Before you decide to sell your NTF Art and which currencies to earn or invest in, you’ll need to set up your crypto wallet. This is where you’ll organise your crypto portfolio.
Crypto wallets that allow the storing of different cryptocurrencies can be much easier than using a different wallet for each currency. Some are able to hold only selected currencies, while others can deal in multiple currencies.
Depending on whether you tend to stick to one form of currency or go between different ones should therefore be a factor you consider when choosing the best crypto wallet for you.
Each wallet comes with a private key that allows you—and only you—to access the wallet’s contents. It also allows you to securely send and receive these and other types of cryptocurrencies.
There are different types of crypto wallets available, including mobile apps and wallets that look like USB sticks.
Types of crypto wallets
Crypto wallets can generally be divided into two categories: software and hardware. But there are actually a number of different wallet types that fall into those categories.
Hosted wallets
Hosted wallets are simple and easy to set up, which explains their popularity. These wallets are “hosted” directly on the exchange where you buy your crypto, so you may sometimes hear them referred to as “exchange wallets.” If you’ve ever bought cryptocurrency on an exchange like Coinbase or Kraken and kept that crypto on the exchange, you’ve already used a hosted wallet.
With a hosted wallet, the crypto exchange typically holds on to your private key for you. This private information is kept and accessed online, which makes it potentially vulnerable to hackers. Hosted wallets may also be limited in their uses, and you may not be able to execute certain crypto transactions—such as buying an NFT —with crypto that’s in a hosted wallet. On the plus side, forgetting your password is usually not a problem, because the exchange has ways to help you retrieve that data.
Wallet Apps
A crypto wallet app is a downloadable piece of software, available via the App Store or the Google Play store. The app stores the private keys that are needed to access your cryptocurrencies. It can be accessed via your mobile phone or on another portable device, similar to how online banking apps work. Crypto wallet apps are great if you think you’ll need to access your crypto wallet on the go.
Non-custodial wallets
A non-custodial wallet allows you to have complete control over your crypto, with no third-party involvement. These software wallets generally offer more freedom and features than hosted wallets. For example, if you’re interested in buying NFTs or staking cryptos—a process in which your crypto supports a blockchain network and earns rewards for doing so—you may want to consider a non-custodial wallet.
With a non-custodial wallet, your cryptocurrencies can be accessed using a private key that’s in your control. Since you’re the only one managing the private key, it’s important to keep safe. If you forget or lose your key, you won’t be able to access your cryptos. And if your key becomes known to someone else, the contents of your wallets may be in danger.
Hardware wallets
Hardware wallets, also known as “cold wallets” or “cold storage wallets,” are physical devices. They tend to look similar to a USB stick. Your private key for accessing your cryptocurrency on a blockchain is stored on this device.
Since a hardware wallet isn’t connected to the internet and exists in physical form, it’s considered by many to be the safest way to store cryptocurrency. A hacker halfway around the world has no way of accessing your crypto without this device in hand.
There are a couple downsides to hardware wallets. For one, popular offerings from companies such as Ledger and Trezor can be quite expensive. And though losing your wallet isn’t the end of the world, you will need a recovery seed to regain access to your crypto. Losing your recovery seed means you’re pretty much out of luck.
How to set up a crypto wallet
To set up a crypto wallet, you’ll need to enter your personal information and set up a security password. Similar to banking security, there is usually a two-step verification process to go through to set up your cryptocurrency wallet.
How do I send crypto from my crypto wallet?
To send cryptocurrency to another wallet is relatively simple. Once you know the recipient’s wallet address, you can open your crypto wallet, select how much crypto you want to send, and send it to that address.
Public vs. private keys—what’s the difference?
Crypto wallets generally use two types of keys: public keys and private keys.
Public keys operate in a similar way to your bank account number. A public key is a long string of random numbers that can be shared with a third party, such as a cryptocurrency exchange, without compromising the security of your wallet. This key allows you to receive cryptocurrency in transactions—oftentimes by using a wallet address, which is essentially a compressed version of the wallet’s public key.
Private keys, on the other hand, should always be kept private. A private key allows you to access the actual cryptocurrency on the blockchain. So if someone has access to your private keys, it’s as good as having access to the crypto in your wallet.
Security
To protect against computer failure or software issues it is good security to back up your crypto wallet. How you do this will depend on the software you are using. For example, Bitcoin wallets will ask you to generate and record a 12-word backup phrase that you can use to restore your wallet if you lose access. These can sometimes be a 24-word phrase, but the process will be similar with all companies. Make sure you look into what you need to do with your particular software, so you’re ready to back it up when needed.