Whether it’s investing or storing your digital currency for investing or using in the future, you need a crypto wallet for any dealings with cryptocurrency. It is essential to know the types of crypto wallets and how to choose the best one.
Your cryptocurrency goal determines your wallet choice. So, you need to know what you want to get out of your digital currency. However, with so many good options and new ones developing daily, it can be challenging to get the right one, especially if you are a newcomer in the crypto world.
This article is a guide to help you know all about the types of crypto wallets, how they work, and the essential features you need to look for to get the best.
What Is A Cryptocurrency Wallet?
Like a physical wallet holds your notes, coins, credit cards, and debit cards, a digital wallet holds proof of your digital funds. Note that the wallets don’t store your digital currencies, only the evidence of it. It’s stored in the form of public and private keys and allows you to track balances and transact from one platform, similar to how a bank account works.
It’s software that allows you to access cryptocurrencies you own, store, manage and send or receive. Some wallets only hold a single type of digital currency, while others will enable you to keep multiple cryptocurrencies. Some wallets are built during cryptocurrency exchange development within an exchange platform.
What Are Public And Private Keys?
For you to be able to access your crypto wallet, you need a public and a private key. A private key is a randomly generated string of numbers and digits that acts as a password to access your crypto wallet. As for the public key, it’s like a bank account that is visible to anyone who wants to send you cryptocurrency.
It would be best if you keep your private key secure. Please take it as the key to your safety. Anybody with the key or code combination can access your crypto wallet. When someone sends you digital currency, they assign or transfer the ownership of the cryptos to your wallet address.
Types Of Crypto Wallets
Crypto wallets are categorized into five types, online, desktop, mobile, hardware, and paper wallets. You might probably wonder what is the best Bitcoin wallet for me as there are so many types. Look at the types of crypto wallets described below to choose which cyrpto wallet would work best for your Bitcoins or other cryptocurrencies you wish to store or transact.
Online Crypto Wallets
The same way you access Google Drive on the cloud, online wallets are cloud-based and are accessed from a web browser on a phone or computer. They share features from both desktop and mobile wallets.
Their advantages are that they offer faster transactions, and are integrated with crypto exchange platforms, and allow you to transfer or exchange cryptos with the supported coins. Their only downside in these types of crypto wallets is low-security levels since hackers can easily access your private key as you store it in the cloud.
Desktop Crypto Wallets
These are software or apps that you can easily download and install on your computer. These types of crypto wallets are available for most operating systems and are considered relatively safe. You can only access them through your PC after download. The app generates a phrase that stores all the information you require to recover your wallet. This same information is what you use to access your wallet, and you must keep it a secret.
Desktop crypto wallets are readily available online and are easy to install. Most cryptocurrencies have desktop wallets. They are pretty safe as they are only accessible from the computer on which you download them, and most offer additional features and tools.
The only vulnerability comes with these types of crypto wallets is when someone hacks your computer, and you lose all your cryptocurrency. Also, since you are warning over the internet, there are chances your computer could suffer malware attacks as well.
Mobile Cryptocurrency Wallets
These are mobile apps that you can install on your smartphone or other handheld devices like tablets. They are available for Android and iOS devices and come with additional security features such as a QR code scanner. They are convenient as you can access your wallet and transact on the go. Major cryptocurrencies have mobile apps.
However, they only have basic functions due to storage capacity constraints in mobile devices. The only drawback in these types of crypto wallets is that they are vulnerable to cyber attacks, malware, and viruses. Anyone who can access your phone and password can transfer your cryptos easily.
Hardware Crypto Wallets
Unlike the other types of crypto wallets discussed above, hardware wallets are offline platforms such as Ethereum offline wallet. You can store the information in an external device, often a USB stick or an external hard disk. To transact, you need to plug the device onto a computer with internet access.
For security reasons, ensure always disconnect the wallet when you complete a transaction. They are an ideal option for those who need to store larger amounts of cryptocurrency, especially for long periods. It has no online security threats, unlike the other wallets.
Paper Crypto Wallets
These types of crypto wallets were an early version of hardware wallets where you can print your public and private keys on paper as a QR code.
They are a safe option. To transact, you need to transfer your digital funds to a software wallet in a process called “sweeping.” The only issue here is that you can miss the paper wallet or someone can steal it easily.
How To Choose A Cryptocurrency Wallet?
Your choice of a crypto wallet depends on whether or not you need to access the wallet daily, the number of cryptocurrencies you will hold, preferred security level, and convenience. If you intend to hold large amounts of cryptos for an extended period, hardware wallets are your safest choice.
For security, hardware crypto wallets are also the best choice. If you need a wallet that offers an excellent user experience, desktop and mobile wallets are the best options. Opt for a mobile wallet if you want to access your coins on the go. Ensure to check if your wallet of choice can hold multiple currencies.
Choosing a crypto wallet is not a decision you should take lightly. Do some research on the types of crypto wallets and read reviews. Ultimately, the best crypto wallet is the one that offers you security for your cryptos, mobility, is user-friendly, allows multiple currencies, and is affordable to you. While most wallets are free, hardware wallets will cost you and might only be cost-effective if holding coins for a long time.