Want to get into crypto?
A crypto wallet is the first thing you need! You’ve probably heard about crypto wallets at some point, and maybe you even have one. But you’re not sure how it works or why you need it, or maybe it looks complicated, and you’re not sure how to navigate the wallet.
It’s okay; using a crypto wallet can seem like a lot of work for a beginner. This guide is here to resolve that; the goal is to make your first step into crypto as smooth as possible. By the end of this article, you’ll understand what a crypto wallet is, know how to use it and keep your crypto safe.
What is a Crypto Wallet?
Your crypto wallet is your gateway to crypto and Web3; it is a key to everything you have to do on-chain. It acts like your bank account, a safe for collectibles, and online identity.
Sounds like a lot; how is a crypto wallet able to do that?
To properly understand how cryptocurrencies and blockchains work, you should first know that crypto assets like Bitcoin (BTC) and Ethereum (ETH) are not physically stored anywhere. Instead, they are represented as balances recorded on the blockchain; they exist as entries on the blockchain.
The blockchain doesn’t store or manage your digital assets; it records ownership and transactions. It keeps track of transactions of these entries and the balance of accounts (addresses) on the blockchain. At its core, a blockchain is simply a ledger that records and keeps track of transactions.
For example, if you own 1 ETH, it’s recorded on the Ethereum blockchain at your wallet’s address; the Ethereum blockchain records 1 ETH to your blockchain address. If you own an NFT, the blockchain confirms you as the owner and links your address to its metadata.
How does a crypto wallet tie into all this?
A crypto wallet is software you can use to store your private key, which proves your ownership of an address on the blockchain. As mentioned earlier, a blockchain records ownership of assets, so while your crypto or NFT “exists” in your blockchain account, only you (with your private key) can authorize actions like transferring or selling them.
Understanding Blockchain Account, Private and Public Keys
A blockchain account is a unique identity on the blockchain that is tied to a private key and a public key. Note that a blockchain account is not a physical entity but an entry in the blockchain’s ledger.
A private key is a long, unique string of characters that gives access to a blockchain account and proves ownership of the assets associated with that account/address. This is what is stored in your wallet and allows you to carry out transactions with your crypto wallet. Someone with your private key can control your blockchain account and access its funds.
On the other hand, a public key acts as an identifier; the raw, technical version of your wallet address is generated from the private key. This is what allows others to identify your blockchain account when sending crypto or collectibles to you.
Your blockchain or wallet address is a simplified, shorter version of the public key that you can easily share. It acts like your “crypto account number” and represents your account on the blockchain in a simplified, shareable format.
Below is a simple analogy that I use to explain blockchain account, private key, and wallet address (I borrowed this from one of my favorite blockchain writers, The Blockchain Gandalf)
You can think of your blockchain account as your bank account and your blockchain address as a bank account number. You use your bank account number to look up the balance, and you can send money to your bank account number. Your private key is like your master PIN, which allows you to access your account and authorize transactions.
- Blockchain account – Bank account
- Private Key – Master Pin
- Public key or blockchain/wallet address – bank account number
When you set up a new wallet, you generate a blockchain account that comes with a private key and a public key.
What Can You do with your Crypto Wallet
You need your wallet for everything on-chain since every blockchain transaction requires proof that you own the assets being used. Your crypto wallet is like an all-access pass on the blockchain; it acts as:
- A bank account – stores your digital assets and collectibles
- Your digital identity – proves ownership of your assets and sign transactions.
- A Bank – lets you carry out financial transactions like borrowing/lending.
- Security – keeps your private keys secure, giving you complete control over your assets.
- Access to Web3 activities – acts as a username/password that allows you to participate in activities like quests, earn airdrops, and engage in community engagement.
What You should know before setting up your first wallet
In this section, I cover some information you should have in mind before setting up your first wallet.
Decentralized vs. centralized wallet
Centralized wallets are provided by exchanges or custodial services that manage your private keys for you. With centralized wallets like Binance Wallet, you don’t have to worry about the technicality behind private keys and securing your assets; you only need your PIN and other authenticators to authorize transactions.
This makes centralized wallets an excellent starting point for beginners since they are user-friendly and offer support for account recovery. But, the problem with centralized wallets is that you don’t fully control your crypto since the wallet provider holds the private key. Your funds are at risk if the provider is hacked or goes bankrupt.
