As the cryptocurrency market expands its reach across the globe, more and more internet-users are becoming crypto buyers, traders and investors every day. For beginners to the cryptocurrency world, there are lots of new terms, methods and procedures that they need to learn about in order to successfully own and manage cryptocurrency in 2021.
One of the most commonly asked questions with regards to cryptocurrency usually pertains to the nature and purpose of crypto wallets. Many wonder how to go about setting up a crypto wallet, while some wonder how to choose the right wallet for their needs.
In this crypto wallet guide, we will guide you through all there is to know about the basics of cryptocurrency wallets. We’ll explain what crypto wallets are in simple language and walk you through the process of setting on up. We are sure that by the end of the article you will be fully equipped to interact with your cryptocurrency on a crypto wallet.
What is a Crypto Wallet?
It is important to understand that a crypto wallet is necessary in order to do anything with any type of cryptocurrency. You can think of it like the crypto version of a bank account, although there are some important differences.
Simply put, a crypto wallet is a software that allows you to access, store and interact with your cryptocurrency. Unlike a bank account, in which your account number is public and is linked to your identity, a crypto wallet address cannot be linked back to the owner. Furthermore, with crypto wallets both your account number and transactional history are public.
The more accepted term in the crypto sphere for a wallet’s account number is ‘public key’ which is also your wallet’s unique address. This key is a string of numbers and letters (both upper and lower case) generated by a wallet provider when you set up a crypto wallet. This public key can be used by others to send you cryptocurrency.
Along with a public key, each crypto wallet also has a private key which only the owner of the wallet should know. This is the key you can use to access and interact with your cryptocurrency. As suggested by the name, a private key should not be shared with anyone, as access to your private key means access to your cryptocurrency.
Crypto wallets with public and private keys were used by crypto buyers and traders for quite a long time. However, today you won’t find many people in the crypto sphere use these terms. That’s because they have largely been superseded by a much more secure type of crypto wallet called an HD wallet.
HD here stands for Hierarchical Deterministic and is a type of wallet that provides a better overall user experience. This is because, rather than generating a key that is a string of hard-to-memorize letters and numbers, an HD wallet uses a string of common, everyday words from the English language. This string of words is known as a Mnemonic Seed.
Since people are generally much better at memorizing random words than they are at memorizing random strings of letters and numbers, Mnemonic seeds have proven to be much more secure wallets and are hence used by a large proportion of crypto buyers and traders.
Moreover, it is possible to create many addresses from just a single seed. How many, you ask? Let’s just say it’s far too many for one person to use. Therefore with just a single Mnemonic seed you can own multiple wallet addresses or accounts for a cryptocurrency and none of them can be traced back to you.
Setting Up a Crypto Wallet
Let us now turn to the process of setting up a crypto wallet. While understanding how wallets work and how to interact with them can prove to be a slight challenge, setting up a crypto wallet is extremely simple. For this example we will be showing you how to set up an HD wallet for Ethereum cryptocurrency.
There are many wallet providers for every different kind of available cryptocurrency. While choosing the right crypto wallet for your needs beforehand is very important, setting up a crypto wallet follows essentially the same procedure for all wallet providers. For this example we will be using the wallet provider known as MetaMask.
1. Download MetaMask Extension
To start, visit the MetaMask homepage. Upon being welcomed to the home screen you will be prompted to download MetaMask. In order to set up a wallet with MetaMask you will need to install MetaMask for your web browser. Click ‘Download Now’ as shown below and follow the steps to add MetaMask as an extension on your web browser
2. Create Wallet
Upon entering the MetaMask extension you will be greeted with the screen shown below. You will be asked to either import an existing wallet to MetaMask, or to create a new one. In order to begin setting up a crypto wallet, select the option on the right.
Next, you will be asked to create a password for your MetaMask account. This is just to add an extra layer of security for any wallets you create with MetaMask. Although, MetaMask itself will not have access to your wallet addresses after it has generated them. Create a password that is strong and secure by including capital letters and special characters.
3. Seed Creation
In order to view the Mnemonic seed generated by MetaMask click on the box as instructed. Once you have seen the secret string of words, either memorize it or write it down on a piece of paper in a secure location. This is necessary in order to complete the next and final step to setting up a crypto wallet.
Once you’re ready click ‘Next’. You will be redirected to a screen that looks like the one shown below, with your secret words provided as selections in a random order. In order to set up your wallet you will have to select them in the correct order.
Once you’re done hit ‘Confirm’. You will have successfully created your crypto wallet. All HD wallet providers essentially follow the same procedure so whether you are using MetaMask or some other crypto wallet provider, our crypto wallet guide should you set up your first crypto wallet without any trouble.