Curriculum

Crypto Wallets

Wallets

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Wallet Security

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Rabby.io

0/5

Exodus Wallet

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MetaMask.io

0/11

Phantom SOL

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Proton Wallet

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Hardware Wallets

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Trezor Hardware Wallets

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Tangem Card Cold Wallets

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Video lesson

Custodial and Non Custodial Wallets

Digital Asset Control: Custodial vs. Non-Custodial Wallets

A Deep Dive into Wallet Ownership: Custodial vs. Non-Custodial

In the rapidly evolving world of cryptocurrencies, understanding the tools at your disposal is crucial. One of these foundational tools is the blockchain wallet, and it is here that the distinction between custodial and non-custodial wallets becomes paramount. These different types of wallets are not just technical details; they represent fundamentally different philosophies of ownership and control over digital assets. This lesson will explore the implications of these two wallet types within the context of the burgeoning financial technology landscape—a world increasingly enriched by decentralization, transparency, and autonomy. Particularly in the context of the Crypto Is FIRE (CFIRE) training program, grasping this difference is essential for anyone eager to navigate this exciting arena.

Understanding Custodial vs. Non-Custodial Options

To appreciate the differences between custodial and non-custodial wallets, one must first understand the fundamental nature of blockchain networks, like Ethereum. These decentralized ecosystems operate like public utilities, enabling peer-to-peer interactions without the need for intermediaries.

Central to this discussion is the concept of private keys. With custodial wallets, custodians—such as exchanges—retain possession of your private keys. When you register and log into their system, you access your funds indirectly; they essentially act as gatekeepers to your assets, retaining control over your financial destiny. By contrast, non-custodial wallets, exemplified by tools like MetaMask, empower users to manage their wallets independently. When using a non-custodial wallet, users generate and store their private keys locally, meaning they directly interact with the blockchain without intermediaries.

One striking statement made in the lesson is the importance of the secret recovery phrase: “The fact that you can own and control digital assets as a totally free agent without any intermediary may grant or withhold your access is pretty incredible.” The crux of the argument is clear: with great power comes great responsibility.

Critical Analysis

The arguments presented in our examined lesson about custodial and non-custodial wallets reveal several strengths that underscore their relevance.

Empowerment Through Ownership: The lesson emphasizes how non-custodial wallets empower users by allowing them to control their private keys. This decentralization is transformative; it aligns with the ethos of blockchain—promoting individual ownership and financial freedom. For example, in decentralized finance (DeFi), users are increasingly opting for non-custodial wallets to avoid the risks associated with third-party exchanges. This trend is vital as it fosters greater financial autonomy in the crypto ecosystem.
Security Through Self-Custody: One of the core benefits of non-custodial wallets highlighted is security. Since users store their own private keys, they are not susceptible to hacks that typically target exchanges holding multiple clients’ keys. A notable case was the infamous Mt. Gox hack that led to the loss of approximately 850,000 BTC due to centralized control. The critical lesson here is that self-custody can mitigate risks associated with centralization.
Direct Network Participation: The notion of interacting directly with blockchain networks through non-custodial wallets allows for a broader engagement in decentralized applications (dApps). This direct access is essential for those looking to leverage opportunities in DeFi and the NFT space both as participants and creators, emphasizing the lesson’s claim about the freedom afforded by this wallet structure.

However, it’s essential to recognize some limitations and counterarguments related to these perspectives:

The Burden of Responsibility: While empowerment is a significant advantage of non-custodial wallets, it comes with the burden of safeguarding private keys. Users must maintain diligence and implement security measures to avoid loss due to mismanagement. Without a custodian, there is no safety net, compounding the consequences of losing access to one’s wallet.
User Complexity: Non-custodial wallets can be intimidating to newcomers who may struggle with the technical aspects of cryptography and private key management. This complexity can deter potential users, limiting the broader adoption of cryptocurrencies as compared to the perceived accessibility of custodial wallets, where recovery protocols are often more straightforward.
Market Considerations: The volatility of the cryptocurrency market raises concerns about over-reliance on decentralization. During price fluctuations or network congestion, users of non-custodial wallets may face challenges regarding timely accesses. Custodial wallets can sometimes provide an advantage when immediate liquidity is needed, due to their integrated trading systems.

Overall, while the arguments presented are compelling and rooted in a philosophy of empowerment and security, various complexities and nuances warrant a more balanced examination of the custodial versus non-custodial landscape.

Connections to Cryptocurrency and Blockchain

Examining the concepts inherent to custodial and non-custodial wallets also reveals critical ties to broader themes within the cryptocurrency and blockchain worlds.

The rise of DeFi is a prime example of how non-custodial wallets are shaping the future. These platforms allow users to lend, borrow, and trade assets without reliance on traditional financial intermediaries. The decentralized nature of these protocols often necessitates the use of non-custodial wallets for seamless interaction, enabling participants to have direct control over their funds.

