You can only buy and sell cryptocurrencies if you have a crypto wallet or bitcoin wallet. There are many cryptocurrency wallets in the market. Knowing what is a cryptocurrency wallet will help you choose the best crypto wallet to store your bitcoin and other cryptocurrencies safely. A crypto wallet can be a device, a service offered by a crypto exchange, or a program on an app or online. Cryptocurrency wallets are in two major categories: Cold wallets and Hot wallets.
How Does a Cryptocurrency Wallet Work?
A cryptocurrency or bitcoin wallet is simply put a computer program that stores the private and public keys that communicate with a blockchain to allow wallet holders to send, receive and view their cryptocurrency balance.
The public keys can be shared with anyone who wants to send you a cryptocurrency, while the private keys are to be kept secret. These private keys allow you to move your bitcoin around the blockchain and thus make transactions from your wallet. When someone sends you bitcoin, they send it to your public address. Your public and the private keys, however, must match for the cryptocurrency sent to show in your balance, and only by having access to your private keys you can sign transactions and move your assets.
Not your keys, not your coins
Custodial vs non custodial wallet: A custodial wallet is a crypto wallet in which the private keys are kept by a third party. An example of this is a wallet held by a cryptocurrency exchange (the marketplace where you buy bitcoin) such as Coinbase. A non custodial wallet is a wallet in which the crypto owner holds the private keys and has the full control over their cryptocurrencies. A non custodial wallet is safer than even the best non-custodial wallet.
Cold Storage Wallets and Hardware Wallets
Cold wallets or hardware wallets are the best wallets for cryptocurrency when you want to store private keys offline. They are the most secure types of crypto wallets. Essentially, hardware wallets are small devices used to store private keys offline. To use your hardware device, you will need to connect it to your PC, log in and start transacting. Examples of hardware wallets include the following:
- Trezor wallets. The Trezor wallet comes in two models; The first generation Trezor One and its successor, Trezor Model T. The Trezor Model T wallet gives you the ability to access third-party exchanges directly in its website interface. The Trezor One costs $59 while the Trezor T Model costs $179.
Ledger wallets. There are two models of the Ledger wallet; Ledger Nano S and Ledger Nano X. Ledger wallets are multi-currency wallets and can store different coins at the same time. Both wallets have access to the Ledger Live software. The Ledger Nano S costs $59 while the Ledger Nano X costs $119.
KeepKey. KeepKey is an open source hardware wallet developed by the Swiss cryptocurrency exchange, Shapeshift. Apart from being is easy to use for beginners, it supports over 40 cryptocurrencies. You can buy KeepKey at $79 or from authorised reseller at $99.
Coldcard. Coldcard is a bitcoin only wallet that looks like a credit card or bank card. The Coldcard wallet comes with a number-based seed, making it different from other hardware wallets which come with word-based seeds. The Coldcard wallet costs $119.97.
BitBox. This is the smallest and simplest open source cryptocurrency hardware wallet whose private keys are stored on an ultra-secure tamper-proof chip. It is easy to set up and it requires no registration. You can buy it at $141.
SafePal S1. The SafePal1 is a portable multi-currency hardware wallet. If you want to transfer your coins and tokens, connect to the SafePal app using a local QR connection. This ensures safety of your crypto funds. The sale price is $49.99.
You are advised to buy hardware wallets directly from the manufacturer or official resellers. Private sellers online have previously stolen cryptos from owners after manipulating the devices before selling.
Hot Storage Wallets
Hot wallets are online wallets that allow you to store bitcoins and other cryptocurrencies and make transactions over the internet. These wallets run on internet-connected devices like phones, tablets, or computers, and are often even hosted, custodial wallets. Their connection to the internet makes them vulnerable to attacks, and in the case of custodial wallets, they are less secure. Examples include desktop wallets on your computer, mobile wallets and web wallets such as those offered by an exchange.
Desktop wallets are wallets that are downloaded to your computer and store your cryptocurrency on your desktop computer. Desktop wallets are more secure than both mobile and online wallets because you have more control of your funds. However, you will need to ensure that you choose a good antivirus and have backups of your hard drive. Examples of desktop crypto wallets include: Electrum, Exodus, Bitpay, Atomic wallet, Wasabi etc.
Mobile wallets are apps that are downloaded and used to store bitcoin on your smartphone. Your smartphone can be stolen anytime, and it is your responsibility to ensure you have backups every time. Mobile wallets include Mycelium, Exodus, Samourai, BlueWallet, and Muun. Muun is one of the best cryptocurrency wallets for beginners.
Web wallets are crypto wallets that can only be accessed in a web-browser. Although you can access your bitcoin through any device, web wallets are vulnerable to hacking. And it’s not advisable to store your coins in a web wallet. Well-known online wallets include crypto exchange wallets such as Coinbase and Exodus.
How to Choose the Best Cryptocurrency Wallet
Picking a secure crypto wallet to store your crypto assets is a critical step that needs to be taken seriously. Factors to consider when picking your wallet include security, wallet type (more on this below), features, level of anonymity, and charges. Other factors are User Interface and accessibility, backup and multi-signature capabilities, built-in services, and transparency, such as open-source code.
Cold storage bitcoin wallets are the most secure types of bitcoin wallets. It is vital to do thorough research on available types of bitcoin wallets before you choose. Picking the wrong wallet for your bitcoin may cause you to lose all your cryptocurrencies.
What is crypto custody? Crypto custody solutions are cryptocurrency storage institutions or third-party security service providers that store crypto and digital assets on behalf of institutional and professional investors.