You may store your cryptocurrency safely in a crypto wallet. Although there are many other kinds of crypto wallets, hosted wallets, non-custodial wallets, and hardware wallets are the most common ones.
Which one is best for you will depend on what you intend to do with your cryptocurrency and the level of security you require.
A hosted wallet is the most well-liked and simple to set up cryptocurrency wallet. Your cryptocurrency is immediately stored in a hosted wallet when you purchase it through an app like Coinbase. Hosted cryptocurrency refers to digital assets that are kept for you by a third party, much like a bank would do with funds in a checking or savings account. You may have heard stories of people “dropping their keys” or “missing their USB wallet,” but none of that is a concern if you use a hosted wallet.
The biggest advantage of storing your cryptocurrency in a hosted wallet is that you won’t lose it if you forget your password. You can’t use a hosted wallet to use all of cryptocurrency’s features, which is a disadvantage. However, when hosted wallets begin to enable additional functions, that might change.
Creating a hosted wallet:
1. Pick a website that you can trust. Security, usability, and compliance with governmental and financial rules ought to be your top priorities.
2. Set up an account. Specify your personal information and pick a strong password. Utilizing 2-step verification, also known as 2FA, adds an additional degree of protection and is advised.
3. Buy or trade cryptocurrency. You may usually buy cryptocurrency with a bank account or credit card on platforms and exchanges for cryptocurrencies. If you already have cryptocurrency, you can move it to your newly hosted wallet for security.
With a self-custody wallet like the Coinbase Wallet, you have total control over your cryptocurrency. Non-custodial wallets don’t entrust the security of your cryptocurrency to a third party, sometimes known as a “custodian.” While they supply the software required to store your crypto, it is entirely your duty to remember it and keep it secure. There is no way to access your crypto if you lose or forget your password, which is also known as a “private key” or “seed phrase.” Additionally, if a third party finds your private key, they will have complete access to your assets.
Why keep an unguarded wallet? You have complete control over the security of your cryptocurrency in addition to having access to more complex crypto-related activities like yield farming, staking, lending, borrowing, and more. However, a hosted wallet is the simplest option if all you want to do is purchase, sell, send, and receive cryptocurrency.
Making a non-custodial wallet:
1. Install a wallet app. Coinbase Wallet is one of the well-liked choices.
2. Set up an account. A non-custodial wallet can be created without divulging any personal information, unlike a hosted wallet. not even a working email.
3. Make sure to record your private key on paper. It appears as a 12-word sentence chosen at random. Keep it in a safe place. You won’t be able to access your cryptocurrency if you misplace it or forget this 12-word phrase.
4. Add cryptocurrency to your wallet. You’ll need to move cryptocurrency into your non-custodial wallet from somewhere else because it’s not always possible to purchase cryptocurrency using conventional currencies (like US dollars or Euros) with a non-custodial wallet.
Customers of Coinbase can choose between a hosted wallet and a self-custody wallet. A hosted wallet is the Coinbase app, where you may purchase and sell cryptocurrency. To benefit from a non-custodial wallet, you can also download the standalone Coinbase Wallet app. Some of our customers have both, making it easier to buy crypto with regular currency as well as participate in complex crypto activities.
The private keys to your cryptocurrency are kept offline on a physical device called a hardware wallet that is roughly the size of a thumb drive. Due to their increased complexity and cost, hardware wallets aren’t used by the majority of consumers, but they do have some advantages, such as the ability to keep your cryptocurrency secure even if your computer is hacked. They can cost upwards of $100 to purchase, and their superior security makes them less easy to use than a software wallet.
Creating a hardware wallet:
1. Buy the equipment. The two most recognizable brands are Trezor and Ledger.
2. Install the application. You need specific software from each brand to configure your wallet. To build your wallet, download the software from the official company website and then follow the on-screen directions.
3. Add cryptocurrency to your wallet. Similar to a non-custodial wallet, a hardware wallet often prevents you from purchasing cryptocurrency using fiat money (such as US dollars or euros), thus you must transfer cryptocurrency to your wallet instead.
Cryptocurrency can be kept in a variety of places, just like cash (bank accounts, safes, under the bed). With cryptocurrency, you have a variety of options. You may keep things simple with a hosted wallet, have complete control over your cryptocurrency with a non-custodial wallet, take further security measures with a hardware wallet, or even have various types of wallets.