How to pick the best cryptocurrency wallet
Are you thinking about what type of cryptocurrency wallet you need for your Bitcoins or altcoins? Well, then you are in the right place. Here we will guide you through the different types of cryptocurrency wallets, and which one you should pick depending on your needs.
We will in this guide cover:
- What is a cryptocurrency wallet
- Different types of crypto wallets (hardware - mobile - desktop - web - paper)
- Custodial vs Non-custodial wallets
- Hot vs cold wallets
What is a cryptocurrency wallet
After investing in cryptocurrencies you need to pick a good and reliable crypto wallet to use for managing and sending your coins and tokens.
In terms of non-crypto money (Fiat money - USD, EUR, GBP, etc) you probably have your own bank account where you get your salary into, and that you have connected to a bank card that you use to pay for your coffees and other expenses.
Nothing out of the ordinary there and how it works.
And in the crypto world instead of relying on a bank, you are your own bank. And the cryptocurrency wallet is your bank account. In the cryptocurrency world, your coins and tokens are actually stored on the blockchain as lines of code.
And to be able to send and receive cryptocurrencies you need:
- Private keys = used to sign transactions so you can send your cryptos
- Public keys = the address used by others to send the cryptos to
This is the power of how cryptocurrencies work. The power of decentralisation. There is no need for corporate banks to 'manage' your money. It is all done on the blockchain through lines of code (and nodes).
What are the different types of cryptocurrency wallets?
There are various popular types of cryptocurrency wallets that you could use. They all work in a similar way with the functions of private and public keys. But depending on your needs you can pick a different wallet type.
The main cryptocurrency wallet types are:
- Hardware wallets
- Mobile (app) wallets
- Desktop wallets
- Web wallets
- Paper wallets
These are often referred to as the safest wallets to use. This is because of how they work but also due to the fact that they are often kept somewhere safe and thus with fewer risks they are exposed to (theft, loss, etc).
Cryptocurrency hardware wallets are extra safe as they, for example, keep you offline when interacting with your coins and tokens.
Meaning that they can't be hacked by others as you are not connected to the internet. The private keys are stored safely on the device and they cannot be transferred out from your device in plain text.
The hardware wallets are also immune to any computer viruses that might have been exposed to. And you also need to have a password to use the device and send your cryptos.
If you would lose your device, or if it broke you can always reset your wallet using your seed phrase. Which is your backup code for your cryptocurrencies.
So if you really care about the value of your cryptocurrencies then investing in a safe and reliable hardware wallet should be your top priority.
They cost a bit more but according to us, it is definitely worth the price. Price ranges from about $60-180 from different types of hardware wallets.
Some of the most popular hardware wallets are:
- Ledger Nano S
- Ledger Nano X
- Trezor One
- Trezor Model T
These are basically wallet apps for your mobile devices. As smartphones are so commonly used around the world the need for a good mobile crypto wallet is definitely at the top.
Mobile wallets work the same way as desktop wallets and they are perfect for people that want to have quick and easy access to their cryptocurrencies.
Usually, all mobile crypto wallets are free to use.
The downside of them is that they are not as secure as hardware wallets and perhaps there might be a bigger risk of you losing your phone or breaking it than losing or breaking your hardware wallet that's kept somewhere safe.
With mobile wallets you download it to your mobile device (iOS / Android).
Some of the popular mobile wallets are:
So instead of downloading a wallet to your mobile device, you download it for your computer. Your Mac, Windows or Linux OS-based computer. Otherwise, a desktop wallet works like any other crypto wallet. You can use it to store your coins and tokens on the blockchain and then sending them to other wallets.
With desktop wallet apps you can usually also enjoy some other cool features such as portfolio management. See the value of your cryptocurrencies easily. Built-in exchanges, so you can trade and buy or sell more cryptos. And other useful features.
With both desktop and mobile wallets your wallet is connected to the internet, so that is something to consider. This means additional risks compared to offline wallets. Another important thing to consider is that your private keys are not stored on the wallet without being encrypted. Or that if you use a custodial wallet then your private keys can be accessed by your wallet service. And potentially hackers.
Some of the popular desktop wallets are:
These are basically websites that run wallet interfaces accessed via a website. At some of the popular open-source web wallets, you can also connect your own hardware wallets to them and then use the web wallets interface to send and receive cryptocurrencies with.
There are different types of web wallet sites. We'd recommend using one that is open-source and of course non-custodial (more on what that means shortly).
Some of the popular web wallets are:
These are basically a piece of paper that you print off and store somewhere safe and on which your private keys and public keys are printed on. So they are safe as they are offline (paper is not printed to the internet). But perhaps they are a bit less user-friendly as you still need to use another wallet service (web wallet for example).
So paper wallets are a decent choice if you value security and you plan on letting your cryptocurrencies sit there for a longer time.
So with paper wallets you need to use a web service or desktop app to generate your wallet and then you use the public keys generated to send your cryptocurrencies to. And then it is just about keeping your paper wallet somewhere safe.
You can use either of these sites to generate your own paper wallet:
Custodial vs Non-custodial wallets
Custodial wallets refer to wallets that keep a copy of your private key. That means you share your private keys with the wallet service which is a risk in itself. But you can also enjoy some benefits with custodial wallets in which you can restore your wallet account if you lost your private keys for example.
But otherwise, we always recommend non-custodial wallets. Where you only have access to your own private keys. And you are your own bank. We feel that this is safer right now.
Hot vs cold wallets
This is another common term used to describe cryptocurrency wallets. And it means that if your wallet is connected to the internet = hot wallet. Or if it is used in an offline mode = cold wallet.
With hot wallets, you are exposed to additional risks as they could potentially be hacked by others. Or exposed to any viruses that your device might have. This could also potentially damage your wallet. So generally it is recommended to use cold wallets like the hardware wallets we mentioned above. But of course just because there are risks doesn't mean they necessarily will happen.
But consider the value your cryptocurrencies are worth and then if it is far beyond the cost of a hardware wallet ($60-180) then we'd recommend buying one.
We hope that this guide to the best cryptocurrency wallets was helpful. We hope that by now it is far more clear how cryptocurrency wallets work. And what are the differences between the different cryptocurrency wallets. We do recommend investing in a safe hardware wallet. We have and it makes sleeping at night much easier.
Good luck and let us know if you have any questions about cryptocurrency wallets or cryptocurrencies in general!