How Do You Set up a Crypto Wallet?

Setting up a crypto wallet might seem more complicated than it really is. It’s about as complex as creating a new email account; you just need to grasp a few key concepts and be diligent about security, especially regarding the keys generated in the process.

To give you a general overview, here's a breakdown of how the process will look:

• First, pick your wallet type based on how you'll use it. Consider the level of security you need, the ease of use you require, the types of cryptocurrencies you'll handle, and how you plan to use your crypto. Trading frequently? You want something quick to access, probably connected to an exchange. Storing long-term? You'll want something more secure, even if it's less convenient.
• Following this, you'll proceed with the actual setup, which varies depending on your choice. Exchange wallets need account registration. Software wallets need an app download and account registration. Hardware wallets come as physical devices that need to be configured. None are particularly difficult to set up.
• Next comes the critical part - your keys. Your wallet will generate a public key and a private key, including a seed phrase. The public key is your address for receiving crypto, while the private key is used to sign transactions, prove ownership, and grant access to your funds. The seed phrase is a list of 12 to 24 words that serves as a master key to recover your wallet if you lose access. Losing it means losing your crypto forever.
• The final step is making your first transaction. This could be buying crypto directly through your wallet or moving existing crypto into it.

In the following sections, we'll explore each of these steps in detail, delve into the different types of crypto wallets available, and provide tips on how to keep your crypto safe.

Types of Crypto Wallets

There are three main types, each with different trade-offs between security and convenience.

Custodial Wallets (Hosted Wallets)

When you sign up for a crypto exchange or trading platform account, like on Newton, you get a custodial crypto wallet. The provider holds your private keys on your behalf, similar to how banks manage your traditional accounts.

This makes things simple - you log in, trade, and don't worry about managing your keys.

Pros

• This simplicity makes them perfect for beginners or active traders
• No need to manage private keys or recovery phrases.
• Easily trade or stake your crypto assets within the same interface.

Cons

• You don’t control your private keys.
• Vulnerable to hacking or the wallet provider going out of business. However, measures are in place to reduce these risks at Newton, including keeping 80% of assets offline in cold storage and maintaining insurance coverage to protect against loss or theft.

Best For

• Beginners seeking a simple solution.
• Active traders who need quick access to funds.

Non-Custodial Wallets (Self-Custody Wallets)

A non-custodial wallet gives you full control over your private keys. These wallets come in two forms: hot wallets (software wallets) and cold wallets (hardware wallets).

Hot Wallets (Software Wallets)

Hot wallets are applications you install on your phone or computer that stay connected to the internet. They’re convenient for frequent transactions but less secure than cold wallets.

Pros

• Easy to set up, simple to use
• Perfect for frequent transactions
• Supports multiple cryptocurrencies.

Cons

• Being connected to the internet makes them vulnerable to hacking
• Less secure for long-term storage.

Best For

• Everyday transactions and using decentralized apps(dApps).
• Storing small amounts of crypto for regular use. You wouldn't want to keep your life savings there.

Cold Wallets (Hardware Wallets)

Cold wallets are physical devices that keep your crypto keys offline, providing the highest level of security.

Pros

• Highly secure (more immune to online hacking attempts).
• Ideal for long-term storage.

Cons

• Less convenient for frequent transactions.
• Requires a physical device (which can be lost or damaged).
• They cost about 65 CAD to over 530 CAD

Best For

• Storing large amounts of crypto securely.
• Users prioritizing security over convenience.

Comparison Table of Crypto Wallet Types

Choosing the Right Setup

Most experienced crypto users end up using multiple wallets. They might keep some crypto in an exchange for trading, use a software wallet for daily transactions, and store their main holdings in a hardware wallet.

The key thing to remember is that security and convenience usually work against each other. The more secure a crypto wallet is, the more steps it takes to use it.

Step-by-Step Guide to Setting Up a Crypto Wallet

Here’s how to set up the different types of crypto wallets:

Setting Up a Hosted (Custodial) Wallet

These are typically set up through cryptocurrency exchanges. Here's how it works.