Remember, “not your keys, not your crypto.”
On the other hand, decentralized wallets give you complete control over your crypto by letting you manage your private keys. In most cases, you get a seed phrase that encodes your private key. Decentralized wallets like Phantom and Metamask give full ownership of your funds, no middlemen, and are permissionless—interact directly with blockchains and dApps.
| Features | Decentralized Wallets | Centralized Wallets |
| Private Key Control | User has full control of private keys | Wallet provider manages private keys |
| Ownership | Full ownership of assets; no intermedaries | "Not keys, not your crypto" |
| Ease of Use | requires some understanding of proper key management | user-friendly and suitable for beginners |
| Recovery Options | Recoverable only with seed phrase; wallet provider can't help if you lose your keys | offers account recovery |
| Permission | Permissionless; interacts with the blockchain directly | requires provider approval for some actions |
Hot Wallet Vs. Cold Wallet
Hot wallets are always connected to the internet and store private keys online. With a hot wallet, your private key is stored digitally, either on the device where the wallet is installed (e.g., your phone or computer) or on the wallet provider’s servers.
They are designed for accessibility and convenience, making them ideal for daily crypto transactions or interactions with decentralized applications (dApps). Since they are usually easy to set up and use, hot wallets are great for beginners.
However, hot wallets are more vulnerable to online attacks like hacking and phishing attacks. They also require strong security practices to guide your private keys.
On the other hand, Cold wallets like Ledger and Trezor are offline wallets designed for secure, long-term storage of cryptocurrency. They store your private keys offline, usually on a hardware device or a physical medium like a piece of paper.
Since cold wallets are not connected to the internet, they offer a higher level of protection against cyber threats. To use your cold wallet, you have to connect the cold wallet to a computer temporarily (for hardware wallets) or manually input your keys (for paper wallets).
Cold wallets are highly secure against online threats like hacking and are Ideal for long-term investors (HODLers). The only problem is that they might be less convenient for frequent transactions and can get lost or damaged if not stored properly.
| Feature | Hot Wallet | Cold Wallet |
| Connectivity | always connected to the internet | offline; connected to the internet only when in use |
| Private key storage | stored online; either on provider servers or on the device | stored offline in the hardware or on a piece of paper |
| Ease of Use | easier to set up and use; ideal for beginners | less convenient to use and set up |
| Purpose | best for frequent transactions | best for long-term storage |
| Security | more vulnerable to online threat like Phising and hacking | less vulnerable to cyberattacks |
Blockchain Networks and Crypto Wallets
Another thing to note is that you might need different crypto wallets for different blockchain networks. It’s important to understand that not all wallets support every blockchain network. Each blockchain operates independently, with its own set of rules, tokens, and technical requirements. This means that you may need different wallets to interact with different blockchain ecosystems.
For example, Phantom supports Solana, Polygon, Ethereum, and Bitcoin. If you want to trade on the Binance network (BSC), you won’t be able to use the Phantom wallet. You’ll need another wallet, like Trust Wallet, that supports this blockchain network.
How to Choose the Right Crypto Wallet
Your choice of crypto wallet is a combination of several factors, including your experience level, goals, and the blockchain network you want to use. Here are some factors to consider to help you make the right choice:
What do you need the wallet for?
If you want to trade or carry out DeFi transactions like staking, you’ll need a wallet that is designed for accessibility or convenience. Hot wallets like MetaMask or Trust Wallet allow for quick transactions and are excellent for beginners. Centralized wallets might also be a better option since they are easy to use and have a large liquidity volume.
However, cold wallets are a better option for long-term storage because of their security. The best strategy if you have large holding is probably to use a combination of Cold and Hot storage. Keep majority of crypto asset offline and leave the amount you need often in a hot wallet for convenience.
Blockchain Compatibility
You want to check if the wallet supports the blockchain network and tokens you want to use. For example,
- Phantom: Ideal for Solana and Ethereum.
- MetaMask: Best for Ethereum and EVM-compatible chains.
- Keplr wallet: Best for Cosmos
User experience
As a beginner, you want beginner-friendly wallets with simple, intuitive designs. That way, you don’t have to go through a complicated learning phase to get used to the wallet. Centralized wallets like Binance and Bybit might be a great place to start since they allow you to quickly change your fiat currency (like the Dollar or Naira) to crypto.
