How to open a cryptocurrency wallet
While there are some similarities between Bitcoin and other cryptocurrency wallets and traditional online bank accounts, the reality is cryptocurrency protocols work quite differently from virtual banks and other virtual fanatical services. For example, cryptocurrency transactions are irreversible which means there are much higher standards when it comes to the security of the digital money held in a wallet. It’s really important to know how to choose a cryptocurrency wallet and to understand how that cryptocurrency wallet works underneath the hood to avoid the loss of funds. There are five basic steps you look through when using a cryptocurrency wallet for the first time:
- Determine what kind of wallet you want to use mobile, desktop, or Hardware.
- Download or buy your wallet.
- Install the software.
- Set up an account and security features.
- Deposit your cryptocurrency.
When all these five steps are followed properly, it’s much easier for you to ensure that you’ll be using cryptocurrency safely and securely.
Choosing the right wallet
When you choose a crypto wallet, the most important thing for you to think about is why you are using cryptocurrency in the first place. Different wallets are made for different use cases, so it makes sense to stick with an option that approaches how you’ll be interacting with various cryptocurrency networks. Here are some of the questions you should ask yourself when choosing your first wallet:
- Are you only using Bitcoin?
- How much money do you plan to store in your wallet?
- Do you need upgraded privacy features?
Again, security should also be at the top of your mind when you’re choosing a crypto wallet because this piece of software and sometimes hardware will be in control of your private keys. The private keys are the password to your cryptocurrency funds, which allows those funds to be sent to other users. In other words, control over the private keys equates to control over the money.
How to setup a hardware wallet
Setting up a hardware wallet is usually the most time-consuming option, but it’s also the most secure. This added security is possible because your private keys will be held in an offline device separate from your laptop, mobile phone, or another device. These hardware wallets are much more secure than online wallets because the hardware wallet is less vulnerable to malware attacks from hackers, which keeps your cryptocurrency holdings safe from hacker attacks.
Once you have purchased a hardware device, such as a “Trezor One” or “Ledger Nano X” you can follow the instructions to set up the device. This will usually include three main steps: downloading the hardware’s associated software to your computer or device, writing down the recovery passphrase for your private keys, and connecting the hardware device to your main computer.
Set up mobile wallet
It is easy to set up a mobile wallet. The first step is to choose a mobile cryptocurrency wallet from your device’s associated app store. For example Edge and BRD.
With most mobile wallets, you’ll be able to accept cryptocurrency payments instantly. Remember, in the case of cryptocurrency, there is no third party to call for help when you’ve lost your password.
Set up a desktop wallet
Setting up a desktop wallet is similar to setting up a mobile wallet. Once you have selected your cryptocurrency wallet software, you simply need to run the software to start the setup process. Similar to the mobile wallet setup process, desktop wallet software may ask you to make a backup of the security passphrase associated with your private keys.
Desktop wallets typically include more huge portfolio tracking graphs and charts, so that you can track the value of your coins in different ways, according to your preference. Here are some examples of desktop wallets Exodus Wallet, Jaxx Liberty, and Atomic Wallet.
Custodial Vs. Non-Custodial Wallets
At this point, we should mention the existence of a “custodial wallet”. Custodial wallets are differing from non-custodial wallets in that they hold your private keys for you. In that case, a third party is essentially holding your cryptocurrency for you. That’s why people must choose honestly, regulated providers such as Coinbase.
Lastly, remember you always back up your private keys, as you won’t be able to recover your funds if you lose your access to those keys. Also, make sure your backup is in the physical form. You are in full control of your cryptocurrency holdings, which means if you lose your private keys no one will be able to help you.
Related: A beginner guide to Cryptocurrency – How to use cryptocurrency
