There are many different types of crypto wallets, but the most popular ones are hosted wallets, non-custodial wallets, and hardware wallets. Which one you choose depends on what you want to do with your crypto and how safe you want to be.
A hosted wallet is the most popular and simple cryptocurrency wallet to set up. Your crypto is kept in a hosted wallet when you make a purchase using an app like Coinbase. It’s called “hosted” because a third party holds your crypto for you, much like a bank keeping your cash in a checking or savings account. You’ve probably heard people talk about losing their keys or forgetting their USB drive, but with a hosted wallet, you won’t have to worry about that.
The biggest advantage of keeping your cryptocurrency in a hosted wallet is that if you forget your password, you won’t lose your money. A disadvantage of using a hosted wallet is that you are unable to access all crypto has to offer. That may change, however, as hosted wallets begin to support more capabilities.
How to set up a hosted wallet:
- Choose a platform you trust. You need to think about security, how easy it is to use, and if it meets government and financial regulations.
- Create your account. Enter your personal information and choose a strong password. It is also recommended to use 2-step verification for an extra layer of security.
Buy or transfer crypto. You can buy crypto on many platforms and exchanges using a bank account or credit card. If you already own crypto, you can transfer it to a new hosted wallet for safekeeping.
A self-custody wallet, such as Coinbase Wallet, allows you to have complete control of your cryptocurrency. Non-custodial wallets aren’t based on a third party — or “custodian” — to keep your assets safe. While they provide the software needed to store your crypto, the responsibility for remembering and safeguarding your password rests entirely on you. There’s no way to get access to your crypto if you lose or forget your password. And if someone else gets hold of your private key, they’ll be able to access all of your holdings.
Why would you use a non-custodial wallet? You may access more complex crypto activities such as yield farming, staking, lending, borrowing, and so on when you have control of the security of your cryptocurrency. However, if all you want to do is buy, sell, send, and receive cryptocurrencies, a hosted wallet is the simplest solution.
How to set up a non-custodial wallet:
- Download a wallet app. Check out our list of useful links here.
- Create your account. A non-custodial wallet doesn’t require you to share any personal info. You don’t even need to give your email address.
- Be sure to write down your private key. This 12-word phrase is important for you to remember. If you lose it or forget it, you will not be able to access your crypto. Keep it in a safe place!
- Transfer crypto to your wallet. You can’t always use traditional currencies, like US dollars or Euros, to buy crypto with a non-custodial wallet. You’ll need to transfer crypto into your non-custodial wallet from somewhere else.
A hardware wallet is a physical device that stores your private keys to crypto offline. This makes them more secure than if you just had the keys on your computer. But they are more complex to use and can cost $100 or more.
How to set up a hardware wallet:
- Buy the hardware. There are two well-known brands for storage devices for digital currencies: Ledger and Trezor.
- Install the software. Different brands have different software that you need to create a wallet. Download the software from the company’s website and follow the instructions to create your wallet.
- Transfer crypto to your wallet. A hardware wallet is a type of wallet that does not let you use traditional currencies, like US dollars or Euros, to buy crypto. You will need to transfer crypto to your hardware wallet from an exchange or another source.
There are many ways to store crypto. You can use a hosted wallet, which is a simple way to store your crypto. You can also use a non-custodial wallet, which gives you full control of your crypto. You can also use a hardware wallet, which is an extra safe way to store your crypto. Or you can use multiple wallets — it’s up to you!