For instance, protocols like Uniswap operate in a completely decentralized manner, allowing users to trade tokens directly from their wallets, highlighting how the non-custodial model facilitates innovation and participation. However, it also opens users up to the risks associated with smart contracts, where improper coding can lead to significant vulnerabilities, underscoring the continuous evolution of the ecosystem.

On the contrary, many cryptocurrencies, such as stablecoins like USDC, are often held in custodial wallets provided by exchanges, catering to users seeking stability and ease of access amid market volatility. This illustrates that while non-custodial wallets provide more freedom, custodial wallets maintain their relevance, especially for those who prioritize convenience over the complexities of self-custody.

As blockchain technology matures, we can expect to see innovative approaches combining the best of both worlds, potentially leading to hybrid solutions that enhance user experience while retaining self-custody benefits.

Broader Implications and Future Outlook

The ongoing evolution of custodial and non-custodial wallets will have far-reaching implications for the financial landscape. As decentralized finance continues to challenge traditional financial systems, the demand for non-custodial wallets is likely to grow, particularly among tech-savvy individuals seeking alternative investment paths.

This shift toward self-sovereignty in asset ownership could catalyze changes in regulatory frameworks as policymakers grapple with how to approach decentralized finance. Regulations may need to adapt to the realities of wallet ownership, user identity, and interoperability. Additionally, as more users gain awareness of their options, a cultural shift toward financial literacy and independence may lay the groundwork for a more democratized financial system.

Technological advancements, especially innovations in zero-knowledge proofs and other privacy-preserving tools, may address security concerns associated with non-custodial wallets. This could streamline the intricate balance between user autonomy and usability, making self-custody more appealing to broader audiences.

Personal Commentary and Insights

Reflecting on the duality of custodial and non-custodial wallets, it becomes evident to me that the ongoing narrative in the crypto world mirrors a larger societal conversation about trust, ownership, and responsibility. While custodial wallets may provide a safety net for the inexperienced user, they inherently reintroduce a layer of traditional financial barriers that many cryptocurrencies aim to disrupt.

The empowerment from self-custody cannot be overstated; it not only symbolizes financial independence but also challenges individuals to cultivate a deeper understanding of digital assets. My experiences navigating both types of wallets reinforce the notion that the ultimate choice benefits from thorough research and self-awareness.

In essence, embracing non-custodial wallets is not merely about gaining control; it is about taking ownership of one’s financial journey in an ever-shifting landscape.

Conclusion

In conclusion, understanding the distinctions between custodial and non-custodial wallets is essential for anyone involved in the cryptocurrency space. The increase in autonomy and control through non-custodial wallets lays the groundwork for innovation and broader adoption of blockchain technologies. As we progress, this lesson highlights that with freedom to manage digital assets comes responsibility and the continuing evolution of our financial systems.

Embracing these changes points to a future where individuals can leverage the full potential of cryptocurrencies, driving societal shifts toward decentralization and increased financial literacy.

Quotes:

“Possession of the private key is everything.”
“The fact that you can own and control digital assets as a totally free agent without any intermediary may grant or withhold your access is pretty incredible.”
“The empowerment from self-custody cannot be overstated; it not only symbolizes financial independence but also challenges individuals to cultivate a deeper understanding of digital assets.”

Continue to Next Lesson

As we delve deeper into the Crypto Is FIRE (CFIRE) training program, the subsequent lesson will further explore the dynamics of decentralized finance, focusing on how these principles of ownership apply to new investment modalities and economic structures. Stay tuned!

Understanding Wallets: Custodial vs. Non-Custodial

In the evolving world of cryptocurrency, distinguishing between different types of wallets is crucial for anyone venturing into this digital domain. The lesson today revolves around the fundamental concepts of custodial and non-custodial wallets. Understanding these differences is paramount not just in traditional finance, but also in navigating the rapidly advancing landscape of cryptocurrencies and blockchain technology. With the right insights, newcomers can confidently decide how to manage their digital assets while avoiding common pitfalls.

Core Concepts

Blockchain
- Definition: A decentralized digital ledger that records transactions across multiple computers.
- Crypto Application: Forms the backbone of cryptocurrencies, enabling secure peer-to-peer transactions.
- Importance: Essential for understanding how digital assets like Ether or NFTs operate beyond traditional banking systems.
Custodial Wallet
- Definition: A wallet where a third-party service, such as an exchange, controls the private keys on behalf of the user.
- Crypto Application: Examples include exchanges like Coinbase or Binance.
- Importance: Users trade control of their assets for convenience; understanding this trade-off is critical for managing risks.
Non-Custodial Wallet
- Definition: A wallet where the user retains complete control of their private keys and financial assets.
- Crypto Application: Metamask is a popular example.
- Importance: Provides greater independence and security, encouraging users to take personal responsibility for their funds.
Private Key
- Definition: A cryptographic key that allows the holder to access and manage their cryptocurrency from a wallet.
- Crypto Application: The security of users’ cryptocurrencies hinges on the safekeeping of private keys.
- Importance: A thorough understanding reduces the risk of loss or theft of assets.
Secret Recovery Phrase
- Definition: A phrase used to recover one’s wallet and private keys if access is lost.
- Crypto Application: Typically issued when setting up a non-custodial wallet, like Metamask.
- Importance: Understanding its significance is crucial for ensuring the longevity of access to one’s digital assets.
Intermediary
- Definition: A third party that facilitates transactions or access between two parties.
- Crypto Application: In custodial wallets, the exchange acts as an intermediary; in non-custodial wallets, the user interacts directly with the blockchain.
- Importance: Recognizing the role of intermediaries can influence decisions about which wallet type to use.
Digital Assets
- Definition: Any digital representation of value such as cryptocurrencies, tokens, or NFTs.
- Crypto Application: They exemplify what users store in their wallets.
- Importance: Awareness of digital assets aids in grasping the purpose and potential of blockchain technology.

