Setting Up Your First Crypto Wallet

Source | BSC News

The only way to take complete control of your financial life is by cutting out the middleman who has unlimited access to your money. In my last article I introduced DeFi and some of its interesting use cases. To interact with DeFi apps and protocols, you’ll first need your own crypto wallet. In this article I’ll introduce what a crypto wallet is, how it works, and show you how to setup your very own.

In terms of what wallet to use, there are tons of options available. For this article we’re going to focus on MetaMask, one of the most popular Ethereum based wallets. I’ve chosen this wallet because it’s one of the easiest ones to use when interacting with the world of DeFi (and as mentioned, the majority of DeFi today happens on Ethereum). Here’s a list of some other wallets to consider.

What is a crypto wallet?

Crypto wallets come in many different forms. You’ve got hardware wallets such as the Ledger Nano S, and you’ve got mobile wallets such as MetaMask. There are of course many more, but these are two very popular options that you’ll hear a lot about in the crypto sphere.

Unlike a physical wallet where you store your physical cash, a crypto wallet doesn’t actually store your cryptocurrency holdings. Instead, your cryptocurrency lives on the blockchain. A crypto wallet is merely a way to access and use the crypto that belongs to you. You can only access your crypto by using your unique private key. Your private key is a combination of words that’s unique to you and it proves that you own your crypto. This is the main purpose of your crypto wallet. If you lose your private key, you lose access to your crypto and there’s no way of getting it back so it’s very important that you keep it safe.

When selecting a crypto wallet, there are 3 main types of wallet available.

• Paper wallet
  Your private keys exist only on a piece of paper and have no presence in the digital sphere. This may seem like the safest way to store your crypto, however, it’s not generally recommended to store any significant holdings on paper due to how vulnerable this method is to losing your keys.
• Hardware wallet
  Your keys are stored in a hard drive device such as a USB and kept offline. You can access your funds through an online portal only when you connect your drive. This is a good mix of security and convenience and I personally use this method for my funds.
• Online wallet
  Your keys are stored in an app or other software. For smaller holdings, this can be a very convenient way to access your crypto and I personally use this for smaller transactions when I use web3 applications. For significant crypto holdings this poses a bit more of security risk and can make you more vulnerable so be aware of this option if you start to amass substantial amounts of crypto.

Each option has its own advantages and tradeoffs, mostly based on security, accessibility, and ease of use. When you first get started, I think it’s important to start with the simplest approach and ease your way into how it all works.

So how do you get started setting up a wallet?

Introducing MetaMask

MetaMask is a crypto wallet app that supports ETH and ERC20 tokens. It functions as a web browser extension and as a smartphone app. ERC20 tokens are cryptocurrencies built on the Ethereum blockchain. MetaMask is used by more than 21 million people and allows you to both store your crypto and interact with a world of decentralized applications. Due to its widespread adoption, security, and simplicity, I recommend starting here.

MetaMask easily allows you to connect your wallet address to web3 apps and interact with them at the push of a button. For those of you concerned about security, don’t worry, connecting your wallet to an application doesn’t mean that you grant a third party access to your funds. Connecting your wallet is simply the web3 way of agreeing to the Terms and Conditions for that particular application, as you would when signing up to a platform like Facebook.

It’s worth noting that MetaMask is a non-custodial wallet. This means that you, and you alone, control access to your funds. Although this is a fundamental part of crypto’s value proposition, it’s important to highlight what it means and some of the pros and cons to having a non-custodial wallet. When you put money in a bank account, the bank is the custodian of that money. This means that they have control of your money and can, in theory, do what they please with it. However, this also means that if you’re the victim of fraud or you lose access to your bank account, the bank can help you regain access to your funds. That’s a pretty big deal for most people and brings a heightened sense of financial security. This will not be the case with a non-custodial crypto wallet. If you’re the victim of financial fraud or lose access to your wallet, you’re on your own. There is no way to retrieve your funds. As with anything in life, there are pros and cons to every approach and it’s worth understanding these in more depth before you decide how you want to store your funds. However, I believe part of the excitement of web3 and crypto is the fact that you can take full custody of your own funds and I think it’s well worth exploring this option when you get started.

