How do you setup a Crypto Wallet?

How Do You Setup a Crypto Wallet?

Having your own crypto wallet is essential for cyptousers, as a cryptocurrency wallet is a software electronic "wallet" that stores your cryptocurrencies on a blockchain address (a giant long string of alphanumeric characters). The crypto wallet works on public and private keys (essentially the keys to your wallet) and cooperates with the blockchain to allows users to send and receive digital currency between each other's electronic wallets. If you want to use cryptocurrencies like Bitcoin or Litecoin for example then you will need a crypto wallet. It can't be done without it. So how do you actually setup a crypto wallet? Well, in this guide I will show how to setup one.

Choosing a crypto wallet

The first step is you will have to choose a crypto wallet to use. There are a number of different options all of which have pros and cons. If your using a mobile phone you can download a wallet and there are some top wallets apps such as Bread, Loaf, Coinbase and Copay to choose from.

There are 3 main categories of crypto wallets —hardware, software, and paper. The software wallets can be used three ways on the desktop, online, or mobile.

  • Online: there are wallets online that can process on the cloud and available for use with any computing device at any location. However, even though they are easy to access the private keys are still stored online, therefore the private keys are controlled by a third party means it is vulnerable to hackers.
  • Mobile: wallets that are run on iOS or Android they are very convenient since it is an app meaning they can be accessed anywhere including retail stores. Additionally, mobile wallets are much more compact in sized and straightforward than a desktop wallet due to the limited space.
  • Desktop: wallets on the PC or laptop will have to be downloaded and installed. Although, they can only be accessed on the computer that they downloaded it on. Wallets on the desktop are beneficial as they have such high-security levels but if your computer gets a virus or hacked then they may be a chance that you will lose all your funds.
  • Paper: this type of wallet is basically a physical copy of your public and private keys. This way it is convenient to use and offers high-security levels. A paper wallet can also be known as a piece of software that is used to safely and securely produce a pair of keys so they can be printed. The paper wallet is actually relatively easy to use, so when transferring cryptocurrencies to your paper wallet is achieved by the software wallet transferring funds to the public address that is shown on your paper wallet. On the other hand, if you wish to withdraw or spend the currency you will have to transfer money from your paper wallet to your software wallet. Additionally, this process can be done manually by entering your private keys or by scanning QR code on the paper wallet.
  • Hardware: this type a wallet is somewhat similar to software wallet except for the fact that it will store the user’s private keys on a hardware device similar to a USB. Hardware wallets offer more secure security since you make the transactions online but they the transactions are stored offline. Another beneficial factor of hardware wallet it the fact they are compatible with many web interfaces and supports different currencies. Additionally, making a transaction is very simple and easy, the users just have to plug their device to any computer or device with internet then just enter the pin and send the currency. Hardware wallets make it easy and convenient to transact while at the same time keeps your funds offline away from danger.

How do Crypto Wallets Work?

A crypto wallet doesn’t actually store the crypto coins, which many people might assume that they do like traditional wallets which literally hold your cash. The cryptocurrencies are not actually stored anywhere in the physical form - they only exist in the records of transactions held on the blockchain. Using your public key anybody can view your crypto balances and entire transaction history. However to spend your coins you will need your private key and only this can be used to access your coins - so keep it safe!

Are Crypto Wallets Secure?

At a high level the security of most wallets depends of some factors like what type of wallet you use, the service provider and where your private key is stored. Having an online wallet which you enter your private key in your web browser can expose vulnerabilities to hackers. On the other hand, having an offline hardware wallet cannot be hacked since they are not connected to any network and also does not rely on any third-party network for security. Additionally, make sure you remember if you ever lose your private keys this will mean you lost your coins.

Crypto Wallet Security Measures

There are a few things you can do for extra security for your crypto wallets such as:

  • Up to date Software: You should make sure that you keep your software up to date because then you have the latest security benefits and fixes available. You should update straight away whenever the latest update is available for your wallet. Hardware wallets like Trezor and Nano publish regular updates of the firmware which patch up security issues. You will see there is an update when you plug it in, but it might be best to subscribe to thier newsletter in order to find out sooner.
  • Additional Layer of Security: Having an additional layer of security is never a bad thing. It could be as simple as using password that is secure and strong or using two-factor authentication for login or using a pin code every time the wallet app is opened. Some wallets also offer a multisig feature like Coinbase or Copay. Having a multisig feature is extra strong security since you must have the permission of another user before the transaction can be made.
  • Backup Your Wallet: Make sure to backup your wallet just in case of computer failures or if it is lost or stolen. Most computer wallets such as Exodus provide an easy backup feature with 12 safe words you can write down and use to restore your wallet on a new computer.

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About the Author

Sam Deering

Sam Deering

Sam is a blockchain and cryptocurrency enthusiast, crypto trader, web developer, entrepreneur and also the founder of Crypto News Australia.