Key points
There are many types of crypto wallets. Custodial wallets are easy to set up but offer less control.
Non-custodial wallets give you full control, but you are entirely responsible for the security of your keys and assets.
Hardware wallets offer high protection against hacker attacks and exploits, but they are relatively expensive and not so user-friendly for beginners.
In this guide, we introduce the different types and show you how to set up a cryptocurrency wallet in just a few steps.
Introduction
New to crypto? The first thing you need is a crypto wallet! A crypto wallet is a tool used to send, receive, and store cryptocurrencies and digital assets. There are several types of wallets, each with their own advantages, limitations, and risks. Let’s explore the different types so you can choose the best option for your needs. Let’s take a look at the different types so you can choose the best cryptocurrency wallet that suits your needs.
Custodial wallets
Also known as hosted wallets, custodial wallets are provided and managed by a cryptocurrency exchange or third party. Hosted wallets do not give you full control over your assets and you rely on the provider's services to make withdrawals or payments.
The main advantage is that you don't have to worry about managing your keys and you can reset your password if needed.
How to set up a custodial crypto wallet
1. Choose a platform: Select a reputable cryptocurrency exchange and make sure it complies with local regulations.
2. Create an account: Register using your email and a secure password.
3. Identity Verification: Most platforms require identity verification (KYC) to comply with regulations.
4. Add Funds: After verification, you can link a payment method to deposit fiat or cryptocurrencies into your wallet.
5. Start Trading: You can now trade or invest. For more details on how to get started on Binance, check out the Binance Guide for Beginners.
Non-custodial wallets
Non-custodial or self-custodial wallets give you complete control over your keys and funds. While these wallets provide greater freedom and control, you are fully responsible for remembering the passwords and seed phrases that keep your cryptocurrencies safe.
In the vast majority of cases, if you get hacked or lose access, there is no way to reset your password or recover your funds. MetaMask and Trust Wallet are popular examples of non-custodial cryptocurrency wallets.
How to set up a non-custodial crypto wallet
1. Get the wallet app: If you are using a mobile device, make sure to install a trusted wallet app from official sources (App Store or Google Play). If you are using a desktop device, download the browser extension from the official websites. In this example, we will use MetaMask.
2. Create a new wallet: Open the app and choose the option to create a new wallet.
3. Set a secure password: This will protect the application from unauthorized access.
4. Back up your seed phrase: Write down the 12 or 24 word seed phrase provided by the app. Store it in a private and secure place. The seed phrase is essential for recovering your wallet in case you lose access.
5. Add funds: The traditional way to add funds to your non-custodial wallet is by transferring crypto from a crypto exchange like Binance. However, some wallets also offer fiat on-ramp services with credit card and bank payments.
Your self-custodial wallet is ready to use. You can now connect to DeFi platforms like Uniswap, PancakeSwap, and more. But be careful. Connecting to malicious DApps or phishing sites may result in loss of funds.
Before connecting your wallet to Web3 platforms, make sure you are using reliable and legitimate services. You can also split your funds and use temporary wallets to reduce risks.
Binance Web3 Wallet
The Binance Web3 Wallet is a unique crypto wallet that combines the best of both worlds. It is a self-custodial wallet that eliminates the need to store your private keys in a single location. Binance Web3 Wallet users do not need to worry about seed phrases and can count on 24/7 customer support.
How to Use Binance Web3 Wallet
1. Log in to your account on the Binance app and go to [Wallet].
2. Create a wallet. Click [Create Wallet] and follow the instructions. Binance Web3 Wallet uses multi-party computation (MPC) technology, so you don’t have to worry about the seed phrase. Instead, you create three key-shares that are stored in three separate locations.
3. Back up your wallet and set up your recovery password. The shared keys are protected by your recovery password. Keep it in a private and secure place.
4. Activate the wallet: After activating the Web3 wallet, you can use it for trading, staking, or interacting with DApps.
Binance Web3 Wallet offers 24/7 customer support, making it an excellent choice for users who need guidance.
Hardware Wallets
Hardware wallets are physical devices that store your private keys offline. Popular brands like Ledger and Trezor can offer strong protection against malware and hackers. However, hardware wallets are relatively expensive and not very user-friendly for beginners. They are best suited for more experienced cryptocurrency users who plan to HODL large amounts as a long-term investment.
How to set up a hardware wallet
1. Buy a hardware wallet: Buy a Ledger Nano or Trezor wallet from the official website or a trusted retailer.
2. Install a wallet software: Download and install the wallet software (e.g. Ledger Live or Trezor Suite) on your computer or smartphone.
3. Connect the device: Connect your hardware wallet to your computer using a USB cable.
4. Set a PIN: Choose a secure PIN to protect your device.
5. Backup recovery phrase: The device will generate a recovery seed phrase. Write down the seed phrase and keep it in a safe place.
6. Send and receive cryptocurrencies: Once you have set up your hardware wallet, you can transfer cryptocurrencies to or from it.
Final considerations
With a few simple steps, you’ll be ready to securely store, send, and receive cryptocurrencies. Remember, to stay safe in the crypto world, it’s essential to protect your private keys and stay alert to potential security threats.
Further reading
Disclaimer: This content is presented to you for informational and educational purposes only, without representation or warranty of any kind. The content should not be construed as financial, legal, or professional advice, and is not intended to recommend the purchase of any specific product or service. You should seek your own advice from professional advisors. In the case of contributions and articles submitted by third-party contributors, please note that the views expressed are those of the respective author and do not necessarily reflect the views of Binance Academy. For more details, please read our disclaimer here. Prices of digital assets can be volatile. The value of your investment may go down as well as up, and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy will not be liable for any of your possible losses. This material should not be construed as financial, legal, or professional advice. For more information, please see our Terms of Use and Risk Disclaimer.
