How to Get a Cryptocurrency Wallet
If you've been exploring the world of cryptocurrency, you've probably heard of a "cryptocurrency wallet." But what exactly is it, and do I need one?
A cryptocurrency wallet is a must-have digital tool to securely store, send, and receive cryptocurrencies such as Bitcoin, Ethereum, or any other cryptocurrency. Just like an Apple or Android wallet holds your cards, IDs, tickets, and more, a cryptocurrency wallet keeps track of your cryptocurrencies, NFTs, and other digital assets.
Having a secure and user-friendly cryptocurrency wallet is the first step to harnessing the full potential of digital assets. Buying, sending, or selling cryptocurrencies requires a wallet, whether you're new to blockchain technology or an experienced user.
There are many different types of cryptocurrency wallets, each with pros and cons. Understanding which cryptocurrency wallet is best suited for you will help you continue your crypto journey with the right tool in hand.
By the end, you will be well-equipped to pick the right wallet.
What is a crypto wallet?
A crypto wallet is a software tool to store, manage, send, and receive your cryptocurrencies. Think of it as a secure account for your cryptocurrency, where you can keep an eye on your portfolio, send tokens to your friends, buy crypto, and use applications like Uniswap to swap new tokens! Your crypto wallet is like your gateway to the world of crypto.
Crypto wallets store and secure your assets like Bitcoin, Ethereum, NFTs, or other popular tokens. They are all stored and accessed using your crypto wallet, just like you keep cash, credit cards, and your ID in your physical wallet.
Each crypto wallet has a unique number called an address. You may have seen things like 0x50ec05ade8280758e2077fcbc08d878d4aef79c3. This string of letters and numbers is like a username to identify the crypto wallet. Everything you do with your crypto wallet will be tied to that public address. You can send funds, receive funds, and interact with applications, all by using your wallet's address.
Your crypto wallet address is similar to a website's IP address. For example, Google's IP address is 142.251.33.78 but everyone knows it as google.com. Similarly, crypto wallet addresses can also be simplified. For example, the crypto wallet address 0x50ec05ade8280758e2077fcbc08d878d4aef79c3 is mapped to hayden.eth which is much easier to remember and can be used interchangeably with the longer crypto wallet address.
Public key, private keys, and recovery phrases
Under the hood, crypto wallets use advanced encryption to protect digital currencies using public and private key cryptography. This concept is crucial in understanding how your crypto wallet functions.
Your public key is how the blockchain knows who you are. It's similar to a personal email address that lets others know how they can reach you. With your public key, you specify where you want your funds to go, whether a friend is sending you a payment or you're withdrawing money from an app.
Your private key unlocks access to your crypto wallet, approves transactions, and lets you transfer assets that you control with your crypto wallet. It's like your personal email password to do stuff with crypto, whether you're sending, swapping, or buying. Your crypto wallet is your home base for crypto, which you can connect and disconnect from apps easily while also keeping your information and assets secure.
It is not safe to share your private key with others. Whoever has your private key has control over your crypto wallet.
Private keys vs. recovery phrases
The private key is the cryptographic key that grants access to a crypto wallet.
Imagine you have a special, highly secure vault where you keep all your valuable belongings, such as rare diamonds, important documents, and precious family heirlooms. This vault has an incredibly advanced lock system that requires a unique password to open it.
In this scenario:
- Your personal vault represents your cryptocurrency wallet
- The valuable belongings inside the vault are your cryptocurrencies, NFTs, and other digital assets
- The lock system on the vault is the encryption algorithm used to protect your digital assets.
- The secret password that only you know is your private key.
Just as you are the only one who knows the private key to your vault, you are the sole owner of your private key in the digital world. It's essential to keep this private key safe and never share it with anyone you don't trust completely. Private keys look similar to public keys, like 0x61ce8b95ca5fd6f55cd97ac60817777bdf64f1670e903758ce53efc32c3dffeb.
