How to Set Up a Cryptocurrency Wallet

Crypto wallets can be served hot or cold!

• Cryptocurrency is an incredibly speculative investment. Help decide whether cryptocurrency suits you by measuring your risk appetite to judge whether you can stomach the volatility. 
• Having purchased cryptocurrency from an exchange, such as Binance or Coinhako, take the necessary steps to better secure your crypto in either a hot or cold wallet.
• A wallet stores the public and private keys that enable you to send and receive cryptocurrency and view your holdings. 

Custodial Hot Wallet

Hot wallets are the most popular form of crypto wallet. If you purchase crypto from an exchange such as Binance or Coinbase, your crypto is stored automatically in the host’s wallet. With hosted wallets, you do not control your private keys, as they are stored online by a third party. This means that you do not have control over your keys' security, which may be a positive or a negative, depending on how well you keep your belongings safe!

To Set up:

1. Choose your platform (i.e. an exchange such as Coinbase or Gemini). Take the relevant precautions when it comes to security. 
2. Create an account with the platform (i.e. an exchange). This will require personal information and security steps. 
3. Buy your crypto. Select the type and amount of cryptocurrency you wish to purchase. The vast majority of hosted wallets allow crypto to be purchased using fiat currency, e.g. US Dollar. You can usually fund your account in numerous ways, including debit cards, credit cards and bank transfers. Expect to pay fees when purchasing cryptocurrency. Alternatively, you can transfer existing cryptocurrency holdings to your new hosted wallet. 

Non-custodial Hot Wallet

Examples of non-custodial hot wallets include MetaMask and Crypto.com’s DeFi wallet. Using a non-custodial wallet requires having control of your crypto. As in, you are responsible for your private keys, password and other personal and security-related information. 

To set up:

1. Download the non-custodial wallet’s app. This can be a mobile or desktop version. 
2. Create an account. This will not require anywhere near the personal and security information as with a custodial wallet.
3. Take note of your private key. This comes in the form of a 12-24 word phrase. Take the appropriate steps to make your private key safe!
4. Buy your crypto. Some, but not all, non-custodial wallets allow for crypto to be purchased using fiat currency, e.g. the US Dollar. Alternatively, you can transfer existing cryptocurrency holdings to your new non-custodial wallet. 

An increasing number of cryptocurrency exchanges offer their customers both custodial and non-custodial wallet options. For example, as mentioned previously, Crypto.com allows users to hold cryptocurrency in a hosted wallet or in their DeFi wallet app.

Hardware (cold) wallet

Hardware wallets store your private keys on a hardware device such as a drive or a USB. Hardware wallets are offline, meaning you are not dependent on internet connectivity. However, you will need to connect it to the internet when wanting to make a transaction. Because they are offline, hardware wallets have greater levels of security than online wallets. However, hardware wallets are not as practical as having a hot wallet, meaning that they are less popular. Unlike hot wallets, hardware wallets are not free and come at a cost, usually around $100.

To set up:

1. Purchase the hardware wallet
2. Install the hardware wallet’s software to your device, e.g. computer. Hardware cold wallets come with dedicated software to enable you to transfer peer-to-peer. To transfer, users plug their hardware wallet into an internet-enabled device, type out their pin and then send away!
3. Transfer your cryptocurrency over from an exchange or additional wallet. Generally, hardware wallets do not allow for crypto to be purchased using fiat currency, e.g. the US Dollar. 

How to Maximise Your Crypto Wallet’s Security

1. Avoid Scams 

Cryptocurrency scams are on the rise, and it’s essential to know how to avoid them. Here are some basic principles:

• Any social media post asking for cryptocurrency to be sent is attempting to scam the user. 
• If a cryptocurrency payment request is urgent, it is almost certainly a scam.
• If an offer seems too good to be true, such as promising free money or guaranteed returns, it probably is. 
• Do not give your private keys to anyone.

2. Backup Your Wallet

Do not leave a large amount of cryptocurrency sitting in an exchange wallet. Backing up your holdings into offline storage, such as a hardware wallet, means that you are not exposed to computer or software vulnerabilities.

3. Update Software

Hackers can exploit non-updated wallet software. Likewise, updating your device's operating systems is recommended for the same reason.

4. Two-Factor Authentication (2FA)

Adding 2FA means an additional layer of security to your crypto wallet. It means that a hacker would need more than your password alone to get past the authentication check.

5. Reputation

Some wallets have a better reputation for security than others. Do your own research and pick wallets with good, credible reviews. 

6. Avoid public WiFi

Public WiFi is less secure than private networks. If you are going to use public WiFi, it is recommended to have a virtual private network (VPN).

7. Change Your Password Regularly

Your password should be strong, complex and changed regularly. Do not use the same password for multiple wallets. 

8. Multiple Wallets

Diversification is not limited to your investment portfolio! Having multiple wallets can mitigate the risk of your cryptocurrency holdings being breached.

KEEPING CRYPTO SAFE. COMPLETED. ✅

Sources:

1. https://www.dbs.com.sg/personal/articles/nav/investing/beginners-guide-to-cryptocurrency 
2. https://www.coinbase.com/learn/tips-and-tutorials/how-to-set-up-a-crypto-wallet 
3. https://blockgeeks.com/guides/cryptocurrency-wallet-guide/
   
4. Cover photo by Unsplash