Bitcoin DeFi
Jan 25, 2025
To create a Bitcoin wallet, simply choose the type of wallet you’d like (hosted or self-custody), choose a platform that offers the type of wallet you’d like to use, and create an account.
What is a Bitcoin Wallet?
A Bitcoin wallet, like any crypto wallet, is a digital platform that allows a user to store their cryptocurrency and digital assets securely.
Bitcoin wallets use cryptography to create a set of public keys and private keys that belong to one specific user, allowing them to store and manage their assets.
A public key allows users to send and receive Bitcoin, while a private key lets users access and manage their bitcoin. The private key should be kept safe, and should be known only to the user.
How to Set Up Your Bitcoin Wallet with Leather
First, download the Leather extension from either the Chrome, Brave, or Edge stores – with mobile functionality coming soon – and allow the extension to run when prompted.
Then, open the extension and hit “Allow” when asked if Leather can access deidentified service usage data.
From there, click on “Create New Wallet.” Leather will generate a unique 24-word code. This is your private key. Copy it down and store it somewhere safe – Leather will not be able to recover this code – then click “I’ve backed it up.”
After that, just set a password and you’re done!
For a full guide on how to create your Leather wallet, click here.
Hosted Wallets
A hosted Bitcoin or crypto wallet is managed by a third-party service provider. They operate much like a bank account, wherein your dollars or other fiat currency is stored on your behalf by your bank. With a hosted crypto wallet, your digital assets are stored and managed by a provider like a centralized exchange (i.e. Coinbase, Gemini).
Self-Custody Wallets
A self-custody wallet, like Leather, gives users full control and responsibility over their private keys and management of their digital assets. Unlike a hosted wallet, where the third-party service provider owns your private key, a self-custody wallet gives you full ownership of your assets and the ability to manage them exactly how you wish. Self-custody wallets do not require an internet connection to operate.
Hardware Wallets
Hardware wallets are dedicated physical devices used for storage and management of digital assets like Bitcoin, other cryptocurrencies, and beyond. Hardware wallets store your private key on a chip that is separated from internet access. Being completely offline makes them even better protected from spyware and malware software wallets.
How to Choose a Crypto Wallet
There are various factors that new users should consider when creating a crypto wallet.
Hosted software wallets are popular among newer users due to their convenience and reduced responsibility for one’s own private key, which is managed by a third-party service provider like a centralized exchange.
Self-custody wallets are more popular among more experienced and privacy-minded users due to their reliance on full user control and management of one’s own private key.
Hardware wallets are more of a niche product, but are also popular among those holding high-value assets and more hardcore, privacy-and-security-minded users. They offer less flexibility than software wallets, but very high levels of security.
As digital assets become more complex and NFTs become more popular, and Bitcoin-native utilities like Ordinals, Stamps, and Runes emerge, more users are choosing wallets based on flexibility and their ability to handle the next generation of cryptocurrency and its related assets.
What You Need to Open a Crypto Wallet
What you’ll need to open a crypto wallet depends on the type of wallet you’re opening.
For hosted wallets, you will need to create an account on a trusted platform. You will likely need to provide your name, email address, and create a password. You may also need to provide photo ID and your home address for KYC (Know Your Customer) and AML (Anti-Money Laundering) law purposes.
For a self-custody wallet, you will likely not need to provide any information other than a password, because you will be managing the assets in the wallet yourself. You will need to remember – and safely store – your private key, which will be generated by the wallet platform.
For hardware wallets, you’ll first need to buy the hardware device. Then, you’ll need to download the accompanying software in order to set up the device and transfer funds to and from the device. You will also need to remember – and safely store – your private key in order for the device to interface with the software in the future for the purposes of sending and receiving assets.
Risks Associated with Storing Cryptocurrency
The primary risk associated with storing cryptocurrency and other digital assets is security. Security risks can come from third-party sources, like if hackers were to compromise a centralized exchange and potentially make your account information vulnerable to bad actors.
It could also come from poor asset management on the part of a user, like forgetting a private key for a self custody software or hardware wallet. With hardware wallets, you also run the potential risk of simply losing the device.
