What type of crypto wallet do I need?
This is one of the first decisions for anyone looking to get into crypto, and it’s a big one. There are many types of wallets, but don’t worry, most work in a similar way: wallets are applications that allow you to access your crypto on a blockchain.
There are both software wallets and hardware wallets. Hardware wallets are generally recommended for safekeeping larger amounts, so for the sake of this introductory guide we’ll focus on software wallets.
Like most things in crypto, software wallets come in a few flavors.
There are web-based wallets added to your web browser and mobile wallets downloaded onto your phone or tablet. Most software wallets operate along the same lines regardless of where they live.
Every wallet has an account address (also known as a wallet address or a public key) that exists on the blockchain. This is the string of numbers and letters you can share with others so they can send you crypto from their wallets. Think of it as your account on the blockchain.
While most software wallets are similar, it’s important to note that some wallets may only hold specific cryptocurrencies and work on certain blockchains. If you’re interested in a particular chain or currency, look up which wallets are compatible.
Most wallets you encounter will include security measures to keep your assets safe, such as a Recovery Phrase, password, or secret key (often one wallet will use multiple security options). We highly recommend familiarizing yourself with these safety features before setting up your wallet.
Selecting a crypto wallet is a balancing act of convenience versus security. Some wallets entrust security to a third party but offer some convenient features. Others give total control to the owner, but the owner must keep their Recovery Phrase safe or risk losing access to their wallet. These categories are respectively known as custodial and self-custody:
Self-Custody (Non-Custodial): The wallet is entirely in your control, and you can do more with it, like connect to dapps. While you get absolute control over your wallet, as you do with a physical wallet where you keep cash and cards, if you lose your Recovery Phrase, there is no other way back in––your crypto is locked away forever. Self-custody wallets are the most secure, but they put responsibility entirely on the owner to keep them safe.
Custodial: More like a traditional bank, a third party holds your wallet and manages its security. Since you’re ultimately entrusting your wallet’s access and security to a company, there are ways to get back in if you lose your password.
Traditionally, people consider custodial wallets easier and more convenient to use. But recent advances in self-custodial wallets have prioritized usability and convenience. That’s why today, wallets like Valora can offer the ease and convenience of custodial wallets while continuing to offer the control and security of self-custodial ones.
So here’s what to ask yourself when choosing a wallet:
Is this wallet compatible with the blockchain and/or cryptocurrency I’m interested in?
Where will I use this wallet? On my phone or tablet, my web browser, desktop?
Do I want a custodial or self-custodial wallet? How much control and responsibility do I want to have over my assets?
However you answer these questions, there’s a wallet out there that’s best for you.
Next Lesson: How do I keep my crypto wallet safe?
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