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How to set up a cryptocurrency wallet: step-by-step guide

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Why proper wallet setup is important

For anyone who finds themselves diving into the world of cryptocurrencies, a series of frequently asked questions often arises: what is a cryptocurrency wallet, what types of wallets there are, and how to set up a crypto wallet. The itez team has already addressed the first two questions, so now it’s time to tackle the third.

In this step-by-step guide, we’ll walk you through how to choose, set up, and secure your cryptocurrency wallet. Let's get started!

Types of cryptocurrency wallets

Let's begin with the basics. A cryptocurrency wallet is a type of cryptocurrency storage. It allows users to conduct transactions—receive, store, and send cryptocurrency.

Interestingly, the coins themselves are not stored in the wallet; they are kept in the blockchain. So, what’s the purpose of wallets? Well, wallets store the cryptographic keys, also known as private keys, for the user. These keys are the only way to access your cryptocurrency. 

Therefore, a cryptocurrency wallet can be likened to the door of a safe, behind which lies the blockchain and the user's digital coins.

Wallets come in various types: custodial and non-custodial, centralised and decentralised, hot and cold. We’ll focus on the last two categories, as they are the fundamental ones.

Hot wallets

A hot wallet is a special programme, browser extension, or application that requires a constant internet connection to function. 

Some of the most popular wallets in this category include Trust Wallet, MetaMask, and wallets from well-known centralised cryptocurrency exchanges like Binance or Coinbase.

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Coinbase Wallet interface. Source: Coinbase

Due to their “online” nature, hot wallets are widely regarded as the most convenient and accessible option. They allow users to perform transactions quickly and in any quantity, with a particular emphasis on mobility, speed, and ease of use.

However, there are also downsides. For instance, the constant internet connection makes hot wallets much more vulnerable to various threats such as viruses, malware, hacking attacks, and other disruptions.

For more useful and interesting information about hot wallets, be sure to check out our dedicated review.

Cold wallets

A cold wallet is the complete opposite of its hot counterpart. Typically, these wallets are small physical devices. Their unique feature is that they almost never require an internet connection—owners only connect them to a WiFi network when they need to perform a transaction. At all other times, a cold wallet stores digital assets entirely offline.

Popular wallets of this type include Ledger, Trezor, and the “veteran” of the cold wallet segment, KeepKey.

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Trezor website

These cryptocurrency wallets are often chosen by experienced investors and traders to store large sums of money. Cold wallets excel at this task, offering maximum protection against online threats and exceptional physical reliability thanks to their sturdy construction and screen.

However, they do have some drawbacks. For instance, these models are often quite expensive. Additionally, they can be complex to set up and manage, which can deter less experienced market participants. Plus, executing quick and frequent cryptocurrency transactions with such a device is not feasible.

Need more details? Check out our other article for comprehensive information on cold wallets.

Choosing the right wallet

So, which model should you choose? Unfortunately (or fortunately), there isn’t a one-size-fits-all answer to this question. Everything depends on each user's individual goals and needs. While we can't give you specific instructions, we can certainly guide your thinking in the right direction. To choose the right cryptocurrency wallet, you should ask yourself a few key questions:

  1. What is my budget for this purchase? (In this regard, it is also important to consider transaction fees, as some wallet models charge fees for transfers).
  2. How often do I plan to conduct transactions?
  3. How large are the amounts I plan to store in the wallet?
  4. How important is a high level of security to me?
  5. Will I be able to navigate a complex wallet setup and interface?

For your convenience, we’ve summarised the main information about hot and cold wallets in a table:

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If you can't decide on just one type, don't feel restricted. Experienced cryptocurrency market players often take the best of both worlds and combine their capabilities: for instance, they store the bulk of their savings in a cold wallet, while using a hot wallet for daily market activities.

Step-by-step wallet setup

Let's move from theory to practice and understand how to set up a cryptocurrency wallet in real life. We'll demonstrate this with one of the most popular hot wallets, MetaMask.

Downloading and installing the app

First, you need to download and install the wallet application. MetaMask is available for the most popular web browsers, such as Google Chrome, Firefox, Brave, and Edge. The app can also be installed on iOS and Android devices.

We've chosen the browser extension for Google Chrome. Here’s what you’ll see first:

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Next, click on the "Add to Chrome" button in the top right corner of the screen. Once the extension is downloaded to your computer or laptop, you'll see this window:

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Here, you need to agree to the programme's Terms of Use by ticking the checkbox. Then, click the blue button labelled "Create a new wallet."

Creating an account

Now the extension prompts us to create and register a new account. The first step is to create a strong password.

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You'll see a window like this. The programme will ask you to create and confirm your password. The requirements are straightforward—it should be strong and unique.

If your password meets the system’s requirements, simply agree to the security terms, and move on.

