To say that the cryptocurrency world is complex would be an understatement and it’s going to take a lot of time and research until one gets a good grasp on this matter. One of the most important, and often, puzzling aspects of crypto trading are wallets, and today we are going to talk about them.
In this article, we’ll explain what they are, what their purpose is, and try to find the best cryptocurrency wallet on the market. If you are a beginner or a trader who happens not to know much about this subject, it is essential that you get through this information for the sake of your money’s safety. Enjoy!
Cryptocurrency wallets: What are they?
Ok, first things first. A cryptocurrency wallet is software which stores the keys that are used when selling or buying various tokens. There are two types of keys – public and private, and they represent the way your wallet communicates with a blockchain ledger (database).
It works something like this; when someone sends you tokens, they are signing off their ownership to the address of your wallet. If you want to spend this money, the public key to which this cryptocurrency is assigned has to match your private key.
The blockchain network consists of ledgers, and these ledgers get updated across all computers which run and maintain the blockchain. This means that all of them get updates at the same time. Now, a wallet doesn’t hold any money, but only the record of transactions.
Despite this, when you open your wallet, you will be able to see a balance as if all of the crypto money is “in” there. This is the main difference between a crypto wallet and a PayPal wallet because the latter does actually contain your money.
The importance of secure wallets
When talking about a traditional (centralized) financial system, all or most of people’s money is kept in banks. They are responsible for the accounts’ safety, and their users do not have to worry much about them.
As you know, cryptocurrencies are a decentralized system which takes out banks and governments from the game. This allows you to break free from centralized control and brings a lot of freedom, but also a lot of potential risk for your finance. You see, now your hard drive becomes the bank vault, and it is your responsibility to make it as secure as possible.
Now, this poses a question of how secure are these wallets? Their degrees of security vary significantly as there are many different types of wallets which we will discuss in the following sections.
Types of wallets
There are three different types of cryptocurrency wallets – software, hardware, and paper. Software wallets can be further divided into mobile, online, and desktop. In the list below, you will find the details and specifications of each type.
– Desktop wallets are software programs which can be downloaded and installed on your personal computer. From that point on, they will be accessible only from this computer and none else. Their level of security is among the highest unless your computer gets hacked or infected with a virus which can compromise this.
– Online wallets can be accessed from any PC or laptop. Although they are more convenient than desktop wallets, they are less safe because your keys are online and are under the control of a third party which makes them vulnerable to hacks.
– Mobile wallets run on a mobile phone application which makes them pretty convenient to use. They are usually much smaller than a desktop wallet due to a smartphone’s limited storage space but are still pretty reliable.
A hardware wallet is a physical device similar to a USB which can store one’s cryptocurrencies. They are also known as “cold storage” and are one of the safest ways to store your finances.
These wallets can only make transactions online, but when you plug them out from the computer, they store the money offline which makes them impossible to hack. Transactions are done by simply plugging the device into any computer that has an internet connection, entering a pin code, and confirming your action.
There are different brands which produce these devices and depending on them, the wallets are compatible with various online services and are suitable for certain cryptocurrencies.
Some of their downsides are their prices (starting around $80), and the fact that they can be misplaced or can get corrupted in the case of which you lose all your money.
Paper wallets are probably the safest way of storing your cryptocurrencies. To put it simply, you print out your public and private key (or their QR code) on a piece of paper, and you have your wallet. If you want to use your funds, you have to transfer the money from the paper to a software wallet, and you do this by scanning the QR code or typing the keys manually.
These wallets are great for long-term investors or those who do not trade often. However, people who trade daily will probably want to look for another way of storing their crypto’s as they would be dealing with too many QR codes in this case.
One thing to remember is that you need to store this paper safely as any kind of damage to it means that your money is lost. Our advice would always be to have a backup paper stored in a safe space or with a person you trust.
Best desktop wallets
Desktop wallets are a good option for folks who trade low volumes and do not hold a lot of money in their accounts. Since this software is installed on a computer which is connected to the internet, it makes it possible to be hacked. Nevertheless, we are going to present a few which offer the best protection.
Electrum is one of the most popular desktop wallets, and it can be installed on Mac, Windows, and Linux. It is pretty technical and requires its users to have a solid knowledge of cryptocurrencies, so it might not be ideal for beginners. This wallet allows you to store your keys offline and it is compatible with hardware wallets such as Trezor.
One other feature that makes this software popular is the fee adjustment option. As the Bitcoin network gets a lot of traffic and becomes busy, the transaction fees become higher. Electrum allows you to adjust the fee and speed up the transaction
This is a wonderfully designed wallet and is more user-friendly than Electrum. Its ease of use might be its biggest advantage along with the customizable interface which gives you the freedom to arrange the look of the app according to your preferences.
It has ShafeShift integrated into it which allows for a fast conversion between a number of altcoins and cryptocurrencies.Exodus also provides you with the ability to store your private keys and gives you full control over them. The program is available for Windows, Mac, and Linux and it is free to download.
In case you run into some troubles, you can contact the company’s support team 24 hours a day, which is excellent if you like to work late at night.
Best online wallets
Online wallets might be the riskiest place to store money, so we would not advise them as your permanent solution. They are good for holding your funds temporarily until you find a suitable wallet of another type. If you still want to go for a web wallet after reading all of this, we will present you with the best option.