Understanding these core concepts lays a solid foundation for newcomers venturing into the crypto space. Each concept interconnects, revealing the nuanced relationship between traditional finance’s established practices and the innovative approaches found in cryptocurrency.

Key Sections

Understanding Blockchain: The Foundation of Wallets

Key Points:
- Blockchain serves a dual purpose: securing digital assets and verifying transactions.
- It allows for decentralized ownership, contrasting conventional finance models.
- The network is secured by cryptography, making manipulation nearly impossible.
Detailed Explanation: Blockchain technology operates like a public utility. It enables users to manage assets such as Ether or NFTs without a central authority, highlighting its fundamental shift from conventional banking structures. The intrinsic cryptographic measures ensure the system’s integrity and transparency.
Parallels to Traditional Finance: In banking, transactions are verified through centralized institutions. Conversely, blockchain relies on collective verification by network participants, promoting empowerment and trustlessness.
Importance in the Crypto Ecosystem: Without blockchain, custodial and non-custodial wallets wouldn’t exist. Thus, the understanding of this technology is paramount while exploring wallet functionality.

Custodial Wallets: The Pros and Cons

Key Points:
- An exchange holds the private keys.
- Convenience often outweighs the security; regulatory compliance inherent.
- Users must trust the third party with their assets.
Detailed Explanation: Custodial wallets simplify the user experience. Users can access their digital currencies through familiar interfaces without needing to manage complicated blockchain keys. However, this convenience comes at the cost of surrendering control. If the exchange encounters security breaches or regulatory issues, users could face restrictions regarding their assets.
Crypto Connection: Well-known custodial wallets such as Coinbase or Binance come with robust security measures, yet they pose risks of hacks that can lead to users losing funds.
Importance in the Overall Ecosystem: While custodial wallets are suitable for newcomers seeking simplicity, a healthy skepticism and understanding of their limitations is essential as one progresses in the crypto journey.

Non-Custodial Wallets: Control and Responsibility

Key Points:
- Users control their private keys directly.
- No intermediary is required for transactions.
- Greater autonomy comes with increased responsibility.
Detailed Explanation: Utilizing a non-custodial wallet like Metamask allows complete ownership over one’s digital assets. When you create a non-custodial wallet, the security and accessibility of your crypto rely solely on your ability to safely store your private keys and recovery phrases.
Crypto Connection: Metamask is a prominent example. It seamlessly integrates with decentralized applications (dApps), emphasizing user control over their funds.
Importance in the Crypto Ecosystem: Emphasizing user sovereignty, non-custodial wallets foster a culture of self-regulation and responsibility, which is vital in a landscape often plagued by centralized control.

The Role of Private Keys and Secret Recovery Phrases

Key Points:
- Private keys are critical for accessing wallets.
- Secret recovery phrases serve as the ultimate safety net.
- Loss of these credentials can lead to irreversible loss of assets.
Detailed Explanation: The private key serves as the exclusive passport to one’s digital assets. Without it, access becomes impossible. A secret recovery phrase is your backup plan, allowing you to recover your wallet in emergencies. As such, they are critical assets in themselves, demanding utmost care in their storage.
Crypto Connection: In the crypto realm, users face unique challenges concerning private key management. Solutions range from hardware wallets to security key methodologies to ensure maximum protection.
Importance in Context: This topic emphasizes both autonomy and the risks associated with digital asset management. Instructions for safeguarding these keys are essential knowledge every crypto enthusiast must grasp.

The Crypto Perspective

Custodial vs. Non-Custodial: Understanding the fundamental differences between custodial and non-custodial wallets is crucial for evaluating security versus convenience in asset management. In the crypto world, custodial wallets eliminate the need for technical know-how but come with trade-offs regarding control and security.

Real-World Applications

Historically, the financial system has relied heavily on intermediaries for asset management. The emergence of blockchain technology and wallets offers parallel mechanisms of the same concept but enhances user control and reduces reliance on entities that safeguard economic interests. As cryptocurrencies evolve and mature, users must stay informed about how asset management ultimately influences market dynamics.

