There is no doubt that cryptocurrency and traditional tenders have some stark differences. Crypto is completely virtual, exists on a blockchain, is hugely unregulated and can be very difficult to understand. But one similarity that crypto and physical currencies share is that they both need to be held in a wallet. All cryptocurrencies require wallets, including Bitcoin, but how do you sign up for one and what should you look for when choosing a cryptocurrency wallet?
Hardware vs. software wallets
In the crypto realm, you get both hardware and software wallets. Software wallets are entirely virtual, while hardware wallets are physical entities. You need one of these two wallet types to store your Bitcoin private keys.
Many choose software over hardware wallets, as most software wallets are completely free to sign up for, while hardware wallets can sometimes cost over $100. Economically, the calculation is simple. But when it comes to security, things get a little more complicated.
This is because software wallets rely on an internet connection, which exposes them to external threats. Hardware wallets, on the other hand, do not rely on an internet connection and store crypto-private keys offline. This reduces the possibility of external attacks and means that a malicious actor must physically have your hardware wallet to have a chance of hacking it.
Software wallets are cheap and convenient, but hardware wallets are undeniably more secure. But this is not to say that software wallets are completely insecure. Many reputable software wallet vendors offer additional security features, such as passphrases, 24/7 customer support, one-time passwords, and two-factor authentication.
There are also custodial and non-custodial crypto wallets. Custodial crypto wallets hold your private key(s) for you, while non-custodial wallets give you total control over and access to your private keys. People lean towards one of these two wallet types, although many believe that non-custodial wallets are a safer bet.
So, now that we are aware of the different types of crypto wallets, let’s get into how you can set up your own.
Setting up a software Bitcoin wallet
Setting up a software Bitcoin wallet can be quite simple, depending on the provider you choose. For example, Exodus is great for beginners, while Mycelium is aimed more at experienced and professional traders (and is only available as a mobile app).
1. Download
Normally, before signing up for a Bitcoin wallet, you need to decide which version of the wallet you want to download. For most users, the desktop version is the best option. Sometimes you have the option to download the desktop version directly from the wallet provider or download the desktop app via your operating system’s native app store.
Many software wallet providers also offer a smartphone app for their users so that you can access and check your crypto wallet even when you are away from home. So if you want this kind of added convenience, consider downloading the smartphone app version of your chosen software wallet (if the company offers one). The steps and examples in this part of the article use the Exodus software wallet and you can use the download links below if you want to follow along.
Download: Exodus for Windows and macOS | Android | iOS (free)
To get started, we recommend downloading the desktop or browser extension of the wallet so you can easily view and adjust the interface.
You must download the software version designed for your specific operating system.
2. Registration
Once you’ve downloaded and opened the wallet version you want to use, you’ll need to create a new wallet. This is a very important step as you will be provided with very sensitive information related to your wallet. The process from here will vary depending on the wallet you’re using, but it’s still important.
On Exodus, for example, you must first set up an account password, as shown below. Make sure you choose a complex password that you don’t use for other online accounts.
You must write down the seed sentence you are given. Your seed phrase is incredibly important and backs up your crypto wallet for emergencies. Some choose to store the seed phrase on a hard drive, while others just use a piece of paper. You can even buy secure capsules to store your seed phrase, such as Ledger’s CryptoSteel. But it is important here that what holds your seed set is kept in a safe place.
You may also need to set up a wallet PIN for an extra layer of security. Make sure you also record and store this information.
From here, you may or may not get your private key, depending on whether you’re using a non-stored crypto wallet. For example, because Exodus is a non-custodial wallet, your private keys will be completely under your control and you can view them whenever you want in your account via Wallet the tab. From here, go to the asset you’re interested in, then click the three dots next to the asset. This will then display an option called See private keys.
Get a hardware Bitcoin wallet
The process of setting up a hardware Bitcoin wallet will take longer as you have to wait for the device to arrive first. The two giants in the hardware wallet market are Ledger and Trezor. Both of these providers have different models, such as Ledger Nano S and Trezor Model One, which may suit you in terms of appearance, price or functions.
Once your desired hardware wallet has arrived, the next step is setup. This process will vary slightly depending on what kind of hardware wallet you have. However, the general process will involve connecting your wallet via a USB cable to your PC or laptop. Now an internet connection is required to set up your hardware wallet, but don’t worry. Your money will be kept in cold storage. After all, that’s the purpose of hardware wallets.
Again, the next step in this process depends on the wallet you’re using.
Ledger, for example, has an application called Ledger Live, which you should first use during setup. Trezor, on the other hand, has an application known as Trezor Suite. No matter what kind of hardware wallet you use, chances are you’ll need to download a program for setup.
As is the case with software wallets, you will also need to set up a PIN and securely store the seed phrase you receive. Make sure you don’t disconnect your wallet from your PC or laptop during this process.
After doing this, the wallet should be ready to use. Some providers will have extra steps, such as choosing a name for the wallet. But you can skip this step and keep the original name.
A secure Bitcoin wallet is essential
Wallets are integral to the crypto world as they allow you to store your keys and securely access your funds. So, if you want to set up a Bitcoin wallet, follow the steps above and note the considerations mentioned. Good luck!
