 million. While users’ funds have been recovered, it highlights the risks any exchange can take — just like traditional financial institutions.
According to Kiana Danial, author of "Cryptocurrency Investing for Dummies" and creator of the Instagram @Investdiva, a hot wallet is as secure as your bank account. Exchanges usually take their security measures seriously, and usually have insurance to back their security in case of an attack. But the tradeoff is the amount of control you have over your own cryptocurrency.
How to get a crypto wallet?
There are three basic types of virtual currency wallets.
One option is a software wallet or hot wallet, which stores your cryptocurrencies on an internet-connected device you own.
Another option to consider for added security is a cold wallet, which is specialized hardware that keeps your cryptocurrencies offline. Custody wallets put your cryptocurrencies in the control of a company you trust, such as a cryptocurrency exchange, and are another storage method to consider.
Non-custodial software or "hot" wallets keep your data completely under your control. Hot wallets are generally free to use and can offer additional services such as staking and lending.
Hot Wallet
Here's how to set up a software wallet:
1. Choose a wallet application and download it to your desktop or mobile device; many software wallets have both options.
2. Create an account. The process will be relatively easy compared to other methods because you won't need to enter personal information. Instead, you need to create a security method, such as a passcode or facial recognition.
3. Write your recovery or "seed" phrase. When you create an account, the app randomly generates a 12 or 24 word phrase that corresponds to your private key. If you lose your login credentials or want to retrieve them on another device, your funds will not be accessible without it, so make sure to store this phrase safely.
4. Add cryptocurrency to your wallet. You can do this by transferring coins from another wallet or linking your account to an exchange in the app settings, which will require additional verification.
Hardware wallet
Hardware wallets are non-custodial, but they store your keys on a physical device that you connect to your computer or phone via a USB plug-in, WiFi, or a QR code. They cost around $50 to $250 and can be more complicated to use, but they increase security by taking your data completely offline.
Here's how to set up a hardware wallet:
1. Purchase equipment. Hardware wallets can be purchased directly from the companies that created them; some are available at stores like Best Buy and Walmart. Once it arrives, you'll need to power it on and you may be prompted to create a PIN.
2. Download the software. Hardware wallet brands have compatible software that you'll need to install to set up your device and transfer funds. Additionally, some desktop applications have built-in tools to connect your wallet to exchanges or decentralized finance applications. When creating an account, remember to write down your 12 or 24 word seed phrase and keep it in a safe place.
3. Connect your device. There are a few different ways to connect your hardware wallet to online software so you can transfer coins. Some devices plug into your computer via a USB cable; others connect wirelessly via a QR code or WiFi. Your device should come with instructions on how to set it up.
4. Add cryptocurrency to your wallet. Some cold wallets have features that help you buy cryptocurrencies and load them onto your device for offline storage. Using your wallet address, you can also migrate tokens from exchanges or other existing wallets.
Custodial wallet
Custodial wallets, also known as hosted wallets, are managed by a third-party provider. They allow users to store assets directly on exchanges for easy access for transactions. Custody wallets also have built-in password recovery in case you lose your login credentials, making them a good choice for beginners or users looking for an easier method.
Here's how to set up a hosted crypto wallet:
1. Find a trustworthy platform. This is especially important with custodial wallets, since your private keys are not under your control. The best exchanges for storing cryptocurrencies protect your assets from security breaches and are easy to browse. Additionally, they provide some loss coverage. Low fees and a rewards program are a bonus.
2. Create an account. After selecting a platform, find the registration page on desktop or mobile. Then, create an account by entering your email address and creating a password. You may be required to enter personal information, including your legal name, address, social security number and date of birth. You may also need to enter a verification code sent to your phone number and upload a photo of your photo ID for verification.
3. Add cryptocurrency to your wallet. Your account on the exchange acts like a wallet, so once you're in, you can transfer cryptocurrencies from another wallet using your new wallet address. You can also buy tokens directly on exchanges by linking your bank account. With most exchanges, you can pay via ACH or wire transfer and use a debit or credit card. Fees sometimes vary by payment method.
I hope this article will help you to learn is it worth getting a crypto wallet and how to get a crypto wallet. Hardware wallets are a good investment even for small amounts of money, as they protect your private keys and give you peace of mind that is not possible when using software wallets.