Challenges and Solutions

Challenges:
- Users often overlook the importance of private key management.
- Distrust toward non-custodial wallets can deter users from exploring their full potential.
Crypto Solutions:
- Wallet educational tools and resources help users understand the importance of self-custody.
- Security protocols and practices mitigate risks associated with fraud or loss.
Common Misconceptions:
- Some newcomers may believe non-custodial wallets are inherently unsafe due to the lack of intermediary support. However, with proper knowledge, non-custodial wallets can provide superior security over time.

Key Takeaways

Understand the blockchain: A foundational knowledge of blockchain equips you for further exploration into the crypto landscape by recognizing its potential.
Know your wallet type: Awareness of custodial versus non-custodial wallets ensures informed decisions in asset management.
Control over private keys: Empower yourself by knowing that holding your private keys comes with risks and responsibility.
Value of recovery phrases: Secure your secret recovery phrase to ensure access to your assets in the long run.
Recognize custodial benefits and risks: Comfort comes with custodial wallets, but vigilance against potential risks is critical.
Embrace the autonomous tools of crypto: Leverage non-custodial wallets for greater control over your assets.
Remain informed: Continuous learning is essential as the crypto landscape evolves.

Discussion Questions and Scenarios

How does the concept of trust differ between custodial and non-custodial wallets in cryptocurrencies?
Compare the risks associated with custodial wallets to traditional banking services.
Imagine losing your secret recovery phrase: what steps might you take to recover your funds?
What are the pros and cons of using non-custodial wallets for individuals new to cryptocurrency?
How can the understanding of blockchain influence one’s choice between custodial and non-custodial wallets?
Discuss how regulatory changes could impact custodial wallet providers compared to non-custodial solutions.
Create a scenario where the advantages of non-custodial wallets significantly outweigh those of custodial wallets.

Glossary

Blockchain: A decentralized digital ledger for recording transactions.
Custodial Wallet: A wallet managed by a third party that holds the user’s private keys.
Non-Custodial Wallet: A wallet where the user retains full control of their private keys.
Private Key: A cryptographic key that allows access to and management of a cryptocurrency wallet.
Secret Recovery Phrase: A series of words used to recover access to a non-custodial wallet.
Intermediary: A third party facilitating transactions between two parties.
Digital Assets: Digital representations of value managed through blockchain technology.

As you continue your journey, understanding the intricacies of wallets is just the beginning. Honing your knowledge on these aspects will provide a solid foundation as you progress through the Crypto Is FIRE (CFIRE) training plan and into deeper waters of the cryptocurrency world.

Continue to Next Lesson

Stay tuned for our next lesson, where we’ll explore more about decentralized finance and how it reshapes traditional financial systems. Get ready for insights to elevate your crypto understanding!

Read Video Transcript

MetaMask | The Difference Between Custodial and Non Custodial Wallets

https://www.youtube.com/watch?v=izvgAmbWPyE

Transcript:

To understand the difference between custodial and non-custodial wallets, you really have to understand what blockchain networks like Ethereum are. Think of Ethereum as something like a public utility, an open, peer-to-peer system that can create digital assets like Ether or NFTs and keep track of them and which accounts own them, so that you can freely join it and interact with it, and it’s all secured by cryptography.

Your account is a foundational part of the system, and is related to a special cryptographic private key, which is like a master password that you use to identify yourself to the network. Anyone possessing the private key for a given account is considered by the system to control that account.

Possession of the private key is everything. With custodial wallets, someone else, a crypto exchange for example, will hold those private keys on your behalf. You register with them, log into their system, and through them, access your funds. You don’t access the network directly. It’s always through them, and they store your user information to verify your login and whatnot.

Non-custodial wallets, like Metamaskask are completely different. When you installed Metamask, you didn’t register anything. No email address, no SMS verification, no username. Metamask just let you set a password for your local device and then gave you a secret recovery phrase, which is a cryptographic object that generates your private keys.

Metamask then stored your private keys on your physical device and sent you on your way. MetaMask doesn’t store any of this on a central server. This enables you to participate on Ethereum or other networks directly, without approval and without an intermediary.

The big difference is that you, and only you, hold and control your private keys. This means you could never be denied access to your assets and can participate fully on the network. And it should be said that’s why it’s vitally important that you safely store your secret recovery phrase, because nobody else has it, just you. The fact that you can own and control digital assets as a totally free agent without any intermediary who may grant or withhold your access is pretty incredible when you think about it. It’s as though you can physically possess something in the digitalworld. So that’s it. Install MetaMask and live that non-custodial life.

How to Start with Crypto [Wallets, Exchanges & Security]

https://www.youtube.com/watch?v=BG6e5T-9IVw

Transcript:

So you finally decided to invest in crypto. The good news is that most people are saying this crypto bull run will be the biggest bull run that we’ve seen, so you’re not too late. The bad news is that you have a lot of catching up to do before you can take advantage of this generational wealth making opportunity.

