Hey everybody. I wanted to write this article for two reasons:
- It’s just a good article to write as many of you navigate these uncharted crypto waters.
- I am currently working on something very cool that is going to happen in early May, and it is very important to me that my OG community is disproportionately benefitting from it.
With that said, I know that many of you have not yet created a wallet that is functional for NFT purchasing. You may have a Coinbase account at this point, but very few are actually set up to buy an NFT. Let’s fix that.
I want to say this, though, before you read the rest of this article. Many of you made fun of your parents 10 to 15 years ago when they were scared to put a credit card into a website to buy something. You ragged on them or you made jokes behind their backs…Today, you’re in the same exact position your parents were in. Many of you are now hesitant to open a MetaMask account or even a basic Coinbase account. I just want to remind you that you have become your parents — everyone’s worst nightmare .
So please, use that line to inspire you to take this article seriously and set up your wallet. The NFT revolution is here and I want you to be ready. I’ve asked my content team, Team GaryVee, to help write the rest of this article in as much detail as possible, so I hope that you enjoy it.
Team GaryVee here
Hello everyone, and thanks for reading and your interest in Gary’s NFT project! After a strong response to Gary’s What is NFT? article, we wanted to continue the crypto conversation with a guide on how to set up your own cryptocurrency wallet. Starting off with a general overview on wallets and how they work, we’ll then take you through the exact steps you need to take to create a wallet compatible with purchasing not just Gary’s upcoming NFT project, but any NFT that might be of interest to you. Afterward, check out 4 Steps to Make Sure You Have Ethereum in Your Wallet to be ready for Gary’s launch on 5/5! We hope our outline will provide you with the knowledge and foundation you need to make your entry into this space as safe and seamless as possible!
WHAT ARE CRYPTOCURRENCY WALLETS?
Cryptocurrency wallets are software used to communicate with blockchain networks to safely access, send and receive crypto funds or assets. Simply put, the software stores your crypto just like traditional wallets store your cash and credit cards. Where things get interesting is in the storage mechanism. Unlike fiat money — aka USD, CAD, etc. — which you store in a bank, crypto assets are stored on the blockchain. Just like you use a debit card to access your paper money at an ATM, you use your crypto wallet to access your crypto on the public ledger. The crypto wallet does not actually hold physical items — instead, it holds unique digital passwords or “private keys” which allow you to transact on the blockchain.
Crypto wallets come in the form of devices, mediums or smartphone applications and help you access records of transaction history that are held on the ledger. Simply put, if you want to actually use your crypto, you’ll need a wallet to do so.
CUSTODIAL VS. NON-CUSTODIAL
When it comes to storing your crypto, let’s talk about two options: custodial or non-custodial wallets. Check out this detailed comparison, but we will give you the breakdown here.
Many people make their first crypto purchases on centralized exchanges. These are online marketplaces where you can buy, sell and store a variety of cryptocurrencies. Many of you may have heard of Coinbase, one of the most popular centralized exchanges in the United States and a great option for beginners! Exchanges like Coinbase are known as “custodians” because they have custody over your cryptocurrency. In other words, when you make purchases with the Coinbase app, Coinbase holds your crypto for you in its own “custodial” or “hosted” wallet. This way, Coinbase acts as a third-party with ownership of your private keys, and you are trusting the platform with the responsibility of keeping your crypto safe and secure.
Custodial wallets are a convenient gateway into the crypto world. It’s as simple as signing up for a Coinbase account with your email address, verifying your identity with a photo ID, choosing a strong password and linking your credit card or bank account to start buying. While Coinbase is great for holding small amounts of crypto and buying major cryptocurrencies such as bitcoin and Ether, the company does not yet offer NFTs — although they may soon be considering it.
For now, if you want to be able to purchase NFTs, you’ll need to have what is called a non-custodial wallet.
For full control over your crypto assets, a non-custodial wallet is your best and safest bet. With these wallets, there is no third-party involved and you are the owner of your own private keys. While this is ideal for security, it also comes with great responsibility. More on the importance of private keys in just a bit. For now, let’s talk about where non-custodial wallets come into play.
Say you have a Coinbase account but you now want full control over your crypto. Good news, you can transfer your crypto holdings from Coinbase into your own non-custodial wallet! This is especially helpful for those of you looking to store large amounts of crypto, or for people looking to purchase NFTs. Since NFTs exist mostly on the Ethereum blockchain, you would need to purchase Ether on Coinbase and then transfer it to your non-custodial wallet, which you would then use to buy an NFT from online marketplaces such as NiftyGateway, OpenSea, Rarible, etc. You can also buy Ether directly using a non-custodial wallet like MetaMask! If you want to be ready for Gary’s upcoming project, MetaMask is what he recommends. Don’t worry, we’ll get you set up by the end of this article
For the purposes of this article, we will be focusing specifically on non-custodial wallets, which come in several options: software (web, mobile or desktop), hardware and paper. Before we dig deeper into each category, let’s explore how wallets actually work.
HOW DO THEY WORK?
Every cryptocurrency wallet functions using public keys and private keys. These keys work in tandem to make secure and verifiable cryptocurrency transactions on a blockchain. For definitions of these and more important cryptocurrency terms, check out this guide from One37 or see this more in-depth explanation to learn more about keypairs and encryption. For now, let’s go over the basics.
Public Keys and Addresses
Wallet addresses are derived from a public and private key pair, and identify your account on the blockchain, thus allowing you to receive crypto. Think of an address like an email address — you can share it anywhere! Whoever knows your address can send you crypto. An Ethereum address will always start with 0x and then a string of 40 alphanumeric characters. It may also appear as a scannable QR code.
Private Keys & Seed Phrases
Every public key is mathematically linked to a private key in a unique key pairing. A private key — which appears as a string of alphanumeric characters — is used to digitally sign a transaction to authenticate your transactions on the blockchain. One private key can generate several wallet addresses.
Seed Phrase > Private Key > Public Key > Address
A seed phrase is a group of 12 or 24 words usually generated within the wallet software that can be used to derive your private key. Further, your private key can be used to derive your public key — however, it is important to note that your public key cannot be used to recover your private key or seed phrase. Therefore, guard your private keys and seed phrases with your life! Check out this guide on best practices for storing your seed phrase safely.
WHY YOU SHOULD ALWAYS PROTECT YOUR PRIVATE KEYS
It sounds dramatic, but we cannot stress this enough. Private keys and seed phrases must NEVER be shared with anyone or left susceptible to discovery or theft. Think of a private key like a password or better yet, a PIN number — whoever has it has access to your crypto assets. Why is this so important? Unlike traditional money, stolen crypto is lost forever. There is no bank to call and report the theft; not even the government can help you recover lost or stolen assets. For this reason, when you create a crypto wallet and receive your private key and/or seed phrase, be sure to store it offline in a secret, safe location only accessible to you. Never store your keys in online notebooks unencrypted, or type into any website. Click here to read more.
By Gary Vee