If you’re investing in digital assets and wondering how to set up a crypto wallet, you’ll find everything you need to know in this article. As you embark on your journey to own and trade cryptocurrencies, a crypto wallet is a must-have. The first step is to look for the best crypto wallet for your particular needs. There are several different types and many providers available in the market. 

To help make things easier for you, we’ll cover the basics of the crypto wallet before outlining step-by-step guidelines for creating one for yourself. 

What is a Crypto Wallet? 

A crypto wallet stores the public and private keys to access cryptocurrencies. While the crypto assets are stored on the blockchain, a wallet holds the keys that allow you to make crypto transactions, such as to and from a crypto exchange. Keys, especially your private key, are essential for accessing and using any crypto holdings. And they must be stored in a secure place. In essence, a crypto wallet’s function is not much different from a regular wallet that secures your money, credit cards, driver’s licenses, etc. 

Types of Crypto Wallets

Fundamentally, crypto wallets are of two types: hot and cold. Hot wallets are online crypto wallets that are software-based and work just like an application on the desktop, web, or mobile. As these wallets are online, they’re connected to the Internet. On the other hand, cold wallets are hardware-based. These resemble flash storage devices and store private keys to crypto holdings. Paper wallets, which store keys on paper, can also qualify as cold storage wallets. 

As opposed to hot wallets, cold crypto wallets are offline, which makes them more secure. However, they’re not the most convenient, especially when compared with software-based wallets, which can be accessed from anywhere. For beginners, a hot wallet is the best choice, especially if you plan to trade and acquire more crypto assets. 

However, recently a new type of wallet has gained popularity. It’s called a distributed wallet and it combines the strengths of a cold wallet with the usability of a hot wallet. 

Custodial vs. Non-Custodial Wallets 

With hot wallets, you have to be wary of another aspect. Is the wallet custodial or non-custodial? With custodial crypto wallets, the provider also has access to the private keys in the wallet. In other words, they have the custody of your crypto assets. With non-custodial crypto wallets, private keys are exclusively for the owner. It’s a completely decentralized offering that ensures only you can access your private keys and conduct transactions in and out of your wallet.

Setting up a Crypto Wallet: Step-by-Step Instructions

Fortunately, setting up a crypto wallet is super easy and quick. This guide focuses on hot wallets only, which are the most popular choice in the crypto world. 

Here’s the step-by-step process on how to get a crypto wallet:

Step 1: Choose a Crypto Wallet

The first step is to decide which crypto wallet you want to acquire. While there are many options, not all are created equal. So, it’s best to do your homework and compare the features of the wallet, especially security features that ensure your assets are safe from hackers. While most crypto wallets are free to set up, there are fees associated with transactions. So, you should also consider that when choosing which provider to go with. 

Step 2: Download the Wallet App

Once you have decided on the wallet you want to use, download its application from the official website. You may find both desktop and mobile applications from the provider. Many crypto traders prefer mobile wallets, which can be used on the go. When downloading the mobile app through the official website, you’ll be directed to the App Store on Apple devices or the Play Store on Android devices. Complete the download. 

Step 3: Create Your Account

The next step is to create your account on the crypto wallet application. You’ll need an email address for this step, so it’s best to use your primary email address. You may have to complete an identity verification process and be asked to provide identity documents. Usually, you should be able to scan the document from the app or upload a picture to it. You may also be required to take a front picture to confirm your identity. The identity verification process may take some time. 

Step 4: Transfer Crypto to the Wallet

With your account set up and identity verified, you can move your crypto assets to your wallet. Your wallet provider will enable various options for transferring assets from an exchange or another wallet. Most wallets are compatible with different cryptocurrencies so that you can transfer various digital assets. Transfers will be made using the private key. 

