We keep searching about the crypto space as crypto enthusiasts daily. Today in this article, we would like to give an insight to our followers on what types of crypto wallets are. Our main aim is to help you find the right wallet and give helpful information about the wallets. Crypto wallets are places where we can securely keep our crypto assets. These wallets allow us to buy, sell, stoke, and transfer cryptocurrencies. Firstly, We can separate these wallets into three main groups. Wallets can be categorized as hosted wallets (custodial wallets), non-custodial wallets, hardware wallets.
What is the Hosted Wallet / Custodial Wallet?
The hosted wallet is a custodial wallet. With a custodial wallet, a third party controls your private keys. In other words, you’re trusting a third party to secure your funds and return them if you want to trade or send them somewhere else. Hosted wallets are similar to bank accounts. These wallets are the most popular ones because they have easy-to-set-up. It is called custodial for the reason that a third party keeps our crypto for us. In this case, third-party decentralized platforms store your keys to access your funds on their servers.
Keeping your crypto in a custodial wallet grants helpful advantages. For example, if you forget your account password, you won’t lose your fund. When you create a custodial wallet account, you have to enter your identity or personal info. In this way, your password may renew again.
On the other side, there are disadvantages. All you can do with a hosted wallet is to buy, sell, store and transfer your crypto. You can not access some opportunities in the crypto area like yield farming, staking, etc.
The hosted wallet is a kind of web wallet. Most popular exchanges are Binance, Coinbase etc.
How to Set Up A Hosted Wallet?
- At the beginning, you must consider choosing a platform. It should have features like advanced security, ease of use, compliance with financial regulations.
- After you choose a trusty platform then you may create a wallet account.
- Then, you must enter your info and secure password for creating a new account. I recommend you use 2-step verification. Please don’t enter an accessible password like your birth date or 12345 etc.
What is the Non-Custodial Wallet?
Non-custodial wallets don’t rely on a third party. You have complete control of your crypto assets through these wallets which run in your browser. There is software in the wallet to manage or store your crypto assets. Security and responsibility of your funds belong to you. When creating a new account, you will get a private key or seed phrase. It is a random 12-word phrase. You have to keep in safe this 12-word phrase. Otherwise, If you lose this seed phrase, you never access your account.
If you have a custodial wallet and you think enough for you, you may be misguided. With your non-custodial wallet, you can also access more opportunities that yield farming, staking, pools, lending, borrowing in the crypto space. You can not do the transaction with a traditional currency like dollars and euros to buy crypto. So you’ll need to transfer crypto into your wallet from elsewhere.
The non-custodial wallet is a kind of web wallet. For example; Metamask, MyEtherWallet, Coinbase Wallet, etc.
How to set up a non-custodial wallet?
- Download the app you trust.
- Create an account. You don’t need personal info and email address for creating an account. Easy-to-set-up
- Don’t forget to write down your private key (seed phrase) and keep it in a secure location.
What is the Hardware Wallet?
The hardware wallet is a kind of physical device like a USB drive. It is called the most secure wallet. The private keys are stored on a specific device and never become visible. These keys are in a place in which cannot be accessed by your computer or any other devices even when it is connected. Hardware wallets have an interface. So you can make easy transactions like buying/selling crypto with this interface.
The hardware wallet brands are Ledger, CoolWallet, Trezor, Xeeda, etc.
How to set up a hardware wallet?
- First, you have to buy a hardware wallet.
- Second, you need the software to install. You can find it on the hardware wallet company’s official website.
- Finally, follow the instructions to create your wallet.
As a result, there are many ways to store your cryptocurrency.
You can easily handle your transactions with the custodial wallet. With a non-hosted wallet, you are in complete control of your funds. If you want advanced security, hardware wallets are for that.
You can choose your cryptocurrency wallet according to your needs and wishes. The choice is yours.