Tips to safely send cryptocurrency to a wallet
Save yourself the heartache of lost funds by learning how to safely send cryptocurrency from one wallet to another
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When purchasing cryptocurrency from an exchange, most platforms have in-built wallets or dashboards that will hold onto your assets for you.
While this may be the preferred method of storage for some investors, it's often recommended to transfer crypto assets into an independent wallet for enhanced security, and to be able to use them with applications or in DeFi.
This will help you get the most out of your cryptocurrency investment and is preferable for a number of reasons:
- Security. Transferring your funds from a centralised platform to a dedicated wallet leaves you less open to exploits and hacks.
- Staking. Staking is the process of locking up your assets in exchange for rewards (similar to earning interest). Many crypto wallets allow you to delegate your tokens to a node for staking, which is a good way for investors to earn a little extra income from their coins — though not without its risks.
- DeFi. Decentralised Finance (DeFi) is a term that broadly refers to a range of financial applications accessible through cryptocurrency. Users can do things like lend their funds and earn interest on them or borrow money against their holdings.
- Independence. One of the major drawcards of cryptocurrency is its decentralised nature, allowing users to take their finances into their own hands. Instead of trusting someone else with your money, you can hold onto it yourself with a similar guarantee of security. Holding crypto-assets in a wallet grants you complete authority over your investments.
Unfortunately sending cryptocurrency to a wallet for the first time can be quite a nerve-wracking process. This is because cryptocurrency transactions are irreversible, which means that if you send funds to the wrong address then you're could lose them forever.
So we've put together a step-by-step guide showing you how to move funds off an exchange and into your wallet, including some general tips to help put your mind at ease.
How to send crypto from an exchange to a wallet
Sending cryptocurrency from one wallet to another is a simple process, but it does involve risks.
The exact steps will vary depending on the cryptocurrency you are using, as well as the exchange. But overall, the steps in this guide should translate easily across various contexts. Make sure to read all the way through for a list of general tips at the end.
In this guide we will use Metamask wallet as an example, which is the most popular wallet for Ethereum and DeFi applications.
Choose a wallet.
It's important to research the different wallets available to you thoroughly before making a decision.
Typically wallets are split into two groups
- Software wallets operate on your computer or phone and let you move cryptocurrencies around easily. Some like Web 3.0 wallets go an extra step and let you interface with decentralized applications, which is necessary for DeFi.
- Hardware wallets are an extension of software wallets, that require a specialised piece of hardware (similar to a USB drive) to work. By doing so they add an extra layer of security that prevents your funds from being moved unless the hardware wallet is plugged in to your computer or connected to your smartphone.
SPONSORED: Learn how to set up a Trezor Model T hardware wallet and keep your funds secure with this simple guide.Read more…
If you plan to use your cryptocurrency regularly for activities like DeFi or trading, then you may want to consider a Web 3.0 wallet like Metamask. They can be paired with a hardware wallet for additional security.
Once you have chosen your wallet, you will need to generate an address. In this case it is an Ethereum address because we want to transfer ether (ETH) to Metamask.
1. Generate an address in your wallet.
Depending on the wallet you choose, you will be provided with an address as soon as you set your wallet up. This is the case for Metamask, while other wallets such as a Trezor hardware wallet require you to generate an address as an additional step.
You may notice that some wallets encourage you to create a fresh address for each transaction, while others let you reuse the same address over and over. If you're planning to use your funds with dapps or DeFi, then keeping a consistent address is easiest.
On Metamask, all you have to do is open up the browser extension and click the 'Account' button above the wallet details. This will automatically copy your address to the clipboard.
Whatever method you choose, make sure to use the copy-paste feature on your device any time you need to paste the address into a withdrawal, or receiving field. After pasting, check that the first and last characters of the pasted address are correct, to ensure everything worked correctly and that you pasted the correct address.
Cryptocurrency transactions are permanent and irreversible. This means that if you send your crypto the wrong address, there is no way of getting it back. You should consider it lost forever. Making sure the address is correct is the most important step of any transaction. Copy-paste is a simple but effective way of solving this.
One way of "hacking" cryptocurrency users is to infect the host device with a virus that swaps out the address during copy-paste with that of the hacker. So always make sure to double-check that the address was pasted correctly.
2. Transfer funds from your exchange to your wallet
Log in to your exchange and navigate to where your funds are stored. The name for this will vary on each exchange, but generally, it is where your account balance is shown and should include some options like "deposit" or "withdraw" next to each currency.
Navigate to the withdraw option for your desired currency and continue until you find the option to input the amount you want to withdraw, as well as the withdrawal address.
On Easy Crypto it looks like this.
You can clearly see the field for the address, as well as the option to choose one from an existing address book, which is another helpful way of ensuring your transaction goes where it is meant to.
Paste your address into the field, and specify the amount you want to withdraw.
3. Finalise the transaction.
Ensure that the delivery address pasted is the same as the one displayed on your wallet before confirming the transaction.
That's it! Your crypto should appear in your selected wallet a little while after.
It's worth noting that the amount you send may be different to the amount you receive in your wallet due to transaction fees, which again depend on the exact cryptocurrency used.
If you want to check on the status of your transaction, try using a block explorer such as Etherscan (for Etheruem) or Blockstream (for Bitcoin) to check how its going. Because blockchains are completely public and transparent, you can see everything that is going on, including the status of your transaction, how much was sent, and where its going. To do so, just copy and paste the transaction ID you received when you completed your transaction.
Tips to ensure your wallet transaction is safe
While holding your crypto assets in a wallet may be the most secure option, there are still a number of steps you should take to ensure the transaction is safe.
- Send small, test amounts. Before transferring your entire portfolio over to your wallet, it can be beneficial to send a small portion to your wallet first. This is a good way to double-check that you understand the transfer process, that your wallet address is correct, and that your money will actually appear in the wallet.
- Copy and pasting addresses. Most wallets will automatically give you the ability to copy and paste your wallet address, but if not, it's a good idea to do this manually instead of typing it out. Crypto addresses are a pretty complicated set of numbers and letters that can be easily mistyped. If even one letter is wrong, you may end up losing all of your funds.
- Thoroughly research the wallet. There are a lot of wallets available on the market today. The majority of them are trustworthy and well-researched, however scams are definitely prominent. Wallets exist where the tokens never actually come into your possession, or where the developers send you through a merry-go-round of 'verification' you can never pass, barring access to your assets. Make sure to read independent reviews and brush up on customer comments to avoid scams.
- Added security measures. Depending on the exchange you are using, there are often two optional security measures that can help ensure the safety of your funds. 2FA (2-factor authentication) can typically be enabled on any outgoing transactions, meaning you will need to enter a code that appears on your phone in order to complete any transfer of funds. Additionally, certain exchanges allow 'whitelisting', which means that you can only send or withdraw funds to pre-approved wallet addresses.
- Destination tag or memo. It may be worth watching out for destination tags or memos when transferring your crypto to a wallet. Certain cryptocurrencies have an added layer of security where owners must assign a 'Memo' to any transactions. If the memo is not included, the transaction will not be executed. Popular cryptocurrencies that use this technology include Ripple (XRP), Stellar Lumens (XLM), Cosmos (ATOM), and EOS. Performing a small, test transaction can be a good way of vetting if you require destination tags or memos to transact with your cryptocurrency.
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Disclosure: The author owns a range of cryptocurrencies at the time of writing