Step 1: Choose a Reputable Platform

Select a reputable crypto exchange. Look for ones that follow regulations and have a solid security track record.

Step 2: Create an Account

1. Sign Up: This part works much like setting up any online account. You'll visit the exchange's website, enter your email, and create a password.
2. Verify Your Email: Check your email for a verification link and click on it to verify your account.
3. Enable Two-Factor Authentication (2FA): Enable 2FA using an authenticator app or SMS-based verification for added security.

Step 3: Complete KYC Verification

Most platforms require identity verification to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. You'll need to provide:

1. A government ID (like a passport or driver's license)
2. A selfie for facial verification
3. Proof of where you live (usually a utility bill)

It might feel intrusive, but it's actually a good sign - legitimate exchanges always require this verification.

Step 4: Add Funds to Your Crypto Wallet

Once verified, you can add money to your account. Most crypto exchanges let you connect a bank account or debit card. You can also transfer in cryptocurrency if you already have some in another crypto wallet or exchange.

Step 5: Access Your Wallet

After funding, you can start using your wallet through the exchange's platform. Everything happens through their interface - buying, selling, sending, and receiving crypto. However, if you send crypto from another personal wallet, the transaction occurs off the platform and will be sent to the receiving wallet on the platform, as long as the correct address was entered.

Setting Up a Hot Wallet (Software Wallet)

Here’s how to set one up:

Step 1: Choose a Wallet Application

Start by picking a trusted wallet app. Don't just download the first option you see - stick with well-known wallets that have strong user communities. They've been tested more thoroughly and are less likely to have security issues. MetaMask, Trust Wallet, and Exodus are widely regarded as popular options by users.

Step 2: Installing the Crypto Wallet

Only download software wallet apps from official sources—either the wallet's website or official app stores (e.g., Google Play Store, Apple App Store). Fake web wallets are common and can steal your crypto. Double-check the developer's name, app reviews, and download count before downloading to ensure authenticity.

Step 3: Create a New Wallet

1. Open the App: Launch the software wallet app on your desktop or mobile device.
2. Create New Wallet: Choose the option to create a new wallet. Follow the on-screen instructions to set up your digital wallet.

Step 4: The Critical Part: Your Seed Phrase

1. Generate Seed Phrase: The cryptocurrency wallet will generate a 12 or 24-word seed phrase—a human-readable representation of your private key.
2. Write It Down: Carefully write down the seed phrase in the exact order presented. Do not store it digitally to prevent hacking risks.
3. Secure Storage: Store the written seed phrase in a secure location, such as a safe or a lockbox. Some people use metal seed phrase plates to protect against fire or water damage. It might seem excessive, but remember: lose this phrase, lose your crypto. Forever. No customer service can help you recover it.
4. Confirm Seed Phrase: The wallet will prompt you to confirm your seed phrase by selecting the words in the correct order. This ensures you have accurately recorded it.

Step 5:Setting Up Security

Create a strong password for daily access. Enable any additional security features offered, such as Two-Factor Authentication (2FA), fingerprint scanning, or face recognition.

Step 6: Adding Funds to Your Crypto Wallet

Finally, you can receive crypto from another wallet or crypto exchange using your wallet's public address. ****Ensure you’re sending the correct type of cryptocurrency to a compatible wallet address, and always verify the wallet address before initiating a transfer to prevent errors.

Setting Up a Cold Wallet (Hardware Wallet)

Here's the process, stripped down to its essentials.

Step 1: Buying Your Hardware Wallet

Start with choosing a wallet from a reputable manufacturer. Ledger and Trezor dominate the market. Only buy directly from the manufacturer's website. Never buy used hardware wallets or ones from third-party sellers to avoid tampering and counterfeit products.

Step 2: Initial Setup

1. Connect the Hardware Wallet: Connect the hardware wallet to your computer or smartphone using a USB cable or Bluetooth and follow the setup wizard.
2. Set up a PIN Code: Create a secure PIN code to access the device. This PIN adds an extra layer of security.

