How to Set Up a Crypto Wallet
When you hold a cryptocurrency or use a DeFi application, you have to use a piece of software to view and spend your crypto assets on a blockchain like Ethereum. A wallet is a piece of software and/or a hardware device that can hold a variety of your tokens. When you set up a crypto wallet, you are likely to create and control multiple public addresses, each corresponding to a separate and unique private key.
- The public key is like your public email address. It's safe to share with others who need to send you money.
- The private key is like your email password that unlocks a virtual safe with your money. It is NEVER safe to share this with anyone.
The private key is typically a string of letters and numbers. As long as you maintain control of your private keys and never share them, you can access your funds anywhere in the world with an internet connection.
Cold vs Hot Wallets
A cold wallet is used for long-term storage of tokens in a more secure place. A cold wallet normally has an "air gap" referring to the fact most hardware wallets when they're not in use, will sit idle without power or any connection to the internet or a computer. Crypto investors who plan to hold tokens for years will often buy a cold storage wallet like a Ledger or GridPlus Lattice1 to keep their tokens safe because it requires multiple passwords, pin numbers, and/or physical confirmations (clicking buttons) to send a transaction (aka send or spend tokens).
A hot wallet is commonly used for more active transacting in and out of a wallet, as well as a place to withdraw or add funds. Imagine a DeFi investor who gets paid in stablecoins. They might use a hot wallet on MetaMask to get paid and then send the stablecoins to an exchange to trade for fiat and withdraw to a bank account.
How to Set Up A Hot Wallet with MetaMask
Let's assume you're planning to hold tokens long-term in a cold storage wallet like a Ledger and you would like to keep some stablecoins ready in a hot wallet like MetaMask to test out DeFi applications. Before we get started, be sure to order a cold storage (aka hardware wallet) like a Ledger or a GridPlus Lattice1. Buy them brand new and never buy used ones. Buying a used hardware wallet could have malicious software to allow hackers to steal your tokens.
From there, here's how to get started setting up wallets for Ethereum!
- While waiting for your hardware wallet to arrive in the mail, download the MetaMask Chrome extension and double-check when you go to the Chrome Web Store that there are not duplicate MetaMask listings. Be aware scammers have listed fake MetaMasks to trick users into downloading a version that exposes your seed phrase so they can take control of your wallets and assets.
- Follow the on-screen directions to install MetaMask. MetaMask will be like a Google accounts UI for your crypto wallets. You can have countless wallets, each with a different private key and public address, all controlled within your MetaMask account. Think of MetaMask as your window into the Ethereum blockchain and each wallet unlocks a different account you use on Ethereum.
- MetaMask will provide you with a unique 12-word seed phrase on the very first launch. WRITE IT DOWN carefully, in chronological order, and keep that paper in a safe place. Do NOT store it digitally in case anyone hacks your phone or computer since they could use that seed phrase to take control of all your wallets. If you do not write it down or lose it, you can log into MetaMask Settings -> Security and Privacy -> Reveal Seed Phrase. DO NOT SHARE this phrase with anyone.
You now have 3 important security details to keep your crypto safe. Your MetaMask password is used to access your multiple wallets stored in MetaMask locally on your computer. It only works on your computer! If you opened MetaMask on another computer you've never used, your password is useless. Each wallet in your MetaMask has a private key which can be revealed in your MetaMask settings and that is a single password to open a single wallet. Lastly, the seed phrase is most powerful. It unlocks access to all your addresses controlled in MetaMask and can be used to restore your MetaMask with generated wallets on any computer. It's like the master key to all your wealth-- NEVER SHARE IT!
How to Set Up a Cold Wallet with Ledger
Pretend your new Ledger has arrived a few days later and you're ready to connect it with MetaMask.
- Follow the instructions for setting up the Ledger onscreen. They will normally instruct you to go to Ledger's website to download software called Ledger Live on your laptop, which is meant to help configure your Ledger device.
- Eventually, you'll be presented a 24-word seed phrase for your Ledger. BE SURE YOU WRITE IT DOWN, KEEP IN A SAFE, AND NEVER SHARE IT!
- Ledger will normally require you to set a four to six-digit pin. Be sure you keep this pin safe or else you won't be able to get into your Ledger or use it.
- Think of your Ledger like MetaMask. It now houses countless Ethereum wallets you can use to invest in tokens or engage in DeFi. Ledger also supports many other blockchains other than Ethereum. Each wallet is unique from the ones created and controlled in MetaMask--having its own private key and public address.
- After Ledger setup is complete, go back to MetaMask and click on the top right colored icon to see an option to Connect Hardware Wallet.
- Follow the prompts onscreen to connect your Ledger and you'll discover you now have multiple wallets in your MetaMask account dropdown menu showing Ledger 1, Ledger 2, Ledger 3 and so on. These are recommended hardware wallet addresses to more safely store crypto or use DeFi. By using Ledger with MetaMask, you gain the security of using a physical hardware wallet that is not connected full time to the internet if hackers were to ever compromise your computer or phone.
MetaMask will continue to serve as a convenience because it is compatible with nearly every DeFi app in Ethereum and other EVM compatible chains. But by connecting our Ledger to MetaMask, we can more securely store our crypto assets with a hardware device using a pin and physical signatures (clicking buttons) to keep our assets safe even if hackers were to ever gain access to your laptop where we control our MetaMask hot wallets.
Tracking Your Wallets in Zapper
Once you've set up your wallets in MetaMask, Ledger, or wherever, you can connect each wallet to Zapper to track all your token and DeFi balances in one place.