A cryptocurrency wallet is a set of private and public keys that validates the ownership of a digital asset (e.g. Bitcoin) and allows the wallet owner to send and receive digital assets or even store them.
There are several types of wallets that can store your crypto holdings, some more secure than others, some are easily accessible and some are dedicated to certain assets. There are two types of wallets – Hot wallets and Cold wallets. The hot wallets are connected to the internet which makes transfers of coins and tokens faster but are also prone to viruses and hackers. The cold wallet refers to the cryptocurrency wallets that are offline. Generally, cold storage is more secure, but are limited to a selection of coins and tokens you can store.
Read: What Is A Decentralized Exchange (DEX) In Crypto Trading?
Software Wallets
Software wallets, as the name suggests, are downloaded and installed on desktops and laptops. They reside on a desktop and can only be accessed on the device where they are installed. They do provide a good level of security but issues with your device, like a virus attack or a hardware issue could deny you access to the wallet. What’s recommended is to export your wallet private keys and store your login and password on a USB stick or on another device. You can re-install the software on a new device and use your login/password along with the exported private keys to access your funds. One of the most popular software wallets available for free is Exodus, where you can store over 100 cryptocurrency assets.
Paper Wallets
Used in the early 2010s, a paper wallet contains your wallet address, private keys and a QR code representing these keys, which facilitates the transfer and receiving of coins or tokens.
Rather than typing each letter and number of the address which could be hectic, one can just scan the QR code and request or receive the asset. Paper wallets ensure security by preventing your private keys from being exposed online upon creation as it’s stored physically and not on a computer or over the internet. Theoretically, it is strong but physically it is weak, it’s great to have a free wallet that never exposes your private keys online at any point. A paper wallet is not made from a strong and durable material such as metal or plastic and can easily tear, burn, or the print can fade away over time. Therefore, many have left behind this option of the past and are utilizing other safer options to store their cryptos. Here you can create your own paper wallet via the wallet generator.
Mobile/App Wallet
Mobile wallets are considered to be the most popular and commonly used type of wallets. They are apps installed on mobile devices and their main advantage is the swift accessibility to funds. Accessing a bunch of features such as sending, receiving, storing, spending. A user-friendly mobile wallet app like crypto.com has multiple services built-ins, you can do all the functions mentioned above, and you also have the option to stake your cryptos and earn a profit, you can buy and trade cryptos to add to your existing portfolio at low fees and even request for a loan.
Many upcoming coins and tokens have used third party wallets to store their coins or even have no supported wallets at the early stage which makes them fully dependent on exchanges to store their coins or tokens. Solid crypto projects typically build their own wallets at an early stage; during or post (ICO, IEO, public and private sale) when they distribute their coins/tokens to users. iOWNX is one of the projects that built a dedicated iOWN Wallet where you can store both Ethereum and iOWN Tokens with several security measures to protect your assets. You can install the wallet app on both Apple and Android for free.
Hardware Wallet
Known as a “Cold Wallet” which is a physical device and considered to be the safest wallet. A hardware wallet securely stores your private and public keys and typically looks like a USB drive and is resistant to computer viruses. Long term crypto holders prefer a cold wallet as it remains offline most of the time.
The wallets are made of metal and hard plastic with an input screen to insert your pin number. In case you lose the device, you can purchase another one and insert your 24-paraphrases, known as seed key, which was created on your previous device, and access your funds. There are several hardware wallets available in the market; the 2 most popular ones are the Nano Ledger that sells devices from $36 to $148 and the Trezor Wallet which goes for around the same price bracket.
Exchange Wallets
Exchange wallets access blockchain through a browser interface without having to download or install any software. The advantage of the exchange wallets is the ease of accessibility to funds if you are an active trader and require direct access to your funds to be able to trade, rather than transferring coins and tokens from a different wallet which could take some time and fees that disables you to instantly trade at a certain price.
The downside of storing your cryptos on an exchange wallet is that some service providers hold and manage the wallet’s private keys on your behalf. Although this may sound more convenient for inexperienced users, it is surely not the best practice. When using cryptocurrency exchanges, you should consider that they provide a high security feature and protection tools such as device management, multi-factor authentication, anti-phishing code, and withdrawal address management. It is highly recommended to store the majority of your coins and tokens in a safer wallet and keep some on the exchange for trading purposes.
Final Word
There are many types of wallets to choose from to securely store your cryptocurrencies, yet there is not a perfect wallet in existence. Your personal needs and requirements will ultimately guide you to the type of wallets that fits your need. If you are looking for a quick “send and receive” in a few taps then mobile app wallets could be an option. If you are more of a “hodler” and believe in long term store value then Hardware wallets could be the wallet for you.
Presuming that you are a swing or an active crypto trader which requires your funds to be available on-demand, then storing it on trading platforms and exchanges is convenient, as you can trade your coin or tokens for others and vice versa, instantly without the need to transfer, send and unlocking wallets to access your funds (which requires a bit of time and gas fees).
We hope that you found this guide helpful and that you will be able to find the right crypto wallet that fits your requirement. For more information, you can check out our video “Intro to Crypto Wallets“ which covers in details all types of wallets.
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