How to get started

The steps to set up your first crypto wallet are actually quite simple.

1. Go to metamask.io and click “Download”.
2. This will take you to the Chrome Web Store. Click “Add Extension” and then “Get Started”.
3. On the next page, click “Create Wallet”.
4. Agree to the Terms and Conditions and then select a password. Similar to your private keys, make sure to keep the password safe and ideally stored somewhere offline.
5. Next, MetaMask will guide you through some foundational principles for keeping your crypto safe and best practices in managing your crypto wallet. I highly recommend you watch these before moving on to the next step.
6. After watching the videos, you’ll be prompted to generate your secret backup phrase (these are your private keys). Make sure to keep these safe and NEVER SHARE this phrase with anyone. Write it down in the safest place you can, but never store it digitally. It’s important that you write these words down in the exact order that they appear on the screen.
7. MetaMask will prompt you to repeat the phrase to confirm that you have it stored in the correct way.
8. You’re done! Your MetaMask wallet is setup and you’re on your way to join the world of crypto and decentralized applications!

What’s next?

With your crypto wallet set up, you can interact with decentralized applications across the web3 landscape. However, to fully experience web3 you’ll need to own some crypto. I’m not a financial advisor so I won’t be recommending that you put any substantial amount of money in. But I would highly recommend buying a small sum of crypto and transferring it to your wallet. This is your first step towards financial self-sovereignty and allows you to interact with your wallet and with web3 applications which is a really useful exercise.

To begin purchasing crypto, I’d recommend setting up an account with one of the biggest crypto exchanges around. It doesn’t really matter which one you go for so I’m going to recommend either Coinbase or Gemini as these are well established and regulated companies. You’ll need to create an account on the exchange and link a bank account or credit card in order to start buying crypto. You’ll also need to have a valid form of identification handy so the exchange can confirm your nationality. There are plenty of guides out there guiding you through how to get set up so I won’t go into depth on this here.

Once you’re set up with either Coinbase or Gemini, select the cryptocurrency you want to purchase and input how much you want to buy. Since we’ve just looked at setting up MetaMask I recommend you purchase some ETH. The purchase will be instant and you’ll see your specified amount minus transaction fees appear in your account. It’s usually denominated in your local currency such as USD or GBP rather than in the underlying cryptocurrency you just purchased.

Buying and transferring funds to your wallet

Finally, you’ll want to transfer this crypto to your MetaMask wallet. This is where the process can start to feel a little bit clunky. At least it is the first time around when you’re unfamiliar with it. Start by clicking on your MetaMask extension and click on your account at the top. It might be called something like “Account 1”. This will copy your wallet address to your clipboard. Go ahead and store this in a notepad on your computer or somewhere else where it’s easily accessible. Unlike your private keys, storing your crypto address digitally isn’t a security risk as this only gives people the ability to send you crypto and nothing more.

Next step is to go to your exchange account and select “Send”. This will prompt a little window where you input how much of your crypto you want to send, what the transaction fee is (this is the mining fee to validate your transaction) and what address you want to send it to. Paste your MetaMask address in here and click send. It’s very important that you include the correct wallet address. Otherwise you could be sending funds to somebody else and that money will be lost, similar to if you send regular cash to the wrong bank account number. It can take a few minutes to see your funds appear in your wallet depending on network congestion. Keep refreshing your MetaMask wallet until you see the funds appear.

Final notes

Now it’s time to pat yourself on the back! You’ve taken your first step towards joining a decentralized financial system. You are now able to interact with a rich system of applications on the Ethereum network that allow you to act as your own bank and enter into financial contracts with people from all over the world. There’s a massive amount of things you can do with your crypto and I discuss some of these use cases here. In future articles, we’ll explore more specific applications in depth and I’ll guide you through how to use these with ease. For now though, be proud of yourself for taking a risk and moving towards a more decentralized and self-sovereign future.