The most popular and easy-to-set-up crypto wallet is a hosted wallet. When you buy crypto using an app like Coinbase, your crypto is automatically held in a hosted wallet. It’s called hosted because a third party keeps your crypto for you, similar to how a bank keeps your money in a checking or savings account. You may have heard of people “losing their keys” or “losing their USB wallet” but with a hosted wallet you don’t have to worry about any of that.
The main benefit of keeping your crypto in a hosted wallet is if you forget your password, you won’t lose your crypto. A drawback to a hosted wallet is you can’t access everything crypto has to offer. However, that may change as hosted wallets start to support more features.
How to set up a hosted wallet:
Buy or transfer crypto. Most crypto platforms and exchanges allow you to buy crypto using a bank account or credit card. If you already own crypto, you can also transfer it to your new hosted wallet for safe keeping.
A self-custody wallet, like Coinbase Wallet, puts you in complete control of your crypto. Non-custodial wallets don’t rely on a third party — or a “custodian” — to keep your crypto safe. While they provide the software necessary to store your crypto, the responsibility of remembering and safeguarding your password falls entirely on you. If you lose or forget your password — often referred to as a “private key” or “seed phrase” — there’s no way to access your crypto. And if someone else discovers your private key, they’ll get full access to your assets.
Why have a non-custodial wallet? In addition to being in full control of the security of your crypto, you can also access more advanced crypto activities like yield farming, staking, lending, borrowing, and more. But if all you want to do is buy, sell, send, and receive crypto, a hosted wallet is the easiest solution.
How to set up a non-custodial wallet:
If you’re a Coinbase customer, you have your choice of a hosted wallet or a self-custody wallet. The Coinbase app, where you buy and sell crypto, is a hosted wallet. You can also download the standalone Coinbase Wallet app to take advantage of the benefits of a non-custodial wallet. Some of our customers have both, making it easy to buy crypto with traditional currency as well as participate in advanced crypto activities. Setting up either wallet is free.
A hardware wallet is a physical device, about the size of a thumb drive, that stores the private keys to your crypto offline. Most people don’t use hardware wallets because of their increased complexity and cost, but they do have some benefits — for example, they can keep your crypto secure even if your computer is hacked. However, this advanced security makes them inconvenient to use compared to a software wallet and they can cost upwards of $100 to buy.
How to set up a hardware wallet:
Just as there are many ways to store cash (in a bank account, in a safe, under the bed), there are many ways to store crypto. You can keep things simple with a hosted wallet, have full control of your crypto with a non-custodial wallet, take extra precautions with a hardware wallet, or even have multiple types of wallets — with crypto the choice is yours.