Because the most important thing in crypto isn’t actually making money, it’s learning how to keep it. Because when the bull runs start, basically everything goes up in value so it’s actually not that hard to make money. The hardest part, and where most people fail, is keeping that money. According to the FBI, losses from crypto scams grew 45% in 2023, totaling more than $5.

6 billion in stolen crypto and it’s only getting much, much worse. So we’re going to split this guide into three sections. First I’ll walk you through the exact crypto exchange I use and how to use it. Second I’ll show you the best crypto wallet and how to use it to manage your crypto. And third, I’ll share the strategy I’ve been using for the last four years to keep my crypto secure.

This isn’t a guide on how to find the next big thing in crypto or how to time the market, but it will give you the fundamentals needed to keep your crypto secure so that you can actually make money when the bull run is all said and done. First, let’s start with crypto exchanges. There are hundreds of crypto exchanges to choose from and I don’t trust a single one of them, but we still have to use crypto exchanges to buy and sell crypto.

That said, the only thing you should be using a crypto exchange for is exchanging your crypto. Crypto exchanges were never intended to be a place to store your crypto. And here’s why. If you store your crypto on an exchange, you don’t actually control that crypto. The exchange does. That’s because exchanges store users’ crypto in their own self-custodial wallets.

And a self-custodial wallet means that the owner, in this case, the exchange, controls and manages the private keys. And the private key is essential for accessing your crypto account on the blockchain where your crypto is stored. But we’ll dive deeper into that in section two. So what’s wrong with exchanges storing your crypto? Well, there’s plenty of stories proving just how dangerous it is to keep your crypto on a crypto exchange.

For example, there are thousands of Reddit posts from users of popular crypto exchanges like Coinbase who have had their accounts locked indefinitely or their funds frozen for months at a time so they can’t access their crypto. And in some cases, exchanges will experience technical difficulties conveniently when crypto prices surge, leaving investors incapable of selling their crypto for a profit, or at least as good of a profit.

And I’ve experienced this myself. Oftentimes when I bought crypto on Coinbase, which is one of the most popular crypto exchanges, I couldn’t do anything with that crypto even though I had just bought it. I couldn’t sell it, I couldn’t sell it, I couldn’t transfer it, all I could do was stare at it and this kind of negligence happens every single day on pretty much every single crypto exchange.

But as investors we still rely on crypto exchanges to initially buy crypto and then later sell our crypto for a profit when we’re ready to transfer it to our bank account. And I’ve used several crypto exchanges over the years, all the popular ones Coinbase, KuCoin, Uphold, and even Robinhood if you want to count that, and they all have their pros and cons and I don’t trust a single one of them to store my crypto and neither should you.

Fortunately, we can still use crypto exchanges to buy and sell crypto. My go-to crypto exchange is Kraken, mainly because I haven’t had any issues while using them, but again I only use Kraken to initially buy crypto, then once I’ve bought it, I only use Kraken to initially buy crypto. Then once I bought it, I transferred to my own self custodial wallet where I have full control over my funds and where it is going to be safe.

So if there’s one thing you take away from this first section, it’s to never store your crypto on a crypto exchange. They were never intended to be a place to store your crypto. They’re used to convert fiat to crypto and crypto to other cryptos. But before we get into what is a secure storage option for your crypto and how to use it effectively, I want to show you how to buy crypto on an exchange like Kraken and then later I’ll show you how to transfer that crypto to your own self-custodial wallet. Most crypto exchanges are the same in terms of buying and

selling crypto so if you want to use another crypto exchange that’s not Kraken, it should be pretty much the same process. If you haven’t already, you’ll need to create an account on your preferred crypto exchange. If you’re in the US, exchanges require KYC or Know Your Customer, so you’ll need to provide personal details including your legal name, address, social security, and proof of identity, along with a selfie. Once your account is set up, you’ll need to connect to payment methods such as

your bank card or bank account. I generally connect my bank account so I can buy and sell using ACH, which is often quicker than using a bank card. After you’ve connected your preferred payment method, tap the button that says buy crypto at the top of the page. From here you can either scroll through the different options or just search for the exact crypto you want to buy.

Once you’ve found the crypto you want to buy, enter the amount in your native currency that you want to convert into that crypto and tap review. You’ll notice there is a small fee, which is just the cost of using the exchange’s service. You’ll also notice you have to check this box stating that you won’t be able to withdraw your crypto for 72 hours after you purchase it for security reasons.

This temporary freeze is generally only for your first transaction. After that, there shouldn’t be a waiting period for future transactions. Once you confirm the transaction, you can view all your crypto by selecting the portfolio tab, but you won’t be using this tab much because later we are going to transfer our crypto out of the exchange to our own self custodial wallet where it’ll stay secure until we’re ready to cash out.

Which brings us to section number two, crypto wallets. The funny thing about crypto wallets is they don’t actually store any crypto. Rather, they store the keys that are used to access your crypto, which is stored on the blockchain. This key is called a C-phrase. A C-phrase is a series of 12 to 24 random words that generates your wallet’s private keys.