Coinbase is an online exchange and as such contains online wallets as a part of its service. It supports Bitcoin, Litecoin, and Ethereum. The bad thing with this wallet, as with any other online wallet, is that if the database gets hacked, your money is at risk of being stolen. Fortunately, such a thing has not happened yet, and this service has more than 8 million users.
Also, the transaction fees are very low which makes it more preferable than some of its competition. To conclude, if you aren’t trading huge amounts of money, then maybe this wallet will serve you well.
Best mobile wallets
Mobile app-based wallets are very popular these days, which is why today, we are going to present you with the top three mobile wallets on the market right now.
This app is very easy to use, and so far it has proven to be a secure way to store cryptocurrencies. It enables instant payments and exchanges between different currencies including Bitcoin, Monero, and Dash. One of its biggest assets is the multi-currency account which allows you to store, sell, and buy 19 different cryptocurrencies from your mobile phone.
Its security is bank-level, and the systems that it uses are top-notch and highly professional. Also, the encrypted SSL technology, 2FA, as well as Trusted IP technology makes this wallet as safe as it gets.
One other advantage is that the transaction fees are relatively low, below other crypto providers. A thing that some users complained about is Cryptonator’s customer service which apparently takes a long time to respond.
Mycelium is another convenient and user-friendly mobile wallet app which was launched way back in 2008. Because of its “long” history with the Bitcoin, it gained the trust of many users, and its team has had a lot of time to perfect it over the years.
It is effortless to navigate, and you can switch between different tasks very quickly. The security system that it endorses is called Hierarchical Deterministic wallet security. In addition, it also uses Microsoft Reference Source license which provides a cover for the app’s code and
enhances the overall security.
As far as its problems are concerned, the customer service is an issue as the support from the company is very limited. The fees are also higher than with some other mobile wallets.
Developed by Bitpay, Copay is a mobile wallet which mainly focuses on convenience. Thus, it is needless to say that it is very simple to use.
The app’s security system includes Bitpay’s HD multisignature technology. This system is great because it allows you to restore your wallet if you happen to run into some troubles. The privacy settings are rather strong, and all this means that it will keep your funds safe.
As with the two previously reviewed app-wallets, Copay’s customer service is also rather weak. It is a relatively small company with a lot of users so that’s why the service takes a long time to reply to the customers’ questions.
Best hardware wallets
The hardware wallet is one of the safest ways to store cryptocurrencies, and in this section, we will take a closer look at some of the top products devices on the market.
This one is probably the most popular hardware wallet on the market today. It is also good to mention that the company pioneered this technology. It is compatible with Windows, Linux, and Mac, it’s very secure and has one of the best Android apps among its competition.
This device uses two-factor authentication as well as a password manager app. It also supports ERC-20 tokens which add to the strength of its security. Trezor can store a variety of cryptocurrencies including Bitcoin, Etherium, and Dash.
You connect the device via USB with your computer. There you can trade and when you are done just disconnect it, and all of your funds will be offline. It gives you total peace of mind, just be careful not to misplace it.
KeepKey is a simple, easy to use, hardware wallet. It is compatible with Bitcoin, Litecoin, Ethereum, Dogecoin, Namecoin, and Dash. It is open source and works with Windows, Mac or Linux.
A great thing about this device is that it cannot get infected by a malware or a virus since it does not have an operating system like a PC or a smartphone. You authorize using a 12-24 word password, and it can also be used to recover information or keys.
It works in the same way as the previous product we mentioned, by connecting it to a computer’s USB port.
Ledger Nano S
This is the last (but not least) of the top 3, most popular cold storage wallets. Ledger Nano S functions in a simple but effective way, and we’re going to explain how.
The cryptocurrencies which are stored inside the device are kept safe with a PIN code and a microchip. This means that the transactions can only be realized if the physical button is pressed, so no malware or virus can affect your funds.
Ledger Nano S supports more than twenty different cryptocurrencies which makes it a multi-currency wallet. It can be used with Windows, Mac, or Linux and it is easy to set up. Just connect it to the computer, download the Google Chrome Ledger manager and start working.
Best paper wallets
To make a paper wallet one can use one of the paper-wallet generators available online. Besides hardware wallets, this might be the safest solution, so if security is what you’re after, take a look at the section below.
This website allows you to create a neat-looking, colorful paper wallet with folding lines so that you know exactly how to treat the paper. Another cool thing about this service is the tamper-proof paper which they offer, so you can seal your wallet shut and make it even safer.
Ok, so we have slowly but surely reached the conclusion of our article. It has been an extensive read, and we’ve covered a lot of information, and now it’s time to try and summarize some of it.
As you can see, cryptocurrency wallets differ a lot, and the levels of security that they provide are not the same. So which one should you opt for? The answer depends on what you need or prefer.
If you are someone who trades with large sums of money your best bet is to go for a hardware wallet. These devices are convenient, will allow you to trade quickly, and will keep your funds 100% secure when you are not using them.
Those who find it too troublesome to have a separate device for their wallet should choose mobile or a desktop wallet. Ease of use is at a high level, and the money will be safer than if kept online.
All in all, doing more research on this topic wouldn’t be a bad idea, so we advise you to do just that!