Key Points
Cryptocurrency wallets come in various forms. Custodial wallets are easy to set up but provide less control to users.
Non-custodial wallets give users full control, but as a result, users must be entirely responsible for the security of their keys and assets.
Hardware wallets provide robust security against hacking and vulnerabilities, but they are relatively expensive and can be challenging for beginners to operate.
In this guide, we will introduce the different types of cryptocurrency wallets and demonstrate how to set them up in a few simple steps.
Introduction
Ready to get started with cryptocurrency? You first need a cryptocurrency wallet! Cryptocurrency wallets are tools for sending, receiving, and storing cryptocurrencies and digital assets. They come in various forms, each with its advantages, limitations, and risks. Next, we will introduce different types of wallets so you can choose according to your needs.
Custodial Wallets
Custodial wallets are provided and managed by cryptocurrency exchanges or third parties. Custodial wallets do not offer full control over assets, and withdrawals or payments depend on the provider's service.
Their main advantage is that users do not have to worry about key management and can reset passwords if necessary.
How to set up a custodial cryptocurrency wallet
1. Choose a platform: Select a reputable cryptocurrency exchange and ensure it complies with local regulations.
2. Create an account: Register using your email and a strong password.
3. Identity verification: Most platforms require identity verification (KYC) to comply with regulations.
4. Add funds: Once verified, you can link a payment method to deposit fiat or cryptocurrency into the wallet.
5. Start trading: Once ready, begin trading or investing. For more details on Binance's beginner guide, please refer to Binance Beginner's Guide.
Non-Custodial Wallets
Non-custodial or self-custodial wallets allow users complete control over their keys and funds. Such wallets offer greater freedom and control, but users must also fully bear the responsibility of remembering passwords and mnemonic phrases to ensure the security of their cryptocurrency assets.
In most cases, if hacked or access is lost, passwords cannot be reset or funds recovered. MetaMask and Trust Wallet are popular non-custodial cryptocurrency wallets.
How to set up a non-custodial cryptocurrency wallet
1. Get a wallet application: If using a mobile device, make sure to install a trusted wallet application from official sources like the App Store or Google Play. If using a computer, obtain browser plugins from official websites. The following example uses MetaMask.
2. Create a new wallet: Open the application and select the option to create a new wallet.
3. Set a strong password: This helps reduce the risk of unauthorized access.
4. Backup the mnemonic phrase: Write down the 12 or 24-word mnemonic phrase provided by the application. Ensure it is kept private and secure. If you cannot access the wallet, the mnemonic phrase is important for wallet recovery.
5. Add funds: Typically, funding a non-custodial wallet requires transferring cryptocurrency from exchanges like Binance. However, some wallets also support fiat deposits using credit cards and bank payments.
Your self-custody wallet is ready. You can now connect to DeFi platforms like Uniswap, PancakeSwap, etc. When using such services, be sure to exercise caution. Connecting to malicious DApps or phishing sites can lead to loss of funds.
Before connecting your wallet to Web3 platforms, ensure you are using reputable and legitimate services. You can also split your funds and use a Burner Wallet to reduce risk.
Binance Web3 Wallet
Binance Web3 Wallet is a unique cryptocurrency wallet that combines the advantages of both types of wallets mentioned above. It is a self-custodial wallet, allowing users to avoid storing private keys in a single location, without the hassle of managing mnemonic phrases, and includes 24/7 customer support.
How to set up Binance Web3 Wallet
1. Log into your personal account on the Binance App and go to [Funds].
2. Create a wallet. Click [Create Wallet] and follow the instructions. Binance Web3 Wallet uses Multi-Party Computation (MPC) technology, eliminating the need to manage a mnemonic phrase. This technology generates three 'key shares' stored in three different locations.
3. Backup the wallet and set a recovery password. The key shares are protected by the recovery password. Ensure it is kept private and secure.
4. Activate the wallet: Once the Web3 wallet is activated, you can use it for trading, staking, or interacting with DApps.
Binance Web3 Wallet offers 24/7 customer service, making it an excellent choice for users who need guidance.
Hardware Wallets
Hardware wallets are physical devices that can store private keys offline. Renowned brands like Ledger and Trezor provide strong security measures against malware and hacking attempts. However, hardware wallets are relatively expensive and challenging for beginners to operate, making them more suitable for experienced cryptocurrency users planning to hold substantial funds long-term as an investment.
How to set up a hardware wallet
1. Purchase a hardware wallet: Buy a Ledger Nano or Trezor wallet from their official website or a trusted retailer.
2. Install wallet software: Download the accompanying wallet software (like Ledger Live or Trezor Suite) on your computer or smartphone.
3. Connect the device: Use a USB cable to connect the hardware wallet to your computer.
4. Set a PIN: Choose a high-security PIN to protect the device.
5. Backup the mnemonic phrase: The device will generate a mnemonic phrase for recovery. Write it down and store it in a secure place.
6. Send and receive cryptocurrency: Once the setup is complete, you can transfer cryptocurrency to and from the hardware wallet.
Conclusion
With just a few simple steps, you can securely store, send, and receive cryptocurrency. Remember, to ensure safety in the cryptocurrency world, the key is to protect your private keys and be vigilant against potential security threats.
Further Reading
Disclaimer: The content of this article is for general information and educational purposes only and does not constitute any representations or guarantees. This article does not constitute financial, legal, or other professional advice and is not intended to recommend the purchase of any specific products or services. You should seek advice from appropriate professional advisors. If this article contains third-party submissions, please note that the views expressed belong to the third-party submitters and may not reflect the views of Binance Academy. For details, please click here to read the full disclaimer. The prices of digital assets may fluctuate. The value of your investments may go down or up, and you may not be able to recover your principal investment. You are solely responsible for your investment decisions, and Binance Academy will not be liable for any losses you may incur. This article does not constitute financial, legal, or other professional advice. For more details, please refer to our (Terms of Use) and (Risk Warning).
