How to Create a Crypto Wallet
If you’re reading this, you’re probably beginning to explore the world of cryptocurrencies and are wondering what a Crypto Wallet is all about. In this article, we outline how to make a crypto wallet and how to use it traverse the digital world of crypto and the blockchain. We're breaking down the different types of wallets at your disposal, and giving some detailed instructions on how to download a digital wallet that's one of the best for beginners.
So, What Is a Crypto Wallet?
A Crypto Wallet is a program that can safely connect to different blockchain networks and communicate the transfer of cryptocurrencies or resources. The purpose of a crypto wallet is the same as a physical wallet, the difference being where the currency is stored. Unlike physical money which can be stored in bank accounts, Crypto resources are kept recorded on the blockchain. As you use a bank card to access funds from your checking account, you use your Crypto Wallet to access your cryptocurrencies on the blockchain. The Crypto Wallet does not hold anything physical but instead uses unique private keys and passwords which are used for transactions in the Crypto world.
Crypto wallets are versatile and come in many forms. They can be reached on many platforms, mediums, and smartphone applications and all help you connect to records of the transaction history. Having a crypto wallet is the basic necessity of traversing the new world of cryptocurrency.
Custodial vs. Non-Custodial Wallets
There are two types of Crypto Wallets, custodial and non-custodial. Firstly, custodial wallets are usually the first type of Crypto Wallets people hear of due to the ease of access to them as they are centralized exchange markets. These large exchange markets have been coined “custodians” as they have custody over most cryptocurrencies, giving the average person the ability to purchase through their assets.
These larger companies act as stand-ins like a bank would and hold your cryptocurrencies through hosted wallets. Coinbase is a great example of this as it is one of the most popular centralized exchanges in the United States working as a mediator by holding ownership over private keys for individual users giving them a platform they can trust while the company is responsible for keeping their currencies safe. Custodial wallets like this are the best starting point for beginners who want to hold their cryptocurrencies easily and securely so they can be comfortable for their first steps into the crypto world.
The downside, however, to custodial wallets is their inability to trade NFTs as of the writing of this article, and that is where non-custodial wallets come into the picture. Non-custodial wallets grant you the ownership of your private key not distributed or secured by a third party, giving all of the responsibility of keeping your private key protected to you, the owner. I recommend waiting to switch to a non-custodial wallet after you’ve had a custodial wallet for a bit to give yourself time to get comfortable with having a private key, but once you feel like you’re ready for more responsibility Coinbase makes it easy to turn your custodial wallet over to your non-custodial wallet.
How Do Crypto Wallets Work?
Crypto wallets work by using public and private keys. The keys work together to protect and certify cryptocurrency transactions on a blockchain. Wallet addresses come from the consolidation of public and private keys to identify individual accounts on the blockchain. The address is used like any other and can be shared to send crypto. All Ethereum address start with 0x then a string of 40 characters.
Private keys are all linked to public keys with a unique algorithm. A private key is used as a mediator to verify transactions on a blockchain and can be used to create many wallet addresses. They come together in a group called a seed phrase which can consist of 12 or 24 words that are randomly generated from the wallet software. The seed phrase is essentially a password to hold your private keys to use in transactions giving you public keys. Unfortunately, there is no way to retrieve a lost private key even by tracing it from a public key that you’ve acquired from a previous transaction, so be sure you keep your private keys safe.
A private key or seed phrase is like a PIN to a bank card meaning you must never share your seed phrase or private key with anyone. No matter how much you trust someone with these sequences, there is no way to retrieve them which could result in leaks giving strangers access to your assets and cryptocurrencies. When these things are stolen there is no safety net to help so the best course of action is to store your private keys in a safe location and not in unencrypted files. Some even store them in a bank lockbox to ensure their safety.
Types of Cryptocurrency Wallets
There are a few separate categories of crypto wallets that you should know about. First, we have software wallets otherwise known as hot storage. Hot storage is classified as any wallet that can be connected to the internet, however, they are also divided into separate categories based on whether you access them from the web, your mobile phone, or your desktop.
Web wallets are comprised of both browser extensions and websites and can be accessed on most computers. MetaMask is an example of this, being very convenient and easy to use. Another option is a mobile wallet which is accessed from your smartphone. This is a great option for accessibility and on-the-go purchases. Metamask also has a mobile application you can download right onto your phone if you’d like to keep all of your currencies in one place. Just be aware both of the previous types of wallets are vulnerable to cyber-attacks which can leak your seed phrases and private keys. Lastly, desktop wallets are downloadable software and are installed directly onto your computer. Private keys are put into the software and are kept safe by the original computer used onto which they were installed. While convenient, software is best used for storing a small amount of crypto due to the risk of ransomware.
The last type of cryptocurrency wallet is cold storage wallets that are stored without the use of an internet connection which provides the greatest security and safeguards. One of the most secure examples of this is the Ledger "cold-storage" hardware wallet which is a physical device that allows you to carry out transactions without uncovering your seed phrase or private keys on the internet. Hardware wallets are normally USB keys that can be easily connected to a computer while making a transaction and can be removed when finished. This allows for a very limited exposure of private keys so they are rarely compromised.
With this information, you're all set to explore the crypto wallet options available and that you need to start navigating the world of cryptocurrency and the blockchain. This is information only, so continue to do your due diligence and research to find out what works best for your personal or business needs. Metamask is a very accessible wallet to use both on the web and smart phone, but there may be options that work better for you to so explore with an open mind and don’t keep yourself limited.
How to Set Up Metamask
1. Go to Metamask.io
2. In the top right corner of the homepage, click the “Download” button
3. Click “Install MetaMask for Chrome”
4. After being taken to the chrome page website, Click “Add to Chrome” which will start the process of adding the extension.
5. Click the new MetaMask logo that appears on your new browser and click the “Get Started” and begin the creation of your wallet by clicking “Create a Wallet”
6. After the wallet has been created, this is when the Seed phrase will be created and this is very important that you keep these in a safe space only you have access to and then you click “next”
7. Confirm your seed phrase by entering your seed phrase in order and click “confirm
8. Click “All Done”
You are now the proud owner of a MetaMask wallet and can access it at any time on your home computer if need be can now transfer this over mobile devices with these simple steps
1. Download MetaMask App to any smartphone
2. Click the “Get Started” prompt that will appear
3. Click “sync with MetaMask extension”
4. Go back to your desktop and open your MetaMask extension and go into your advance settings, and click on “Sync with Mobile” and sign in
5. Using a phone camera, you can scan QR codes to instigate a sync process.
Take the Next Step
Now with all of this down and the setting up of a wallet you can now delve into the world of cryptocurrencies. Hopefully, the information provided here helped build some confidence and discernment in choosing a crypto wallet. Don’t forget to be safe and be mindful of how you protect your private keys and be careful with those you trade with. If you’d like to know what you can use your wallet for, check out this article about diving into the world of NFTs.
Sources: Open Sea, "The Beginner’s Guide to Creating & Selling Digital Art NFTs";
MetaMask, "Getting Started with MetaMask"
Co-Written by Robert Muir and Annah Brice for Floh Creative.
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