Things to Consider When Choosing a Crypto Wallet

As there are many choices for crypto wallets, here are the most important factors to consider:

Security

The deciding factor when choosing a crypto wallet should be security. At the end of the day, using the wallet secures your assets. Pay attention to the security and authentication features the wallet provider employs, whether custodial or non-custodial. Features like two-factor authentication, biometric validation, threshold signature security, and social recovery can ensure your private key to crypto assets is always protected. Also, look for the crypto wallet providers' reputation and whether there have been incidents like hackers gaining access to users’ wallets. 

Supported Cryptocurrencies

While crypto wallets support many popular cryptocurrencies, they might not be compatible. If you intend to transfer multiple currencies, ensure that the wallet you’re choosing supports those currencies. 

Fees

Another critical factor to consider is the fee. Transactions to and from your wallet have a fee, which varies by provider. You want to choose a wallet with a transparent fee structure and, ideally, charges the lowest. 

User Interface

A wallet app with a user-friendly interface will make it easier for beginners to transfer assets. A complicated interface, on the other hand, can have a learning curve and may take time to get used to. 

Customer Service

Lastly, consider the quality and channels of customer service from the wallet provider. You can’t expect the technology to be 100 percent reliable all the time. So, when push comes to shove, you’ll need assistance. Ensure there’s ample knowledge base on the website and options to speak to a representative directly. This can come in handy when you need help urgently. 

Crypto Wallet vs. Exchange Wallet

Exchanges like Coinbase and Binance also provide wallet services, which are custodial. The main difference between a dedicated crypto wallet and a wallet on an exchange is that the latter is owned and controlled by the exchange. Non-custodial wallets ensure that the private key is only known to the owner. Exchanges facilitate transactions and allow you to hold crypto assets, but they don’t allow you to hold your private key. 

Crypto wallets mostly allow you to hold assets; they don’t facilitate the buying or selling of cryptocurrencies. That said, some wallets have partnered with exchanges to allow users to buy and sell cryptocurrencies directly through the wallet app. Opting for a digital wallet is considered safer, especially for holding onto assets. The private keys paired with the wallet’s security features ensure no one else, but you can use the cryptocurrencies you own. 

Besides, it’s very easy to transact digital currencies from your wallet to an exchange for the purpose of trading or staking. 

Best Practices of Using a Crypto Wallet

Here are some tips for beginners who are new to using crypto wallets:

• Don’t share your private keys – The security of your crypto assets hinges on the private key stored in your wallet. If you share this key with someone, they own your crypto and can move it anywhere. 
• Change the password regularly– Your software-based wallet account has its own password, which should be updated every few months. Make sure to use a strong password combination and ensure it’s not the same as any of your other accounts. 
• Don’t access your crypto wallet with the public Internet– Avoid using the crypto wallet app when connected to public Wi-Fi. Such connections are more susceptible to hacking and can compromise your private keys. Use a virtual private network (VPN), when using a public network. 

Most Secure Crypto Wallet

Gridlock is the best crypto wallet for beginners and pros alike, offering some of the most advanced security features in the industry. It’s a multi-computational wallet (MPC) that uses a network of trusted guardians and a threshold of signatures to authenticate transactions and recovery keys. It combines the convenience of a software-based wallet with the security protocols akin to that of a hardware-based one. 

FAQs

How much does it cost to set up a crypto wallet?

Most crypto wallets (hot wallets) are free to set up. You don’t have to pay a fee to create an account. However, you may have to pay a transaction fee once you transfer assets to and from the wallet. If you’re just storing Bitcoin or other cryptocurrencies in the wallet, you don’t have to pay a fee. 

Can you sell crypto from your wallet?

Some wallets allow you to sell crypto assets directly from the application. Otherwise, you can move your crypto from your wallet to an exchange to sell it. Check if your wallet provider offers crypto buying and selling services. If not, move your assets to an exchange of your choice. 

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Written by Mason Winsed

Mason Winsed simplifies blockchain for the people. With a comp-sci background and a passion for crypto safety, he's your go-to for straight-forward crypto wisdom. In his off time, he's coding or gaming. Join Mason for a no-nonsense crypto talk.