The C-phrase acts as a master key for your entire crypto wallet, creating multiple private keys for different cryptocurrency accounts within it. Anyone who knows your C-phrase can for your entire crypto wallet, creating multiple private keys for different cryptocurrency accounts within it. Anyone who knows your seed phrase can access your entire crypto wallet and everything in it, so protecting your seed is the most important aspect of crypto security, but we’ll touch more on that in section three.

Fortunately, you don’t have to handle your seed phrase often. The only times you’ll need it are when you initially set up your crypto wallet, as your wallet generates a seed phrase and you have to record it, or if you ever need to recover your crypto wallet. The cool thing about seed phrases is they aren’t tied to one specific brand of crypto wallet so if I create a seed phrase using my Ledger wallet and I need to recover my crypto account on my Tangium wallet, I can do that.

Likewise your crypto isn’t tied to any specific wallet, it’s actually tied to your seed phrase so if you lose your wallet or it’s damaged, you can always recover your wallet using your seed phrase. Now let’s talk about the different types of crypto wallets. There are two main types of crypto wallets, hot wallets and cold wallets, also known as software wallets and hardware wallets.

A hot wallet is a digital wallet that store your keys in the software on your device, like your phone or your computer. Hot wallets are free to use, extremely convenient, and easy to set up. Popular examples of hot wallets include MetaMask, Phantom, and Trust Wallet. But hot wallets come with one big risk.

While they do give you full control of your crypto, they’re not the safest option for storing your keys. And since they’re connected to the internet, they’re easy targets for hackers and malware. And if a hacker gets a hold of your key, you can kiss your crypto goodbye. That’s not to say hot wallets are completely useless.

Their convenience make them a really good option for interacting with decentralized websites like decentralized crypto exchanges and NFT marketplaces. But we’ll break this down more in the next section. But if you wanna keep your crypto secure, you really need to get a cold wallet. A cold wallet is a physical device that keeps your private key stored offline on the device itself.

As a result, it’s immune to hacks and malware, making it ideal for long-term crypto storage. It’s as close as you’ll get to a vault for your crypto. The main issue I have with cold wallets is there are way too many options to choose from, and especially as a beginner, this can be extremely overwhelming.

Not only that, but I found cold wallet companies often sacrifice user-friendliness for advanced security features, making them less suitable for someone who’s new to crypto. And this poor user experience can actually make your wallet a liability since you’re more likely to make a mistake that could cost you your crypto.

Fortunately, not all cold wallets are like this though. There are plenty of options on the market that are extremely user-friendly and secure, even if you’ve never used a cold wallet before. But before you get a cold wallet, you should really consider what makes a good cold wallet. So what does make a good cold wallet? Well, there’s really two things.

You want one that’s going to secure your crypto, so security, and you want one that’s going to be enjoyable and easy to use, so user-friendliness, and that’s really it. But there are other factors to consider as well. One of the biggest mistakes that people make is not checking to see that the wallet supports the cryptocurrencies they plan to hold.

Now, this seems like it would be common sense, but if there’s one thing I’ve learned, there’s no such thing as common sense in crypto. Fortunately, this is easy to verify. Just go to the wallet’s website, find the coin support tab, and search for any crypto that you plan to hold in your wallet. Something else worth considering is compatibility.

Do you wanna use your cold wallet with your phone, your computer, maybe both? This is really just personal preference and it’s really easy to check. You can just type it in on Google or go to the wallet’s website and they should tell you what it’s compatible with. So while there are literally dozens of cold wallets to choose from, in fact, I own most of them, there’s really one that stands out to me as the most user-friendly wallet and the best one for beginners.

And I’ve been using it for well over a year to manage and secure my crypto, and that is Tangim. Ask anyone who’s ever used a Tangim wallet and they’ll tell you the same thing. There’s really nothing else that compares. It only takes three minutes to set up and all you need to set it up is your wallet and your phone with NFC capabilities, which is basically all phones on the market today.

The Tangim card store your private key offline on a secure chip inside the card card away from potential hackers and malware. This is the same type of secure chip used in bank cards and electronic passports. It’s also the main reason Tangim has sold nearly 2 million wallets since 2017 and not a single one has been hacked. But my favorite thing about Tangim is the app.

You use the Tangim app on your phone to manage your crypto and do things like buy, sell, swap, and even stake your crypto directly from your cold wallet. In most cases, you won’t even need to use a crypto exchange like Kraken if you use a wallet like Tangim because you can literally do everything directly in the app all while keeping your crypto secure.

The cards are also really discreet. They look like any other card you’d keep in your wallet, but they’re also really durable. They’re IP68 rated, so they’re waterproof and resistant to extreme temperatures. They’re even immune to EMPs, electrostatic discharge, and x-ray machines, making them the perfect travel wallet for anyone who’s on the go but still wants a secure way to manage their crypto.