You may have heard the term recovery phrase. A recovery phrase, also known as a seed phrase or a mnemonic phrase, is a sequence of words (usually 12 or 24) created by a cryptocurrency wallet during the setup process. It is a backup to regain access to your crypto wallet and the funds it holds if you lose your primary access methods, such as the private key or password. Unlike the private key, which directly controls access to your funds, the recovery phrase is used as a fallback option. If you lose or forget your private key or password, the recovery phrase helps you regain access to your crypto wallet. It acts as a secondary key, so it's vital to keep it safe, just like the private key.
In summary, the private key is the primary key that directly controls your cryptocurrency funds, while the recovery phrase acts as a backup that helps you regain access to your crypto wallet if the private key or password is lost or inaccessible. Both the private key and recovery phrase are crucial elements in ensuring the security of your cryptocurrency wallet. You can safely store your private keys and recovery phrases by writing them down, though many wallets, like the Uniswap app, offer simpler backup methods like iCloud to restore your crypto wallet in case you lose your phone.
Why do you need a crypto wallet?
A cryptocurrency wallet will let you interact with the blockchain, secure and store your digital assets, manage transactions, and use applications.
Interact with the blockchain
Your crypto wallet is how you interact with the blockchain. When you need to send funds or use an app to buy an NFT, your crypto wallet sends a message to the blockchain with all the necessary information. Things like who you’re sending funds to, how much, and other details.
Your crypto wallet will ask you to “sign” a transaction. This tells the blockchain that you, as the owner of your wallet, have explicitly approved doing something on the blockchain.
This is when you might have to pay for "gas" or a "network fee." Blockchain validators receive these gas fees in return for adding your transaction to the blockchain.
Store your digital assets
Your crypto wallet is where your Bitcoin, Ethereum, NFTs, and any other digital asset can be found. They’re like a personal vault that can only be accessed with your private key.
Crypto wallets have everything you need to know about your assets. A portfolio view to see your tokens, their prices, and whether they’ve changed in value. A token explore page to discover top tokens by market cap, price charts, and volume and trade them. An NFT gallery to show off your NFT art.
Crypto wallets are kind of like an email inbox. You’ll have important emails that you’ll want to keep and junk that found its way in. In the same way, you’ll have important NFTs and coins you want to know about and other junk that people sent you. Crypto wallets help you manage what you want and don’t want.
Transaction management
Using your crypto wallet, you can interact with the blockchain by signing a transaction. This transaction tells the blockchain to “do something” with your cryptocurrency, like sending it to others while signing tells the blockchain that you’ve authorized the transaction.
A good crypto wallet will make the process of signing and sending transactions easy. Before you sign the transaction, it will show you important information like where it’s going, how much are you sending, and how long it will take to complete. Once your transaction completes, you’ll get a notification that confirms everything.
Security and recovery
Crypto wallets provide essential security and recovery features, ensuring that even if you lose access to your wallet or suffer a device malfunction, your digital assets won't be lost forever. As we learned earlier, recovery phrases can restore crypto wallets and private keys let you sign transactions in your wallet. Wallets will have several security mechanisms to keep your crypto safe, like requiring a pin or FaceID authentication before signing transactions or backing up your recovery phrase using iCloud.
Types of crypto wallets
There are multiple types of crypto wallets, and it’s essential to understand the intricacies of each before picking one.
There are three things to consider when selecting a wallet:
- Will the wallet be self-custodial or custodial?
- Do I want a hot or a cold wallet?
- What device will I use my wallet with?
Wallets and ways to custody
The most important thing to know about a crypto wallet is whether it’s custodial or self-custodial:
- A custodial wallet, also known as a hosted wallet, is a wallet where a third party, typically an exchange or a wallet service provider, holds and manages your private keys on your behalf.
- A self-custodial wallet, also known as a non-custodial, is a wallet where you have complete control over your private keys and manage them yourself.
The difference is in the management of the private key, which you need to sign and approve transactions in your crypto wallet. It’s like a password that lets you do stuff with crypto, whether you’re sending, swapping, or buying. Letting someone else manage your private keys means trusting them with the custody and security of your funds. It may be your money, but they have the key that sends transactions.
