While crypto wallets and standard online bank accounts have certain similarities, cryptocurrency protocols operate considerably differently from PayPal and your bank’s website. For example, because bitcoin transactions are irreversible, there are far stricter criteria for securing digital money stored in a wallet.
What to Consider when Choosing a Wallet
To minimize potential investment loss, it’s critical to learn how to pick a cryptocurrency wallet and how it operates below the hood. When utilizing a bitcoin wallet for the first time, there are five essential procedures to follow:
• Decide on the type of wallet you wish to use (Hardware, desktop, or mobile)
• Purchase or download your wallet
• Setup the software
• Configure your account and security features.
• Make a crypto deposit.
When these five procedures are done correctly, it is much easier to assure that you will use crypto safely and securely.
Also Read: BTC and how it affects the general market
Hardware Wallet Set Up
Setting up a hardware wallet is normally the most time-intensive, but it is also the most secure alternative. This increased security is achievable because your private keys will be stored on a separate offline device from your laptop, mobile phone, or another computer. These hardware wallets are far more secure than internet wallets since their offline nature makes them less vulnerable to virus assaults from hackers, keeping your bitcoin assets safe from hacker attacks.
You may set it up using the accompanying instructions after purchasing a hardware storage device, such as a Trezor One or Ledger Nano X. This normally consists of three steps: downloading the hardware’s related software to your computer, jotting down the recovery pass for your private keys, and connecting the hardware device to your computer.
Choosing the Right Wallet
The most crucial factor to consider when selecting a crypto wallet is why you are utilizing cryptocurrencies in the first place. Different wallets are designed for specific use cases, so it’s best to choose one that corresponds to how you’ll interact with various cryptocurrency networks. Here are some things you should ask yourself before purchasing your first wallet: Do you solely use Bitcoin? How much cryptocurrencies do you intend to keep in your wallet? Do you require more privacy features?
Again, security should be a major priority when selecting a crypto wallet because this piece of software (and occasionally hardware) will have access to your private keys. The private keys are essentially the password to your cryptocurrency funds, allowing them to be transferred to other users. Power over the private keys, in other words, translates to control over the money.
Custodial vs. Non-Custodial Wallets
We should disclose the existence of a “custodial wallet” at this time. Custodial wallets are distinguished from non-custodial wallets in that they store your private keys on your behalf. In this case, a third party is effectively keeping your crypto on your behalf. As a result, customers must pick reputable, regulated services like Coinbase.
Over the years, many people have lost their Bitcoin simply by entrusting their money to the wrong people.
It would be best if you also utilized two-factor authentication wherever it is available. Almost every custodial wallet will support two-factor authentication, and the Electrum wallet does it in a quasi-decentralized way.
Aside from crypto software, it would help if you thought more extensively about computer security in general. If a malicious hacker gains access to your laptop or mobile phone, they will almost certainly be able to take your cryptocurrency.
Finally, always backup your private keys since you will not be able to retrieve your cash if you lose access to those keys. Also, ensure that your backup is tangible. Because you have complete control over your crypto assets, no one will be able to assist you if you lose your private keys.