But even if you don’t travel, it’s still the perfect at-home wallet because of how easy it is to use. The main downside of the Tangem is that it is a mobile-only wallet, so if you wanna use it with your computer, you can can’t. However it is compatible with both iOS and Android mobile devices plus it offers ample coin and blockchain support supporting more than 65 blockchain networks and literally thousands of cryptocurrencies.

If you want to see how easy it is to set up and use the Tangim wallet I’ll leave my full tutorial down in the description for you. I’ll also drop a link to this wallet along with a 10% off discount code that you can use to save some money. And that’s another great thing about Tangim is it’s not going to break the bank. It’s $50 for a pack of two cards or $60 for a pack of three cards if you use that discount code at checkout.

If you prefer to use a cold wallet with your computer, another extremely user-friendly option that’s good for beginners is the Ledger Flex. This also allows you to buy, sell, swap, and stake crypto directly in the Ledger Live app, which you can use both on your phone and your computer. I’ll leave my full review of the Ledger Flex down in the description if that’s something you’re interested in as well.

But for this guide, I want to show you how to transfer crypto from Kraken to the Tangent wallet. And to be clear, the process is the same for transferring crypto, regardless of which wallet or exchange you’re using, and it’s actually really easy, but it is crucial that you do it correctly, otherwise you could lose your crypto. When it comes to sending and receiving crypto, you really only need one thing, and that’s the wallet’s receiving address, also known as its public address.

You can think of this address like an email address, except instead of sending and receiving messages, you’re sending and receiving crypto. So if we want to send crypto from an exchange like Kraken to our Tangent wallet, the first thing we need to do is get the receiving address from our Tangent wallet.

But different blockchain networks have unique receiving addresses in your wallet, so it’s important that you copy the right receiving address for the right blockchain network that you’re going to be sending your crypto on. For example, the Bitcoin address in your wallet is different from your Ethereum address.

So if you’re sending Bitcoin from an exchange to your wallet, make sure to copy the Bitcoin receiving address. So since I have some Solana in my Kraken account, I want to transfer that to my Tangent wallet. So the first thing we need to do is copy the Solana receiving address from my Tangent wallet. So I just open up the Tangent wallet on my phone, tap Solana, tap receive, and here is my receiving address. Now I need to copy and paste this address into the send spot in my Kraken account. If I were using the Kraken mobile app, I just open up the app on my phone

and paste it that way. But since I’m on my computer, I need to transfer the receiving address from my phone. I can do this by tapping share and choose a method to send it to my computer. Now that I have my receiving address I’m going to open my Kraken account, head over to the portfolio tab and select the crypto that I want to send to my cold wallet.

Since I’m sending Solana to my cold wallet I’ll select Solana and then depending on the exchange you use you’ll either see a send or withdraw option but it’s essentially the same thing. I’ll tap withdraw and select add Solana address. I’ll tap withdraw and select add Solana address. I’ll name the address Tangent Wallet.

That way I can remember it for future transactions. And then this is where you paste your wallet’s receiving address. Kraken is unique in that it requires you to confirm any new withdrawal addresses via email. So you’ll need to open up your email and click the confirmation link to add your wallet address to Kraken. Most other exchanges don’t have this step. it’s usually as simple as pasting your receiving address and tapping send.

Once your cold wallet is added you can choose how much crypto you want to send. You can either enter the amount manually or use the preset percentages to send a portion of your crypto. In most cases, I recommend sending all of it to your wallet for safekeeping, so you can just choose 100% to send it all, then tap withdraw sole to review the transaction details.

The withdrawal amount is what you’ll receive in your receiving wallet, the fee is what you pay to the exchange for their service, and it’s deducted from the crypto you’re sending, finally the total is the overall amount of crypto you’re withdrawing, including the fee. If everything looks good, tap withdraw and your crypto will be on its way to your wallet.

It can take anywhere from a few seconds to over an hour to receive your crypto when sending it from an exchange. For example, sending Solana usually takes just a minute or two while Bitcoin might take around 45 minutes. This variation depends on how each blockchain network operates. You can check the status of your transfer in your crypto exchange by going to the transaction tab, clicking on your current transaction and checking the status of your transfer in your crypto exchange by going to the transaction tab, clicking on your current transaction, and checking the status section. If it says pending,

it’s still on its way. Once it says success, your crypto should be safely in your wallet. Now if I open up my Tangent wallet, I can see that my Solana has arrived and it’s secured. But what if you want to send your crypto back to the exchange to cash out? Well, the process is essentially the same, just kind of in reverse.

Just get the receiving address from your exchange account by tapping the deposit button, select the crypto you want to receive, and then copy that receiving address. Then you can paste it into the send section of your cold wallet and send it back to the exchange. And it doesn’t have to be the same exchange either.

As long as the exchange supports whatever crypto you’re trying to send to it, you can send your crypto from your wallet to any exchange. Once your crypto arrives in the exchange, you simply go back to your portfolio tab, select the crypto you wanna sell and tap sell. This converts your crypto into fiat, your local currency.