While custodial wallets may be easier for beginners to manage, self-custody wallets offer individuals a powerful tool to always stay in control of their finances. You do not need to trust third parties with sensitive personal information, mitigating the risks associated with hacks, data breaches, or the whims of corporate entities. At their core, self-custodial wallets embody the principles of decentralization, ownership, and personal responsibility.
What is a hot wallet?
A hot wallet is a cryptocurrency wallet connected to the internet and readily accessible for transactions. It is designed for convenience and frequent use, allowing users to send and receive cryptocurrencies quickly. Hot wallets are commonly used for day-to-day transactions and hold funds you might need to access easily.
Mobile wallets
Mobile wallets, like the Uniswap app, are cryptocurrency wallets designed for use on mobile devices such as smartphones and tablets. They are software applications that can be downloaded and installed from app stores, allowing users to manage their cryptocurrencies on the go.
Mobile wallets are popular because they are portable. Your phone is always with you so you can check your portfolio and swap on the go. However, just like your phone, mobile wallets can be susceptible to hacking or loss if your device is stolen or compromised. Be sure to protect your phone and enable additional security features.
Online/web wallets
Web wallets are accessible through your favorite web browser. They are hosted by third-party service providers that let users access their crypto wallets through a browser extension.
Web wallets are popular because they are easily accessible and can be used from any device with an internet connection. Because of their popularity, web wallets can be fairly simple and intuitive to use with friendly user interfaces and various feature integrations, letting you swap, send, and receive currencies from within the crypto wallet.
However, web browsers are always online. They could be vulnerable to hacks, phishing, malware, and other cyberattacks. They are also dependent on third-party services to stay online. If the platform experiences technical issues or shuts down, it could limit users from accessing their crypto wallets.
Desktop wallets
Desktop wallets are software applications installed on desktop computers or laptops, designed to store and manage cryptocurrencies. They provide users with direct control over their digital assets and offer a range of features for secure storage and transactions.
Desktop wallets provide a higher level of security compared to web or mobile wallets. Desktop caters to a more advanced crowd with additional features. Their tradeoff is convenience and portability, as desktop wallets are confined to the device they've been downloaded on.
What is a cold wallet?
A cold wallet, also known as a cold storage wallet, is a type of cryptocurrency wallet that is offline and not connected to the internet unless given explicit permission. It's like turning on your phone only when you need to make a call. Cold wallets provide a high level of security for storing and safeguarding your cryptocurrencies for the long term. Cold wallets typically store significant funds you don't need to access frequently.
Hardware wallets
Hardware wallets are physical devices designed to hold your cryptocurrency offline securely. Hardware wallets are useful if you're a long-term investor or have a significant amount of crypto.
Staying offline limits your wallet from vulnerabilities over the internet, like phishing attacks and remote exploiters.
Even though hardware wallets typically have top-notch security and excellent protection from hacks, they can be expensive and less convenient for frequent transactions. Not only do you need to manage private keys and recovery phrases, but you need to keep the device safe too. If it's damaged or lost, you won't be able to recover your funds without the recovery phrase.
Steps for setting up a crypto wallet
Now that you know how cryptocurrency wallets work and why you need one, how do you get started? Here's a step-by-step guide on how to set up a crypto wallet.
1. Select the right wallet for your needs
When choosing a crypto wallet, you have to consider the type of wallet, such as software wallets, hardware wallets, or web wallets, and whether they are self-custodial.
Choose the right crypto wallet based on your needs. Do you have a computer? Are you going to make a big purchase? Are you on iOS or Android? Consider factors like security, cryptocurrencies supported, convenience, user-friendliness, and customer support.
There are many beginner wallets out there, like the Uniswap app.
2. Install the crypto wallet
Once you've picked a crypto wallet that suits your needs, it's time to download and install it.
For software wallets, simply visit the official website or app store and download the wallet. Follow the installation instructions provided by the wallet provider.
If you've chosen a hardware wallet, it'll come with a device, like a USB drive to connect to your computer or phone. Follow the manufacturer's instructions for setting up the device and installing any required software.
