| Company | Type of Wallet | Purchase Cost | Incorporated Exchange | Compatible Hardware |
|---|---|---|---|---|
| Trezor Model T | Cold | $219 | Yes | Yes |
| Ledger Nano X | Cold | $149 | Yes | Yes |
| Electrum | Hot | Free | No | Yes |
| Exodus | Hot | Free | Yes | Yes |
| Mycelium | Hot | Free | Yes | Yes |
What You Need to Set Up an NFT Wallet
Setting up an NFT wallet is similar to setting up a crypto wallet. First, download or purchase an NFT wallet of your choosing. Then, set up your profile, following KYC protocol if you pick a hot wallet. The following documents are typically required to complete your profile:
- A government-issued ID
- An in-wallet selfie
- Proof of address, such as a copy of your utility bill
Cold wallets usually do not require KYC and are suitable for users who intend to bypass it. You need to set up your cold wallet by connecting it to your device and configuring it.
Personal Information
To use a hot NFT wallet for the first time, you will be required to submit some basic personal information for KYC purposes. Companies providing financial services, even in crypto, must implement KYC procedures for legal reasons and to identify bad actors who might be using the wallet. An NFT wallet company does not usually use personal information for anything other than identification. The kind of personal information that you need to provide include:
- First and last name
- Residential address
- Date of birth
- Phone number
- Email address
It is important you fill in only the correct information, especially your phone number and email address. This information is also used for 2FA and communication purposes.
Investing in cryptocurrencies, decentralized finance (DeFi), and other initial coin offerings (ICOs) is highly risky and speculative, and the markets can be extremely volatile. Consult with a qualified professional before making any financial decisions. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies nor can the accuracy or timeliness of the information be guaranteed.
Types of NFT Wallets
Hot Wallets
Often provided by crypto exchanges, hot wallets are digital wallets that are always connected to the internet to facilitate frequent transactions. These computer programs are popular because they are easy to download and use. As an extra benefit, you can easily store purchased NFTs in these wallets for free. Since they are always connected to the internet, however, hot wallets are less secure than cold wallets as they are more susceptible to hacking and other forms of cyberattacks.
Cold Wallets
Cold wallets are physical devices that store digital assets off the internet to protect against unauthorized access by storing your private keys on your device alone. These are ideal for storing blue-chip NFTs or NFTs that you do not need regular access to over long-term periods.
As for security, losing your private key or cold storage device could mean an irrecoverable loss of any NFTs in the wallet. Cold wallets are not free, as you need to buy a physical device. Since they cost more than a hot wallet, it is advisable to buy cold storage only if you have valuable digital assets to store.
How Much Do NFT Wallets Cost?
Storing and protecting your NFTs on hot wallets is usually free; you only need to pay for transactions. On the other hand, cold wallets for NFT storage are more expensive, ranging from $140 to $400. Note that not all cold wallets are NFT wallets, so when shopping for a cold wallet, ensure the model you go for is NFT-compatible.
Factors to Consider When Selecting an NFT Wallet
Wallet quality/safety: You should pick an NFT wallet with at least a PIN (personal identification number) or 2FA (two-factor authentication) feature to prevent losing your assets to thieves and hackers. Beware of wallets that lack security or only enable biometric security without advanced protection measures.
User interface (UI): When looking for a place to store NFTs, prioritize wallets with an intuitive user interface that eases interaction with your NFTs. If you are a beginner, pick wallets that display all your NFTs, show how much your collection is worth, and have a search bar to find any NFTs easily, all in one glance.
Connectivity: Choose a cold wallet with Bluetooth and software connectivity, ensuring your wallet connects seamlessly to its corresponding software on your phone/PC. These features help you process NFT transactions much faster.
Setup time: Most hot NFT wallets take five to 10 minutes to set up. Completing KYC processes might take five minutes to a few days, but once you are past those, the wallet is ready to use. Cold wallets have a longer setup duration, with beginners often needing one to two hours to complete the process.
Fees (if applicable): Unlike cold storage, using a hot wallet to store digital assets is free. For both wallet types, users are required to pay a small network fee to send or list your NFT on a marketplace.
Customer support: Before you select an NFT wallet, check that it has a live chat/support option. This is the best way to contact the company if you have an urgent issue with your wallet.
Storage and custody: A cold wallet is your best option for sole access to your NFTs. It prevents anyone from accessing your NFTs, including its creators and the wallet company. Hot wallet users are prone to face what FTX users suffered with the exchange because the exchange had access to customers’ crypto holdings. But frequent NFT traders will find a hot wallet more useful for faster transactions and easier access to their NFTs.
FAQs
What Are NFTs?
NFTs (nNon-fFungible tTokens) are unique digital artwork or representations of physical assets backed by a token on a blockchain network. An NFT is as unique as a fingerprint, as the blockchain generates a unique token every time someone mints an NFT.
NFTs are quite different from regular digital files as the latter have no backing on the blockchain. This is why you cannot present the screenshot of an NFT as proof you own it. Anyone can create an NFT with a digital file, some crypto to pay gas fees, access to a minting platform, and an NFT wallet. Most people, however, simply buy NFTs instead of minting them.
Researching an NFT project before you decide to buy it is important. One way to explore a project is to check if its founders are known publicly (doxxed). Projects with such founders have a lower chance of being fake.
Many popular companies are entering the NFT space, and are now seen as reputable sources from which NFTs can be purchased. For instance, Starbucks recently sold 2,000 NFTs in minutes in March 2023. While Meta also started supporting NFTs on Instagram and Facebook in 2022, the company halted this practice in March 2023. Famous NFT projects like the Bored Ape Yacht Collection are also viewed as solid project sources.
Regardless of the NFT project you choose, you need an NFT wallet to go with it.
How Do Non-Fungible Tokens (NFTs) Work?
NFTs are tokens that show ownership of digital assets. To own an NFT, you need to buy the token backing it. Most NFTs are sold in cryptocurrency, which depends on the NFT’s blockchain. For example, an NFT on the Ethereum blockchain will be purchased in the Ethereum coin, Ether (ETH). NFTs can give you special holder rights like the right to participate in an organization’s governorship or an opportunity to make some money by holding and selling them.
What Are Some Unique Features of NFT Wallets?
NFT wallets are different from other digital wallets because they can:
- Connect to NFT marketplaces
- Display NFTs
- Track NFT data and relevant statistics
Are NFTs Bad for the Environment?
NFTs are not bad for the environment, but minting and transacting with NFTs can adversely affect the environment if not properly checked. Due to the high computational power required to run a blockchain, many NFTs are minted using significant amounts of energy. However, blockchain networks that support NFTs like Algorand are going green, which may lead to more eco-friendly NFT transactions.
How Can I Earn With an NFT Wallet?
NFT wallets on your device will only make you money if you have an NFT. You can earn from your NFT by either selling or staking it. Selling an NFT is straightforward, as you simply buy or mint an NFT, keep it in your wallet, and sell it for a better price later. The money you make from the sale will immediately be available in your NFT wallet.
With staking, you lend your NFT to the blockchain in return for rewards, which can either be paid out in the project’s native token, another NFT, or a crypto of the project’s choice. These rewards accumulate in your NFT wallet.
