A crypto wallet is a digital wallet that allows you to store, send, and receive cryptocurrencies on a blockchain network. There are different types of crypto wallets, each with their own unique features and security level. Before selecting a wallet, it is important to research the different types of wallets available. Choosing the right wallet can mean the difference between safekeeping your assets or losing them.
First type of crypto wallet is a software wallet, also known as a hot wallet. Software wallets can be browser or mobile app-based and can be divided into two categories: custodial wallets and self-custodial wallets.
Custodial wallets are controlled by a third-party who holds your cryptographic private keys and securely stores your funds. These wallets are typically regulated entities, similar to traditional banks, and users log in with a username and password to access their account. Examples of custodial wallets include Coinbase. However, it is important to note that custodial wallets cannot be used to trade on USDFI and other decentralized finance (DeFi) applications.
A self-custodial wallet is a type of cryptocurrency wallet in which the user is solely responsible for the management and security of their private keys. These wallets typically allow the user to directly interact with blockchain networks and decentralized applications, such as USDFI. In order to set up a self-custodial wallet, the user must download the wallet application to their phone or computer and create an account. It is important to note that when setting up a self-custodial wallet, the user will be given a recovery phrase, which should be written down and kept in a secure location. This is because the recovery phrase is used to access the wallet if the user forgets their private keys or login information. Additionally, some self-custodial wallets may allow the user to connect a fiat funding source, allowing them to convert traditional currency to cryptocurrency. Examples of self-custodial wallets include Metamask, Rainbow Wallet, and Coinbase Wallet. It is important for users to research and carefully consider the options available before choosing a self-custodial wallet.
A hardware wallet, or a cold wallet, is a physical device that stores your cryptographic private keys offline and provides an added layer of security for your cryptocurrency funds. It is a type of self-custodial wallet, which means that you have full control over your private keys and are solely responsible for securing them.
When considering a hardware wallet, it is important to research the different options available and choose one that fits your needs. Some popular hardware wallets include Ledger or Trezor. Each device may have different features and compatibility with different cryptocurrencies, so it is important to do your own research to find the best option for you.
To get started with a hardware wallet, you will need to purchase one directly from the manufacturer. This ensures that you are receiving a brand new, unopened device. Once you have your hardware wallet, you can follow the set-up instructions provided by the manufacturer. This may include creating a new wallet or restoring an existing one, and setting up a passcode or PIN to access the device.
One of the most important steps in setting up a hardware wallet is to save your recovery phrase. This is a set of words that you will need to write down and store in a secure location. If you ever lose access to your hardware wallet, you can use your recovery phrase to restore your funds to a new device. It is important to remember that anyone who has access to your recovery phrase can access your funds, so it is essential to keep it safe and not share it with anyone.
After setting up your hardware wallet, you can connect it to USDFI and other DeFi platforms to store, send and receive cryptocurrency.