Step 3: The Most Important Part: Seed Phrase

1. Generate Seed Phrase: The device will generate a seed phrase - 12 or 24 words that can recover your wallet if something happens to the device.
2. Write It Down: Carefully write down the seed phrase in the exact order provided. Use the provided recovery sheet or a metal seed phrase plate for durability.
3. Secure Storage: Store the written seed phrase in a secure, offline location, such as a safe or a lockbox. Avoid digital storage methods to prevent hacking risks.
4. Confirm Seed Phrase: The device will prompt you to confirm the seed phrase by selecting the words in the correct order, ensuring accurate recording.

Warning: Losing your seed phrase means losing access to your crypto assets permanently. Handle it with utmost care.

Step 4: Setting Up the Companion Software

1. Download Official Software: Each hardware wallet needs companion software on your computer. Ledger uses Ledger Live, and Trezor uses Trezor Suite. Only download this from the manufacturer's website.
2. Launch the Software: Open the installed software and follow the instructions to link your hardware wallet.
3. Update Firmware: Follow the prompts in the companion software to ensure your device’s firmware is up to date. Firmware updates often include important security patches.

Step 5: Adding Your Crypto to Your Hardware Wallet

Get your wallet's public address through the companion software. This is what you'll use to receive crypto. Double-check everything when sending crypto to your hardware wallet. Sending the wrong type of crypto to an address can mean losing it forever.

Step 6: Daily Use

Keep your hardware wallet somewhere secure when not using it. When you need to make transactions:

1. Connect the device
2. Enter your PIN
3. Use the companion software to manage your crypto(view balances, send and receive funds, and interact with supported applications).
4. Disconnect when done

Keeping Your Crypto Wallet Secure

Most people who lose crypto don't lose it to sophisticated hacks. They lose it through basic mistakes. Here's how to avoid them.

1. Private Keys Are Everything

Your private key and seed phrase are the most sensitive pieces of information in your crypto wallet. Never share them with anyone, and avoid storing them digitally where they can be hacked. No screenshots. No cloud storage. No password managers. Physical copies only, stored somewhere secure. The important thing is keeping it offline and secure.

2. Regular Backups

Having one copy of your seed phrase is risky. Keep multiple copies in different secure locations. Think about what could go wrong - fire, flood, theft - and plan accordingly.

Metal storage plates make the most sense for backing up seed phrases. They're fireproof, waterproof, and can be affordable. Commercial options like CryptoSteel or BillFODL run $50-$100 CAD and work well, but you can always create your own using stainless steel plates and metal stamps from a hardware store. The whole setup costs under $30 CAD. The key is using high-grade stainless steel (300 series) or titanium to ensure durability. Either way, metal beats paper wallets for long-term storage.

Some people even use stainless steel electrical junction box covers - they work just as well. The pre-made solutions are worth considering if you value convenience over cost savings.

3. Watch Out for Scams

The crypto world is full of scammers. They're getting better at looking legitimate. A few rules help avoid most scams:

• Never share your seed phrase. No legitimate company will ever ask for it. Not for verification, not for support, not for anything.
• Only download wallet apps from official sources. Double-check web addresses, especially before entering login credentials. Scammers create convincing fake websites with slightly wrong URLs.

4. Basic Security Hygiene

Use strong passwords. Enable two-factor authentication wherever available. Keep your software updated.

Think of wallet security like layers of an onion. Each measure adds protection. No single measure is perfect, but together, they make it very hard for anyone to steal your crypto.

The goal isn't perfect security - that's impossible. The goal is making it so difficult to steal your crypto that attackers give up and move on to easier targets.

Secure Your Crypto Journey: Your Next Steps

Ready to set up your crypto wallet and dive into the world of cryptocurrency? Start by choosing the wallet that fits your needs, and don’t forget to prioritize security every step of the way.

Visit Newton to begin your crypto adventure today!

‍