And then after that, just tap withdraw to send the funds to your connected bank account. But with cold walls like Tangium, you might not even have to send your crypto back to an exchange to cash it out because you can do it directly in a Tangium app, at least with certain cryptocurrencies. For example, if I wanna sell the Solana in my Tangium wallet then I can do it directly in the app by tapping Solana, scroll over to the sell button, select that, and then enter the amount that I want to sell and hit continue.

You can also buy, swap and stake crypto directly from your Tangent wallet, all without needing a separate app like Kraken, while still maintaining the security of your wallet. This is another reason why Tangent is my go-to wallet. That said, Tangent like other cold wallets, partners with third party exchanges to offer these services directly in their wallet.

So you still have to create an account with these third party exchanges if you wanna use these services, but it’s a lot more streamlined versus having to transfer your crypto between your wallet and various exchanges. And that’s how you buy and sell crypto using crypto exchanges and store your crypto securely in a cold wallet.

Now for section three, I want to dive into the strategy that I’ve been using for the past four years to manage my crypto and keep it secure from hackers, scammers, and pretty much everyone who’s trying to get their grubby hands on my crypto. Using this exact strategy, I’m happy to say I’ve never lost my crypto to any hackers or scammers, just bad investment decisions. And trust me, not many people can say that.

Even people like Mark Cuban, who you think would have the knowledge to avoid scams, has fallen victim to scams when he lost nearly $900,000 worth of crypto. The craziest part is that he could have avoided that loss if he had just known this simple strategy that I’m about to show you. And my strategy is simple.

It takes everything we’ve learned up to this point and brings it all together. So what is my strategy? All you have to do is keep your crypto in a cold wallet to avoid accidentally losing it to a hacker or a scammer. But here’s a catch, cold wallets are not unhackable, unless you know how to make them unhackable.

But to make our cold wallet unhackable, we need to understand how 99% of crypto investors lose their crypto, and it usually boils down to one of two things. First, they get tricked into giving out their seed phrase. One of the most common scams in crypto is known as social engineering. This is where scammers make you think something is wrong with your account, offer to help you, and end up stealing the information they need to access your crypto.

The simple solution to avoid this scam is to never enter your seed phrase anywhere online or give your seed phrase to anyone. In fact, if someone asks you for your seed phrase or tells you to enter your seed phrase on a website, you can 100% guarantee that it’s a scam. So that scam is easy to avoid assuming you know it exists, and now you do.

The second and harder to detect scam is unknowingly signing malicious transaction approvals. This happens when you authorize what looks like a normal transaction or interaction with your wallet on a website, but in reality, you’re signing a malicious transaction that gives scammers control of your crypto.

This malicious approval allows scammers to access your crypto and move your funds at any time without any further consent from you. Generally, scammers will start moving your funds immediately, but if you don’t have a lot of crypto in your wallet, they’ll actually wait until you put more crypto in your wallet and then they’ll transfer it out.

And this is even more confusing because by that time, you probably forgot that you’ve even connected your wallet to an account and then you’re even more confused. And the worst part about all this is that a cold wallet will not protect you from the scam because you are literally signing over approval of your wallet to a scammer.

So how do you avoid this extremely common scam? Well you can do things like double check the URL to ensure that you’re visiting the correct website but what if it’s a website that’s brand new that you’ve never visited before? Then how do you avoid the scam? The only foolproof way to ensure that your crypto remains secure in your cold wallet is to never connect your cold wallet to a website.

Well then how do you interact with websites that require a wallet connection like an NFT marketplace or a decentralized crypto exchange? Well, you don’t, at least not with your cold wallet. This is where your hot wallet comes in.

You can use a hot wallet loaded with a limited amount of crypto to interact with any of these sites that you want to visit. The key here is to only keep crypto in your hot wallet if you’re planning to make a transaction. For example, let’s say you want to swap $100 worth of ETH for $100 worth of a meme coin like Pepe. If your cold wallet doesn’t support swapping ETH for Pepe, you’ll need to use a decentralized exchange.

But to use a decentralized exchange, you need to connect your wallet to it. So you’d simply send $100 of ETH to your hot wallet, connect it to the decentralized exchange, swap your ETH for Pepe, then send that Pepe back to your cold wallet for safekeeping until you’re ready to swap again or take profits.

This way you’re keeping the bulk of your cryptocurrencies secured in your cold wallet, while still being able to explore all the opportunities that Cryptosphere offers using your hot wallet. You can think of your hot wallet like your checking account and your cold wallet like your savings account. You only transfer money from your savings account to your checking account if you plan to spend that money.

And I guarantee that if you use this strategy, the odds that you’ll lose any crypto to any hacks or scams is basically nonexistent. But to implement this strategy effectively, you need a cold wallet. So make sure to check out my full hands-on review of the Tangent Wallet in this next video if you wanna learn more about it.

Or if you know that the Tangent Wallet isn’t for you, check out my other video where I cover 11 of the most common mistakes people make when buying a cold wallet, and this will help you choose the right cold wallet for you. I’ll see you in the next video, peace out.