As the adoption of cryptocurrency continues to grow, Bitcoin remains to be the most dominant coin, but it is now joined by other fast-growing currencies such as Ethereum, Litecoin, and Ripple on the market. More traders and investors are taking an interest in owning these digital assets, and their usage is starting to become regulated in more territories too.
None of this would be possible without blockchain technology, the same tech that allows users to send and receive tokens through digital wallets. Choosing the best cryptocurrency wallet is probably one of the most critical decisions to make once you finally decide to enter the world of crypto.
Most coins have their official wallets, which drastically increases your choices. Besides that, there are many demands that crypto wallets should be able to fulfill, such as the capability of facilitating secure transactions, holding multiple types of currencies, and being resistant to hacking or loss.
Your wallet will most likely indicate how and when you can use your cryptocurrency, whether it’s for trading, purchasing, or both. Choosing the right one for your needs is imperative, so you don’t need to own too many and potentially get lost in the mix.
Types of Wallets Available
There are two distinctions between crypto wallets: they’re either cold or hot. Cold wallets refer to those that are offline most of the time, while hot wallets are those that frequently need to be connected to the internet to work.
Here are the five main types of crypto wallets, as well as the pros and cons of each.
A web wallet runs entirely online. This is one of the most accessible and easiest to own. All you need to do is load up the website host, login, and you’ve accessed your assets. For this reason, it’s one of the most accessible wallets—but since they’re always hot, there’s a high risk from cyberattacks.
If the webpage malfunctions or if the computer you’re using has a virus, there’s a high chance that you could lose your coins. This doesn’t happen often, but it is something web wallet users should be aware of.
As its name suggests, mobile wallets are available on your smartphone. Your primary access point is through an app, so you would usually have to download a developer-made crypto wallet and sign up before your assets become available on it. Plenty of mobile wallets can store multiple currencies.
Since smartphones are personal, theft and security risks are reduced. They are also more portable than web wallets, which need desktops. However, if you lose your phone or your mobile gets damaged, there’s a risk that you may lose your coins.
This wallet is an app that lives on your computer. It can be a cold (and therefore more secure) wallet if said device will never be connected online. But because it’s stored on your computer, it might be difficult to lug around. If portability is not an issue for you, and you have a spare laptop that you won’t connect online, this could be a great choice. However, risk enters the picture if the device ends up getting damaged.
Imagine if your USB became a bit more interactive and had a tiny screen displaying its contents. That’s mostly what a hardware wallet is. It’s one of the most expensive crypto wallets out there but is favored by those who are serious in the business. Online transactions are still possible, however, since it’s offline once you disconnect it from your computer, it’s mostly cold. This makes it one of the safest wallets out there, ideal for storing large amounts of crypto.
Paper wallets are somewhat similar to the effect of having a paper fiat currency; however, it takes a bit more effort to perform transactions. For one, you need to print your public and private keys first. A unique QR code can also be printed out which can be scanned by another user, ideally using a different type of wallet. You won’t get hacked here, but you can imagine how tiring a physical piece of paper will be for day-to-day transactions or trading.
What to Consider When Choosing a Crypto Wallet
- Ease of use – If you’re someone who’s always out and about, you’d want wallets that you can carry around with you. Portability is not a trait all types of wallets possess, so keep this in mind.
- Purpose – What are you using your crypto assets for? If it’s for everyday purchases and you only carry small amounts with you, then it might make more sense to have it on your mobile app. However, if you’re using it for trading and you possess significant amounts of crypto, hardware or even paper wallets might interest you more.
- Security risk – If you’ve noticed the trend, the colder the wallet is, the more secure it is. However, prices tend to become steeper, procedures get more cumbersome, or portability takes a toll when it comes to these. Review what type of asset you’re protecting. If this is for personal use, you may be able to get away with hot wallets—but still, remember to practice caution and handle any wallet with care.
- Price – What’s your budget for this wallet? Hot wallets such as mobile apps can are most likely free, while hardware wallets can have a high price tag.
Investing in the right wallet can be a real tough decision, as it’s your gateway to transacting in the crypto world. It’s also critical to choose one (or perhaps multiple) that can serve your specific needs right away. Study your assets and intentions before making a decision—there’s a wallet for every type of need. All you need to do is decide on which one best fit yours.
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