3. Secure your wallet
Your crypto wallet's security is critical, as it holds all of your most valuable digital assets.
First, create a unique and strong password to protect your wallet. Combining upper and lowercase letters, numbers, and symbols is ideal. Next, enable two-factor authentication (2FA) for added security. This typically involves linking your wallet to an authenticator app. With 2FA enabled, you'll need to enter a unique code generated by the app or received via text message every time you log into your wallet.
4. Backup your recovery keys
Backing up your crypto wallet is an important step to protect your digital assets in case of theft or device failure. When setting up your crypto wallet, you'll receive a recovery phrase, typically 12-24 words. This recovery phrase is a backup key to restore your crypto wallet and its contents.
Some crypto wallets, like the Uniswap app, will let you create encrypted backups of your private keys, wallet data, or transaction history. Follow the crypto wallet provider's instructions to set up these backups. If you're using the manual backup method, be sure to write down your recovery phrase and store it in a safe, secure location and follow these best practices:
- Use pen and paper to write down your recovery phrase instead of typing it on a computer or taking a screenshot. Writing it offline minimizes the risk of digital threats like malware or keyloggers compromising your backup
- Make multiple copies of your recovery phrase and store them in separate locations. This provides redundancy and protects against loss in case of damage or theft at one location.
- Find a secure and private location to store your written recovery phrase. Consider using a physical safe, a lockbox, or another secure place that is resistant to fire, water, and theft.
- Avoid storing your recovery phrase digitally, such as in cloud storage or on your computer. Keep it offline to reduce the risk of unauthorized access. If you need to store it online, encrypt it first.
5. Enjoy your new crypto wallet
After following these steps, you should be all set!
As with all things, exercise caution. Keep your crypto wallet's private keys, recovery phrases, and passwords secure, and never share them with anyone you don't trust.
Crypto Wallets: Frequently Asked Questions (FAQs)
How do I connect my wallet to Uniswap?
If you want to know how to connect a wallet to Uniswap, all you have to do is follow these simple steps:
- Visit the Uniswap website.
- In the top-right corner or middle of the page, click "Connect Wallet."
- Select your preferred wallet type from the list.
- A pop-up window will appear. Enter your wallet password to unlock your wallet. Now you can start swapping!
Always double-check the URL to ensure you're on the legitimate Uniswap website to protect yourself from scams.
What are the best types of crypto wallets for beginners?
As a beginner, it's essential to choose a user-friendly and secure crypto wallet.
Some popular options include:
- Mobile wallets, like the Uniswap app: These are well designed mobile wallets to transact on-the-go.
- Software wallets: These are convenient for daily use, providing easy access to your funds via desktop or mobile apps.
- Hardware wallets: These offer secure offline storage, useful for holding on to long-term investments.
Remember that not all wallets are self-custodial. There are custodial mobile wallets and non-custodial mobile wallets, just as there are custodial software wallets and non-custodial software wallets. You are always in control of a self-custodial wallet whereas custodial wallets give that responsibility to a trusted third party.
How do I send and receive funds from my crypto wallet?
To receive funds, locate and copy your wallet's public address. Share this address with the sender. They'll use it to transfer the crypto to your wallet.
You'll need the receiver's public address to send funds. Paste the address into the corresponding field in your wallet's “Send” section. Enter the amount you wish to send, and confirm the transaction details.
How do I keep my crypto wallet secure?
Maintaining your crypto wallet's security is vital. Follow these best practices:
- Use a strong, unique password to protect your wallet.
- Always enable two-factor authentication (2FA) for added security.
- Regularly update your wallet software to stay protected against threats.
- Avoid sharing your private keys, seed phrases, or passwords with anyone.
- Consider using a hardware wallet for significant crypto holdings.
Conclusion
Crypto wallets allow you to participate in the world of cryptocurrency and blockchain technology. With a secure and reliable wallet, you're well on your way to navigating the decentralized financial landscape.
A crypto wallet is your personal access point and safety deposit box for the cryptocurrencies you collect and manage. Try getting started with the Uniswap app and enjoy the peace of mind a secure cryptocurrency wallet offers.