Choosing the right cryptocurrency wallet is one of the most important choices that every crypto investor has to make. Pick a good crypto wallet, and you will be able to securely hold your digital assets for years without ever experiencing any problems. But choose a bad crypto wallet, and you can lose all your coins within seconds. It’s obvious that choosing a quality cryptocurrency wallet is important. But how to make sure that the crypto wallet you choose is really the best one for you?
What Is a Crypto Wallet
Cryptocurrency wallets are applications or devices designed specifically to allow you to securely store, send and receive cryptocurrencies like Bitcoin or Ethereum.
Some crypto wallets only allow you to use one kind of crypto. For example, Bitcoin wallets only allow you to hold and transfer BTC. Other wallets, called multi-currency wallets or multi-wallets for short, allow you to store many different kinds of coins and tokens.
Why Do You Need a Cryptocurrency Wallet
But why do you even need a crypto wallet? Can’t you just store your cryptocurrencies on an exchange such as Binance or Coinbase?
Well, you can. But storing your crypto on an exchange instead of using a crypto wallet is the quickest way to lose all your funds and be left with nothing.
Exchanges like Coinbase and Binance are generally considered secure. But that doesn’t change one of the most important rules of using cryptocurrency: “not your keys, not your crypto”.
Billions of dollars worth of crypto is stolen by hackers and scammers every year.
A private key is like a certificate of ownership of assets stored on a blockchain. Since the blockchain is public, anyone can see the funds stored at any given address. But to actually be able to use these funds, you need to prove that you are their owner by being able to provide a private key.
Blockchain is like a bank vault storing a large number of safety deposit boxes. Each of these boxes has a different key, and without the key you won’t be able to access what’s inside.
If you use a cryptocurrency wallet, you have full control over your assets. You are the only person in the world who knows the private keys and who can use them.
If you hold your crypto on an exchange, you don’t actually own your private keys - the exchange does. Exchanges are usually well protected from the hackers, but there’s nothing stopping them from locking you out of your funds. If you don’t own the private keys, you don’t actually own your crypto.
Different Kinds of Cryptocurrency Wallets
Cryptocurrency wallets are much better for storing crypto than exchanges. But crypto wallets come in many different shapes and forms, each having their advantages and disadvantages.
Cold Storage Wallets
Cold storage wallets are also called hardware wallets. That’s because instead of being software applications, they are devices specifically built to safely store, send, and receive crypto.
Hardware wallets look very similar to typical flash drives, but they usually have a small screen. In order to send or receive crypto, you plug the hardware wallet to a computer or smartphone, and use a wallet app.
Hardware wallets keep all your private keys in cold storage. What it means is that the keys never actually leave the device. They are always kept on the wallet and never copied to any system connected to the internet.
Cold storage wallets are considered the most secure option for holding large amounts of crypto. However, they are not very convenient if you send and receive crypto often, because constantly plugging and unplugging the hardware wallet can get very tiresome.
Hot Storage Wallets
Hot storage wallets are also called software wallets - instead of being separate devices, they are apps that you download to your computer or smartphone. Since the private keys are stored on a device connected to the Internet, hot storage wallets are not as secure as cold storage wallets, but they are much more convenient.
Desktop wallets are hot storage wallets that you download to your computer or laptop. Many desktop cryptocurrency wallets are very reputable and are generally considered secure.
Choosing a desktop crypto wallet can provide you with a good balance between security and convenience. Desktop wallets are a great option for beginner cryptocurrency users, who don’t own enough crypto to make them need a cold storage wallet.
Mobile crypto wallets are very similar to desktop wallets, but you use them on your smartphone instead of your computer. The main advantage of mobile cryptocurrency wallets is their flexibility - they allow you to send and receive cryptocurrency transactions at any time, anywhere you go.
Generally, desktop wallets are considered a more secure option than mobile wallets. A mobile wallet will be the best crypto wallet for you only if you travel a lot or plan to make dozens of crypto transactions throughout the day.
In the case of web wallets, there is no app that you have to download to your desktop or smartphone. You simply log in to the wallet like you would log in to any other website.
Crypto web wallets are the least secure type of cryptocurrency wallets. Using them can be even more dangerous than storing your coins and tokens on an exchange. There’s really no reason for anyone to use web wallets - hardware wallets, desktop wallets and mobile wallets are all much better options.
Moving your funds from an exchange to your own cryptocurrency wallet is the most important step in making sure that your funds are securely stored. However, choosing the best crypto wallet for you depends on your personal needs.
If you want maximum security, cold storage crypto wallets are the right thing for you. If you don’t plan on storing massive amounts of crypto but want to conveniently send and receive cryptocurrency, mobile and desktop crypto wallets will provide a good balance between security and usability.
Electrum is the earliest popular bitcoin hot wallet.
It was created by Thomas Voegtlin in 2011.
This hot wallet even supports the most widely used hardware wallets. It is designed for Bitcoin and crypto users that already know how to use Bitcoin. Electrum can be hard to use for crypto newcomers.
Supports multisig services
Supports hardware wallets
Private keys encrypted & never leave your computer
Can only store bitcoin
Might be hard to use for newbies
No customer support
Released in 2011
Altcoins not supported
Supports Wiindows, Mac and Linux
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