Create a bitcoin wallet

The difference beteen cold, hot, and custodial wallets

cold wallet

A cold wallet is a wallet for which the private keys were generated on an offline computer. You can download wallet software on one computer, and transfer the installer to an offline computer using an usb stick. Then you are pretty sure that the chance that someone could intercept your private keys is very, very low.

Created correctly, a cold wallet is the safest type of wallet, and may be used to store live savings. A good article to help you create a perfect cold wallet, you can read here (Electrum documentation).

hot wallet

A hot wallet is a wallet for which the private keys were generated on an online computer (or smartphone). So the security of this wallet is only as good as the security of the device. Because it is connected to the internet, you might have downloaded a virus, which potentially could steal your private keys.

It is up to you how much you trust your own device, but it is considered foolish to keep your life saving on a smartphone or laptop without decent security measures. If you don't trust your computer, you can still use it for a wallet, but only for small amounts.

custodial wallet

A custodial wallet is a wallet for which the private keys were generated NOT on your computer, but on the computer of the custodian (eg this platform).

You can use the wallet to interact with the custodians' service (eg trading, subscribing to things, buying stuff..), but you should be aware that the custodian has ultimate control over the wallet. In other words: if you didn't generate the private keys, it's not your wallet.

Step 1: Download Electrum

Electrum is known to be the most secure bitcoin wallet software. It is available as a desktop or mobile application, for all the major systems.

The application is open source and the code is publicly available on github. The official documentation is available here.

You can download the installer for your device at https://electrum.org/#download

Step 2: Install the software

This is different for every system, so this won't be covered here.

Step 3: Open the Electrum app

If the app doesn't find a wallet with the given name, it will offer you to create a wallet with that name. Just make up a name and click next.

Step 4: Pick a wallet type

Yes, there are even different types of hot wallets, but we keep it simple for now and create a Standard wallet. Just click next.

Read about the other types in the documentation.

Step 5: Create a seed

A seed in crypto is a human readable representation of the cryptographic private key, so that you can easily write it down as a form of backup. Cick next to proceed

Step 5.1: Backup the seed

Write down the 12 words on a piece of paper and store it somewhere safe. Never share your seed with anyone. The seed can be used to restore your wallet in case your pc crashes. If you create a wallet from a seed, you don't need to know the wallet password!

Step 5.2: Confirm the seed

Confirm the seed by typing it again in this screen. It will autocomlete, so it should go quite fast. The next button will become active when the seed matches.

Step 6: Set a wallet password

This is optional, but strongly advised. A wallet password protects your funds from someone who might steal your laptop or phone. The password will also be needed to confirm a spending transaction.

Step 7: Finished

Take a look at your brandnew bitcoin wallet. You can now start receving and sending bitcoin (in that order).