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How to use a hot wallet?

How to use a hot wallet?

August 2, 2022
3
 min read

A crypto wallet is software or hardware that lets you own your crypto and make crypto transactions.

By Peter

A crypto wallet is software or hardware that lets you own your crypto and make transactions.

How does a crypto wallet work?

A crypto wallet stores two keys:

  • A public key links to an address that lets you make transactions.
  • A private key proves that you own the assets with your address.
  • A seed phrase is 12-24 words that lets you access your private key.
A crypto wallet has a public key, private key, and seed phrase

If your wallet was your bank account, your public key would be your account number and your private key would be your pin number. Of course, in web3, your assets are on the blockchain vs. in a bank. Just remember that:

  1. You can share your public key with others to make transactions.
  2. You must never share your private key or seed phrase with anyone.

Which wallet to get?

Crypto wallets can be hot (software) or cold (hardware). Our advice is to:

Start with a hot wallet then move your long-term assets to a cold wallet.

1. Start with a hot wallet

Hot wallets are connected to the internet. They’re more convenient but less secure than cold wallets. There are two types of hot wallets:

  • Hosted wallets are managed by an exchange (e.g., Coinbase) that you log in to with a username and password. With a hosted wallet, you don’t own your keys. In fact, most people use exchanges without realizing that they have a wallet.
  • Non-custodial wallets are self-managed. Because you own your keys, you can use these wallets as your web3 identity. Popular wallets include MetaMask (for Ethereum) and Phantom (for Solana).

2. Move long-term assets to a cold wallet

Cold wallets are hardware devices that are default offline and more secure.

If you have assets that you don’t want to trade anytime soon, move them to a cold wallet like Trezor and Ledger. The cost of buying a cold wallet ($60-150 USD) is worth it to secure your long-term assets.

See our"How to use a cold wallet?" guide for more details.

How to set up a hot wallet?

Here’s how you can set up a hot wallet for Ethereum using MetaMask (web) and Rainbow (mobile):

1. Create a wallet using Metamask

  1. Install MetaMask for your web browser.
  2. Click on the MetaMask icon and click Get Started.
  3. Select “Create a Wallet.”
  4. Create a password for MetaMask.
  5. Write down your seed phrase and store it somewhere secure.

Voila, you’re done! Now let’s access the same wallet up from the Rainbow mobile app.

2. Access your wallet from the Rainbow mobile app

  1. Download the Rainbow mobile app
  2. Click “I already have one” and then “Restore with a secret phrase”
  3. Type in your seed phrase and tap Import

Congrats! You now have access to the same wallet on two separate platforms. Note how this is different from web2 where each platform would require a separate username and password. In web3, you own your keys and identity.

How to send crypto to wallet?

Let's transfer some assets to your new hot wallet.

The example below assumes that you have some ethereum in your exchange account (e.g., Coinbase, Gemini).

1. Transfer ethereum to your wallet

  1. Log in to your exchange
  2. Navigate to the withdraw from exchange page
  3. Select “eth” and the amount that you want to withdraw
  4. Copy and paste your public wallet address
  5. Confirm the transaction

It could take minutes for your eth to show up in your wallet. Once it’s there, follow the steps below to connect your wallet to OpenSea, a leading NFT marketplace.

2. Connect your wallet to OpenSea

  1. Visit OpenSea on the web and click the profile button
  2. Select your wallet and sign the connection when prompted
  3. Once you connect your wallet, you’ll be able to buy NFTs using your eth

Now that we covered how to use hot wallets, let's discuss cold wallets next.

Up next: How to use a cold wallet?

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How does a crypto wallet work?

Which wallet to get?

How to set up a hot wallet?

How to send crypto to wallet?

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