As Bitcoin continues to witness adoption, bad actors are flooring the space, looking to steal from investors. As such, secure wallets have become a necessity for every BTC user.
If you are planning to purchase Bitcoin, the first step is to pick a trusted wallet for storing your digital asset. This article explains the various types of Bitcoin wallets to choose from and demonstrates how to set them up. Read on to learn more.
Understanding Bitcoin Wallets
Simply put, Bitcoin wallets are digital wallets that help users store, receive, and send their BTC. They all come with private keys that allow users to approve transactions. If these keys get misplaced, a Bitcoin user risks losing access to their funds forever.
Types of Bitcoin Wallets
As mentioned, various types of Bitcoin wallets are available in the market to cater to a diverse user base. They include:
Hot Wallets: While most of these wallets are ideal for users who wish to have total control over their BTC, they are connected to the internet throughout, making them vulnerable to hacking and malware. Hot wallets can be mobile apps, browser extensions, or desktop apps.
It is worth highlighting that some hot wallets are custodial, meaning third-party entities like crypto exchanges hold their private keys, giving them authority to control how users access their funds.
Cold Wallets: Users looking to store their BTC offline are advised to buy cold wallets. These wallets ensure user funds are safeguarded from online threats such as hacking. Cold wallets come in two forms: hardware devices and paper wallets.
How Do You Set Up a Bitcoin Wallet?
Here is how to set up a Bitcoin hot wallet:
Select a Hot Wallet
While there are hundreds of hot wallets in the market, not all are reliable. Therefore, we recommend doing thorough research when selecting a wallet. After finding an ideal one, download its browser extension or mobile/desktop app on your computer or phone.
Create an Account
Once you’ve installed the wallet, press the ‘Create New Wallet’ button and register an account by providing a strong password. Remember to note down the displayed seed phrase (private keys) and keep the piece of paper somewhere safe. You will use the phrase to regain access to your wallet in case you forget your password.
Deposit Bitcoin
After confirming your password, the Bitcoin wallet will be ready for use. You can begin by depositing BTC. While some wallets allow you to buy BTC within the app, others only facilitate deposits from external sources. To fund your wallet with BTC, click ‘Deposit’ and copy the address. Next, paste that address on the source of funds and initiate the transaction. Monitor the progress of your transaction on Btcscan.org by pasting the transaction ID on the search box.
How Do You Set Up a Bitcoin Cold Wallet?
Select a Cold Wallet
When choosing a cold wallet, consider factors like the purchasing cost, ease of use, and available features.
Connect the Wallet to Your Computer
After buying a cold wallet, connect it to your computer and follow the instructions for installing the necessary software. The connection can be done via Bluetooth or USB cable. Upon installation, a seed phrase will be generated. Keep it safe, and do not share it with anyone.
Transfer Bitcoin
After setting up your cold wallet, hit the ‘BTC Receive Address’ button and copy the address that shows. Now, paste it where you want to transfer Bitcoin from and complete the transaction. Once your BTC reflects on your cold wallet, disconnect the storage device from the computer to secure your funds from online threats.
How Do You Keep Your Bitcoin Wallet Safe?
Here are a few tips to keep your wallet safe:
Create unique passwords: Avoid using guessable information such as your name or birthday as your password. Instead, we recommend mixing letters, special characters, and numbers to create a strong password.
Enable 2FA: Alongside your password, adopting two-factor authentification as an extra layer of protection is advisable. This makes it difficult for unauthorized people to access your Bitcoin wallet.