Security Features
Ensure the wallet has strong security features, such as two-factor authentication (2FA) or biometric login. MPC wallets like Zengo might be a great option if you want strong security without the stress of seed phrases or private keys.
Multi-Chain Support
Look for wallets that support multiple chains so you don’t have to set up several wallets. However, you want to be sure that your wallet supports the blockchain ecosystem and tokens you’re interested in.
Best Crypto Wallets to Use as a Beginner
1. Phantom
Supports: Solana, Ethereum, and Bitcoin.
- Best For Solana-based NFTs and DeFi interactions.
Features:
• Simple interface for beginners.
• Built-in staking for Solana.
• Browser extension and mobile app.
2. MetaMask
Supports Ethereum and EVM-compatible chains (Polygon, Arbitrum, etc.).
- Best For Ethereum DeFi and tokens.
Features:
• Widely supported across decentralized apps.
• Customizable gas fees.
• Available as a browser extension and mobile app.
3. Backpack
Supports: Solana.
- Best For Accessing the xNFT ecosystem and dApps.
Features:
• Focused on Solana’s expanding network.
• Allows you to manage and view xNFTs directly in the wallet.
4. Trust Wallet
Supports Over 65 blockchains, including Ethereum, Binance Smart Chain, and Solana.
- Best For Multi-chain users and beginners.
Features:
• Easy-to-use interface.
• Built-in DEX and staking.
• Available on mobile devices.
5. Ledger or Trezor
Supports: Multiple blockchains, including Ethereum, Bitcoin, Solana, and more.
- Best For Long-term storage and enhanced security.
Features:
• Hardware wallet for offline storage.
• Integrates with software wallets like Ledger Live for ease of use.
• Strong protection against cyber threats.
How to Keep Your Crypto Wallet Safe
The security of your wallet depends on which type of wallet you use. For centralized wallets, you should focus on creating a strong password and adding 2FA layers like email authentication and 2FA apps. Decentralized wallets are a little more complicated because you’re in charge of securing your wallet and assets. So, if you lose your key (Mnemonic phrase) or get scammed, the wallet provider can’t help recover your assets.
Here are some tips to protect your wallet and safeguard your assets.
Start with a Strong Password
You need a strong password for both centralized and decentralized wallets. For decentralized wallets, this password acts as the lock to your wallet on your device, so you need a strong wallet. You want to avoid simple guessable passwords like your birthday or name.
Instead, go for a strong password that is several characters long and combines uppercase and lowercase letters, numbers, and special characters. This way, you can reduce the risk of unauthorized access to your wallets and attacks.
Enable Two-Factor Authentication (2FA):
2FAs add a layer of security to protect your wallet from unauthorized access by requiring an additional verification form. So, when you set up a 2FA, you’ll need a code from another device or app to complete transactions. This code can be sent to your email, phone number, or app, depending on the type of authentication you set up. This makes it more difficult to hack into your wallet.
Backup Your Mnemonic Phrase (Seed Phrase) in a Safe Place
Your Mnemonic Phrase is the 12 random words you get when opening your wallet. These random words encode your wallet and are a crucial part of your wallet’s security. It is what you need to recover your wallet if you forget your password or lose access to your device.
The best practice is to store your Mnemonic Phrase in a safe offline location like a paper or journal. You must also guard your phrase diligently, as anyone can access your wallet with your seed phrase and move your asset.
Keep Your Software Updated
Ensure you are using the latest version of the wallet software. Developers regularly release updates to fix security vulnerabilities and improve the overall stability and functionality of the wallet. Keep your wallet software updated to benefit from the latest security features and enhancements.
Use a Hardware Wallet for Large Holdings
If you hold significant amounts of crypto, use a hardware wallet like Ledger or Trezor for offline storage.
Conclusion
Note that you need a crypto wallet for everything you do on-chain, so taking the time to understand them is the first step to your crypto journey. It might be overwhelming or confusing to get a hang of a crypto wallet as a beginner. It may sound quite technical, but not to worry, it gets easier with time.
This guide will help you understand why you need a crypto wallet and a little bit of how they work.
Start small, prioritize security, and choose a wallet that aligns with your needs and goals. Remember, the crypto space thrives on self-custody and personal responsibility—“not your keys, not your crypto.”