You will need a crypto wallet to purchase and hold most NFTs. Wait…a what? You can sort of think of a crypto wallet as being a computer file that specifies the amount of cryptocurrency and/or NFTs contained in the wallet. A crypto wallet holds your cryptocurrency as well as your NFTs. Whenever you transfer crypto or NFTs, it is from one wallet to another — very similar to a checking account, but wallets have “addresses” instead of account numbers. Setting up a wallet is one of the first steps for you to get started in crypto and NFTs.
There are two primary wallet types: hot and cold. I describe them both below and provide a tutorial video for setting up a MetaMask wallet.
Hot wallets are accessible through the internet. Typically a hot wallet is part of a web or mobile application that you log in to and verify your transfers and purchases directly in the app. While hot wallets are probably the most convenient to use, they are the most susceptible to attack and theft and you must exercise caution. MetaMask is a widely used hot wallet.
A cold wallet is a physical device, usually taking the form of a USB drive. Cold wallets are considered offline wallets since they are not always connected. When authorizing an NFT purchase or transferring funds in a cold wallet, the wallet must be physically connected to the computer and you usually have to click a physical button on the device. Cold wallets are currently the most secure type of wallet. Two of the most popular options are Trezor and Ledger.
So which one should you use?
The short answer is both. I frequently use my MetaMask wallet to buy and sell NFTs on OpenSea or during a project mint. Hot wallets are faster for confirming transactions and specifying transaction fees. This extra speed is critical when trying to buy/mint a popular project. I use my cold wallet to store large amounts of crypto and my most valuable NFTs because of the extra security they provide.
Securing your wallet
There are a few very important details for you to be aware of to keep your wallet and its contents secure. First, when buying a cold wallet:
- Be sure that you only purchase your wallet directly from the manufacturer and not a third party like Amazon.
- Once you receive your wallet, check that the package has not been opened or tampered with before using the wallet.
The above steps are very important to your wallet security. If you buy from a third party or your wallet was tampered with, it is possible that it has been compromised and is susceptible to being hacked.
Second, when setting up either a hot or cold wallet for the first time you will be given a passphrase of either 12 or 24 words. This phrase is the ONLY way to recover your wallet if you lose/damage your physical cold wallet or somehow can no longer access your hot wallet (e.g., forgotten password).
Because the passphrase is critically important, I recommend doing the following:
- Physically write down at least two copies of the passphrase and carefully verify you have written it correctly.
- Do not store your passphrase on a digital device like a cell phone, computer, or thumb drive.
- Keep your passphrase copies in separate secure, but accessible locations like a home safe and a bank safety deposit box.
I know these steps are a bit annoying, but in the land of Web3 it is entirely up to you to secure your wallet. If you lose access to your wallet and do not have your passphrase, nobody is coming to save you.
Setting up a MetaMask wallet
Setting up your first wallet can be daunting, but it’s really not that hard. MetaMask and the cold wallet manufacturers have good resources if you get stuck, but to get you started in this space, I’ve included a tutorial video for setting up a MetaMask wallet from scratch below. Once you have a wallet set up, all you need to do is get some Etherium through Coinbase or a similar exchange and send it to your new wallet. The brief video below shows how this is done.