A crypto wallet is not that different from a physical wallet where you store your cards and IDs. When you are buying cryptocurrency, you should know where to store it. When you transact using crypto, there are always two things that you need: your wallet address and your public and private key. Your public key is like your own bank account number, which you can share with institutions or other people so they can make monetary transactions like sending money and taking money from the account that you have authorized. While a private key is similar to the PIN number of your debit card.
You have to know that cryptocurrencies are not held directly in your wallet. Instead, what it does is store information about your private and public keys. Before we learn how to set up a crypto wallet, we must learn that there are also different kinds of crypto wallets.
Hardware Wallet/ Cold Wallet/ Cold Storage
This is where you store your keys that are completely offline on a device that is not connected to the internet. It looks similar to a USB drive. One example cited in Cryptoner, a website for digital currencies, is called Paper Wallet. Like its literal name, this is where private and public keys are printed, so they are being stored in a safe place. This is a much safer option and has a lower risk for cyber attacks.
Software Wallet/ Hot Wallet
Think of this as your own online bank account. It also has the same security degree as that of a bank account. Although, it has a higher risk of being hacked because your public and private keys are connected to the internet. Because of this, some investors actually have multiple crypto wallets. Its biggest advantage over cold wallets is that it facilitates a basic transaction easier.
How To Set It Up
For cold storage or cold wallet
You need to create an offline crypto address. When creating one, it is vital that the key pair is never exposed to the internet. You have to save the web page that generates the key and then disconnect the device from the internet, and lastly, you open the saved web page on your personal computer and generate the key.
Make an offline copy by printing out public and private key pair, or you can just write it down.
For hot wallet
For hosted wallet, you need to choose first the platform that you trust based on its ease of use and security. Then you can create your account by entering your personal info and secure password. It is recommended to use 2FA verification for extra security.
For a Non-custodial wallet, you just have to download a wallet app, create your account, enter your private key, and then you can transfer your crypto into your newly created wallet.
You actually have the option of not having a crypto wallet since many investors also turn to crypto debit cards for storing needs but whichever way you want your digital currency stored, it is always safe to choose crypto storage after assessing your goals, risk tolerance, as well your background knowledge when it comes to cryptocurrency.