Crypto wallets are like online bank accounts for your cryptocurrencies but with a few key differences. While cryptocurrency wallets are not backed by government deposit schemes, they only hold cryptocurrencies.
However, crypto wallets give you total control over your funds at all times. Non-custodial is the term given to cryptocurrency wallets, like MetaMask, Rainbow Wallet or Trust Wallet, that are separate from the accounts you may have on cryptocurrency exchanges like Allin1Bitcoins.
In this article, we highlight why you need a cryptocurrency wallet for your crypto portfolio.
Storage
When you hold money on a crypto exchange, like Binance, Kraken or Coinbase, those companies are in control of your cryptocurrencies. But when you move your crypto to a non-custodial wallet, you hold the keys to your wallet.
These wallets are the key to the decentralized web and serve as the primary way to interface with decentralized finance protocols, like lending protocols, decentralized exchanges or non-fungible token (NFT) marketplaces.
Crypto wallets are so foundational to decentralized finance that some people on Twitter or Discord refer to themselves solely by their cryptocurrency wallet addresses – anyone who introduces themselves with a username that starts with “Ox” is referring to their Ethereum address.
Why you need a crypto wallet and how to choose one
Unless you’re running a huge company holding so much cryptocurrency that you need the watchful eye of a specialized custodian – a third party that looks after your crypto for you – you’re looking for a non-custodial wallet.
These are, as mentioned, wallets to which only you hold the keys. You may have read the adage, “not your keys, not your crypto.” This phrase is commonly used and stresses the importance of looking after your own crypto. With non-custodial crypto wallets, your assets are backed by something called a private key. This functions as a password to your crypto wallet. You must shroud this in secrecy and never tell anyone about it. Should you lose your private key, you’ll be able to use something called a secret phrase, or seed phrase. These are strings of 12 or 24 words that function as a backup password. It’s important to hide these in a trusted place, ideally by holding parts of the phrase in different places. No company or individual should ever ask for your seed phrase – those that do are almost always scams looking to steal your funds. Different blockchains require different wallets.
MetaMask, one of the most popular wallets, supports just a handful of networks, including Ethereum, Binance, Smart Chan, Polygon (MATIC) and Avalanche, (the common denominator is that these chains all support the Ethereum Virtual Machine (EVM)).
MetaMask does not support Solana or Bitcoin, however, there are a number of other options
including Trust Wallet that do support Bitcoin. NFT support requires special attention.
Most wallets natively support fungible tokens, like Ethereum, bitcoin, and so on. But non-fungible tokens. Marketplaces like Opensea, although not wallets, will automatically display your Ethereum NFTs if you connect your wallets.
On the other hand, Rainbow Wallet displays NFTs within its app. When choosing a wallet, a good rule of thumb is to check which wallets are recommended by a coin’s community.
For example, Solana’s community champions, SolFlare and Phantom, while Monero’s sings the praises of Cake Wallet. Bitcoincash.Org recommends the Bitcoin.Com wallet, among others.
Most of these wallets function as either desktop wallets, browser extensions or mobile wallets. Those that function as browser extensions are particularly useful when interfacing with decentralized finance (DeFi) protocols.
The websites of Uniswap, Aave, Compound and more each have a “connect wallet” button. This functionality replaces the “log in to Google”/ “enter your email and password” of Web 2.
How to Set up a Crypto wallet
Setting up a crypto wallet only takes a couple of minutes. To, get started with MetaMask, either
download the app on your phone or install the browser extension. Then, MetaMask will ask you to set a password to the app, name your wallet, then write down your secret phrase land then get you to check that you have done so). And that’s it! You can then use your wallet to, send or receive funds.
Conclusion
While there are hundreds of crypto wallets in the cryptosphere, you need to identify a wallet that not only guarantees the safety of your crypto holdings but also easy to use.
Additionally, you should check whether the wallet has a recovery feature to enable you recover your holdings should you forget your private keys.