Backing up the seed phrase

However, security requirements don't end there. The next step is the seed phrase. The wallet generates it automatically, and your task is to store it securely.

It is best to store the passphrase in a format that is not connected to the internet and, therefore, cannot fall into the hands of fraudsters. For example, you can write the seed phrase on a piece of paper and store it in a safe place that only you know. Better yet, make several copies of the phrase and keep them in different places. 

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MetaMask will first offer you a short video explaining what a seed phrase is and why it’s important. In short, the seed phrase is your primary method for wallet recovery. It will help you regain access to your wallet if you forget or lose your password.

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Once you've written down (or at least photographed) the given combination of twelve words, you can proceed.

In the next setup stage, MetaMask will ask you to confirm that you’ve saved your seed phrase. The system will prompt you to enter the missing words in the correct order.

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After successfully completing this task, you can proudly say that you’ve created your first cryptocurrency wallet. MetaMask and the itez team congratulate you!

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Fun Fact! Many wallets offer advanced settings for enhanced cryptocurrency protection. These additional settings include:

  • PIN Code: a combination of numbers known only to you, often used in mobile app versions for quick access to the wallet.
  • Two-Factor Authentication (2FA): an extra layer of security that, in addition to a password or PIN code, requires another form of verification. This could be a code sent via SMS or email, or the use of biometric data—such as a fingerprint.

Receiving and sending cryptocurrency

Now you can confidently carry out crypto and on-chain transactions. Once the wallet creation and basic setup process is complete, you’ll see this window:

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The long string of numbers and letters under the “Account 1” label at the top is your wallet address. This is your main tool: you’ll use it to buy and send cryptocurrency to your new account.

The blue circular buttons below provide quick access to the wallet's main functions. To purchase digital assets, click the first button labelled “Buy and Sell.” The wallet will then ask you to select your current location and preferred payment method: debit or credit card, PayPal, Bank Transfer, or Instant ACH..

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Additionally, your new wallet can serve as a place for NFT storage. To switch to NFT mode, simply select the corresponding tab.

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Additional security tips

To ensure your funds are as secure as possible, special attention must be given to secure wallet setup methods. Here, we'll share some key techniques to enhance the level of cryptocurrency protection.

Strong passwords. A password is the first and foremost aspect to focus on when setting up a new cryptocurrency wallet. For anyone who has ever used a computer or a phone, the concept of a password needs no explanation. It is a combination of letters, numbers, and other symbols that should be known only to the device owner.

Your password must be complex and unique—using the same combination for multiple devices is ill-advised. Additionally, avoid storing your password on an internet-connected device. The best practice is to write it down on a piece of paper and keep it in a secure location known only to you.

Avoiding phishing attacks. Special caution is needed due to hackers, scammers, and various other malicious actors. The greatest threat comes from phishing attacks—a type of theft where criminals deceive users into divulging confidential information to steal their cryptocurrencies.

Phishing attacks can take various forms:

  • Phishing websites. These are nearly identical copies of legitimate websites related to cryptocurrency (such as exchange platforms, wallets, and trading sites).
  • Phishing links. These malicious links are often sent via email or private messages. They lead to external websites designed to steal data and money from the victim. Thus, clicking on suspicious links or entering personal information on unreliable websites can be very dangerous.

The key techniques for security in this context are constant vigilance and critical thinking.

Software updates. Developers are also committed to the security of their clients' funds, which is why they regularly release updates. Ignoring these updates or installing them late is not the best practice. These updates often fix previous bugs, errors, vulnerabilities, and more. Regularly installing updates can help protect against numerous threats and enhance your daily experience with the wallet.

Safely storing the seed phrase. Another crucial element is the seed phrase. This term refers to a unique sequence of 12 to 24 words in English that is automatically generated when you create a wallet. Your task is to store the seed phrase as securely as your password. It is one of the most convenient and accessible methods for wallet backup today. It will help you regain access to your cryptocurrency wallet if you forget or lose your password.

These simple techniques will help ensure the best security for your wallet and keep your funds safe.

Done! You've set up your cryptocurrency wallet

Hooray! Together with you, the itez team has walked the complete path from choosing a cryptocurrency wallet to setting it up and ensuring its security.

We hope this step-by-step guide has been helpful and provided you with new knowledge—both theoretical and practical. Now, enjoy working with your new crypto wallet, and don't forget to revisit our itez blog from time to time!

🤔 So, what crypto wallet would you choose to start with? Share your views in our socials! 

💌 Telegram, Twitter, Instagram, Facebook 

Here are three other cool articles: 

Understanding bull and bear markets in investing

What is Binance Smart Chain? A comprehensive guide to BSC

Understanding protocols: the backbone of digital communication

This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.

Maria Kachura
Maria Kachura

Visit her on Facebook or hit her up via Email.

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