Buying Crypto? Here is How to Set up Your Wallets

Buying Crypto? Here is How to Set up Your Wallets

Buying crypto isn’t difficult, but it gets harder when you don’t know how to set up your crypto wallets. Many people are interested in investing in cryptocurrency assets but lack the basics amid the noise and information about blockchain products.

Despite the Nigerian Central Bank’s ban on blockchain, growing acceptance has not reversed.

But some interested people still don’t know how to set up crypto wallets to get started, and that alone has kept millions out of the space.

Coinbase, which recently listed on the New York Stock Exchange, said a crypto wallet is a place to securely store your crypto.

It explained that there are many types of crypto wallets, but the most popular are hosted wallets, non-custodial wallets, and hardware wallets. The right one for you depends on what you want to do with your crypto and the level of security you want.

Buying Crypto: these wallets are best for investing.

Hosted wallets

Hosted wallets are the most popular and easiest-to-set-up cryptocurrency account. When you buy crypto using an app like Coinbase, your crypto is automatically held in a hosted wallet.

It’s called hosted because a third party holds your crypto for you, like a bank holds your money in a checking or savings account.

You may have heard of people “losing their keys” or “losing their USB wallet”, but with a hosted wallet you don’t have to worry about any of that.

According to Coinbase, the main benefit of keeping your crypto in a hosted wallet is if you forget your password, you won’t lose your crypto.

A drawback to a hosted wallet is that you can’t access everything crypto has to offer. However, that may change as hosted wallets start to support more features.

How to set up a hosted wallet:

1. Choose a platform you trust. Focus on security, ease of use, and compliance with government and financial regulations.

2. Create your account. Enter your personal info and choose a secure password. It’s also recommended to use 2-step verification (2FA) for an extra layer of security.

Buy or transfer crypto: Coinbase explains that most crypto platforms and exchanges let you buy crypto with a bank account or credit card. If you already own crypto, you can also transfer it to your new hosted wallet for safekeeping.

Non-custodial wallets

A non-custodial wallet, like Coinbase Wallet or MetaMask, puts you in complete control of your crypto. The thing is, if you choose this option, non-custodial wallets don’t rely on a third party — or a “custodian” — to keep your crypto safe.

This simply means you are in control.

While they provide the software to store your crypto, you’re entirely responsible for remembering and safeguarding your password. But if you lose or forget your password—often referred to as a “private key” or “seed phrase”— you can’t access your crypto.

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Another downside is that if someone else finds your private key, they’ll get full access to your assets.

Why have a non-custodial wallet?

In addition to full control over your crypto’s security, you can also access more advanced crypto activities like yield farming, staking, lending, borrowing, and more, Coinbase says in a note.

It advised that if you only want to buy, sell, send, and receive crypto, a hosted wallet is the easiest solution.

How to set up a non-custodial wallet:

1. Download a wallet app. Popular options include Coinbase Wallet and MetaMask.

2. Create your account. Unlike a hosted wallet, you don’t need to share any personal info to create a non-custodial wallet. Not even an email address.

3. However, be sure to write down your private key. It’s presented as a random 12-word phrase. Keep it in a secure location. If you lose or forget this 12-word phrase, you won’t be able to access your crypto.

4. Transfer crypto to your wallet. You can’t always buy crypto with traditional currencies (like US dollars or Euros) in a non-custodial wallet, so you’ll need to transfer crypto into your non-custodial wallet from elsewhere.

If you’re a Coinbase customer, you can choose a hosted wallet or a non-custodial wallet, since the Coinbase app, where you buy and sell crypto, is a hosted wallet.

You can also download the standalone Coinbase Wallet app to take advantage of a non-custodial wallet’s benefits. Some customers use both, making it easy to buy crypto with traditional currency and participate in advanced crypto activities.

Hardware wallets

A hardware wallet is a physical device about the size of a thumb drive that stores your crypto’s private keys offline.

Most people don’t use hardware wallets because of their added complexity and cost, but they do offer benefits—for example, they can keep your crypto secure even if your computer is hacked.

However, this advanced security makes them less convenient than a software wallet, and they can cost upwards of $100.

How to set up a hardware wallet:

1. Buy the hardware. The two most well-known brands are Ledger and Trezor.

2. Install the software. Each brand has its own software that’s needed to set up your wallet. Download the software from the official company website and follow the instructions to create your wallet.

3. Transfer crypto to your wallet. Like a non-custodial wallet, a hardware wallet typically doesn’t let you buy crypto with traditional currencies (like US dollars or Euros), so you’ll need to transfer crypto to it.

Just as there are many ways to store cash (in a bank account, in a safe, under the bed), there are many ways to buy crypto for storage.

You can keep it simple with a hosted wallet, keep full control of your crypto with a non-custodial wallet, take extra precautions with a hardware wallet, or even use multiple wallet types —with crypto, the choice is yours.

Buying Crypto? Here is How to Set up Your Wallets