Welcome back friends,
Now that we know how to purchase cryptocurrency through an exchange (HOW TO #1), lets take a look at where it is stored and a few options to keep our cryptocurrency safe. You may be wondering, âWhat are the benefits of having a crypto wallet?â. I ask in return, âDo you want to be in total of control of your finances?â. A (non-custodial) crypto wallet gives you just that.
All crypto âwalletsâ have similar characteristics such as a private and public key, security options and transaction history. I like to think of a crypto wallet more like a safe (public key) with a combination lock (private key) instead of a typical fiat wallet. Since there are no tangible crypto coins, the wallet stores the verified completed transactions. Below, we dive into the a few examples, the different types of crypto wallet options, and a step-by-step guide to setting up a MetaMask Wallet. Once again, this is in no way financial advice.
Thanks for reading and have a fantastic day!
-BJ
What exactly is a Crypto Wallet?
It is a piece of software or tool with public and private keys that enables the user to interact with the blockchain in order to send, receive and store cryptocurrency (transactions).Â
Rough Translation:
Public Key = Bank Account Number
Private Key = Password to Bank Account
If you own the private keys, you own control of the wallet. If you control the wallet, then you now control the crypto in that wallet. That being said, it is never a good idea to give up your private keys to anyone.
Think of a crypto wallet like a safe in a bank holding the money. The location (public key) may be known to multiple people but the combination (private key) is only known and accessible by owner.
For example, If Joe decides to send 3 ETH from his wallet to Steveâs wallet, Joe is essentially giving up (signing off on the transaction) ownership of the 3 ETH in his wallet. If the public key Joe sent the ETH to matches the private key associated with Steveâs wallet, the transaction will be complete and Steveâs crypto wallet balance will increase 3 ETH while Joeâs will decrease 3 ETH.
Hosted Wallets vs. Non-Custodial Wallets:
Hosted Wallets are provided by third party exchanges such as Coinbase, Kraken, & Gemini. The user does not own the currency because they do not have access to the private keys of their wallet. Hence the name âhostedâ wallets. Very similar to a typical bank account or savings account. If you are afraid of losing your private keys or donât plan on investing much, then this may be a good option for you.Â
Non-Custodial Wallets (preferred) donât rely on a third party to keep your crypto safe, but put you (the user) in complete control of the crypto. Examples of a few non-custodial wallets are MetaMask, Coinbase Wallet & MyEtherWallet.
A Few Types of Non-Custodial Wallets:
đŸ Hardware: Generally a USB hardware device that stores the wallets private keys offline. Transactions are made online but the data is stored offline, increasing security. The device must be unlocked and plugged into the computer to make transactions. (Example: Ledger)
đ» Desktop: The wallet can only be accessed from the computer it is installed on. The wallet software is downloaded & installed on a computer. The wallet's private key is given to the user and stored on the computer. (Example: Exodus)
đ± Mobile or Browser Extension: Downloaded as an app on a phone or as an extension on a compatible internet browser. This is most useful if you are using cryptocurrency for transactions daily. The wallet's private key is given to the user and stored in the app or extension. (Example: MetaMask)
Steps to Set Up a Non-Custodial Wallet (MetaMask Example)
Find a Wallet that Suits Your Needs
Choosing a wallet really depends on its intended use. Multiple trades per day? Buy and hodl? large volume trading? Sending & receiving small amounts? Each wallet is unique as to its security, user interface and accessibility. It is best to research which wallet will work best for your needs. For this example, I will show how to set up a MetaMask wallet on web browser (also available on mobile).
Visit https://metamask.io/ to Download the Chrome Extension
Click âDownloadâ and choose âGet Chrome Extensionâ. As you can see once youâre on this page, there is also the option for Firefox, Brave and Edge browsers.
Click on âInstall MetaMask for Chromeâ
Once you click, there will be a pop-up requesting to âadd extensionâ. This will then add the MetMask extension into your Chrome browser allowing access to the wallet.
Welcome To MetaMask - âGet Startedâ
Now that MetaMask is accessible, we need to click on âGet Startedâ. This will give us the option to either import an existing wallet or create a new wallet.
NOTE: In order to import an existing wallet, you will need the original 12-word seed phrase as security.
Create a Password & Seed Phrase
After we click âGet Startedâ, we will need to set up a MetaMask password. This is not the private key or seed phrase but only a password to access the MetaMask account. Once you have chosen a password, click next and you will be given your 12-word seed phrase. You will need to write this down and save it as it will be the only backup for your account access. On the next screen, you will need to retype your seed phrase to confirm record.
NOTE: Never give away your seed phrase to anyone. This will allow anyone access to your account. Keep it safe and secure.
DONE! Your New Crypto Wallet is Set Up & Ready
Your new MetaMask wallet is ready to use! You can now trade, send and receive most cryptocurrencies through your wallet. Please beware of network fees when buying or trading cryptocurrencies through MetMask or a decentralized exchange as they can be much higher than a cryptocurrency exchange. Remember, once the currency is in the MetaMask wallet, the wallet owner is now 100% in control of the crypto.
đ Additional Sources To Read/Watch:
BitPanda: What is a Crypto Wallet Overview
MetMask: Getting Started w/ MetaMask
Youtube Tutorial: MetMask Account Settings
đ ON THE HORIZON: Next week we dive a little deeper into sending cryptocurrency between wallets and having access to the Ethereum DeFi ecosystem. Thank you for reading and please feel free to provide any feedback, comments or concerns!