Digital Wallets: Quick Look (2024)

Learning Objectives

After completing this unit, you’ll be able to:

• Explain what a digital wallet is.
• Determine which type of wallet is best for you.
• Set up and connect your digital wallet.

What Is a Wallet?

A wallet is an app (or plugin) that enables users to access/retrieve, send, and receive digital assets. The most common assets people hold in their wallets are cryptocurrency, such as Bitcoin or Ethereum, or NFTs (non-fungible tokens). There are two main types of wallets: custodial wallets and noncustodial wallets.

Custodial Wallets

A custodial wallet is the most popular and easiest-to-set-up wallet. Someone other than the true owner (you) creates and secures this type of wallet. They store what’s in your wallet, similarly to how a bank keeps your money in a checking or savings account.

A benefit to using a custodial wallet is that if you forget your password, you won’t lose what’s in your wallet. With private custodial keys, the platform has control over the private key, which eliminates the risk of losing access to your account if you lose your private key.

Want a wallet that's easy to set up and manage? In this case, we recommend using a custodial wallet when your primary goals are to buy, sell, and exchange digital assets.

Set Up a Custodial Wallet

1. Download a wallet app on your phone or access one on your computer browser.
2. Sign up and create an account. This process is similar to setting up an account on any other platform.
3. Optional: Add your credit card or bank account information if you like. (More on this later.)
4. Transfer digital assets to your wallet. (More on this later, too.)

Non-Custodial Wallets

A non-custodial wallet is a type of wallet that the true owner (you) creates, owns, and manages. This means that the responsibility of remembering and safeguarding the password falls completely on you.

A benefit to using this type of wallet is that you can do more than just buy and sell cryptocurrency. Additionally, you’re the only person who has access to your wallet. Unlike a custodial wallet, where the managing company can access your wallet, you’re the only one with the private key. A downside is that if you forget or lose your means of logging in, there is no way to access your wallet.

Set Up a Non-Custodial Wallet

1. Download a wallet app (or access one on your computer browser).
2. Create an account.
3. Transfer digital assets to your wallet—keep reading to find out how.

Add Assets to Your Wallet

There are two main ways to add assets, in the form of cryptocurrencies and NFTs, to your wallet.

• Buy them in your wallet.
• Transfer them from another wallet/brokerage.

Most wallets (custodial and non-custodial) have the functionality for you to connect to your bank account or debit card to purchase cryptocurrency within the platform. However, since there are typically fees associated with that, many people buy cryptocurrencies from external platforms, such as brokerages, and then send the assets to their wallet.

Here’s how to buy cryptocurrency on an external platform and transfer it to your wallet.

1. Log in to a brokerage and create an account. Setting this up is similar to setting up a custodial wallet or an account on any other website.
2. Connect your debit or credit card, and deposit your local currency such as USD or EUR.
3. Click the cryptocurrency you’re looking to purchase, and clickBuy. From there you can set how much of your local currency you would like to transfer to cryptocurrency.
4. When you’re ready to transfer cryptocurrency to your wallet, find your private key. This is a unique string of numbers and letters that should be easy to find in the settings area of your wallet.

Connect Your Wallet

While having the ability to buy and sell cryptocurrency is great, there’s a world of possibilities open to you once you connect your wallet. Connecting your wallet means that you authenticate your wallet to enable you to do transactions on dApps (decentralized apps). Those transactions include buying and selling NFTs and entering metaverses.

Here’s how to connect your wallet on a computer or mobile device.

1. Open a dApp you want to connect to.
2. Click Connect.
3. You get a popup with different options for connecting your wallet. If you see the name of your wallet on the list, click your wallet name. If your wallet is not listed, click Wallet Connect and select the wallet you have.
4. If you’re connecting your wallet using a computer, use your mobile device to scan the QR code that appears, then click Connect. If you’re connecting your wallet using a mobile device, click Connectin the popup.

The dApp now has permission to interact with your wallet.

Keep Your Wallet Safe

Now you know what a digital wallet is, why you need one, and how to set up and connect one. Remember that, as with any online account, it’s important to keep your wallet safe and secure. Disconnect it from the dApp when you’re finished using it. Keep your password or private key stored safely. And set up multifactor authentication if available.

Resources

• Trailhead: NFTs: Quick Look
• Article: How to create your own crypto wallet