If you’re like many people who want to start investing in cryptocurrencies, you may be looking for a cryptocurrency wallet. This article will explain what cryptocurrency wallets are and how they work—and you will know the best wallets to store your cryptocurrencies.
What are Cryptocurrency Wallets?
Cryptocurrency wallets are applications that provide a way to store and send payment information from one place to another. It allows users to track their spending and keep track of their account balances.
You will need a crypto wallet to start trading or transacting cryptocurrencies. Hence, any standard cryptocurrency exchange will provide its own wallets. You can use these wallets to store your crypto coins. But are exchange wallets the only option to store cryptocurrency? No, there are more.
Types of Cryptocurrency Wallets
There are four standard types of crypto wallets to store your digital coins. Here are those four types of wallets.
Web-based wallets are, as the name suggests, hosted by companies. They take care of the technical details, like generating your private keys and connecting to the blockchain.
There are many web-based wallets out there, and you can identify them by their URLs: they generally have “wallet” in the domain instead of “exchange” (e.g., coinbase.com/wallet).
The main advantage of using a web-based wallet is convenience—you don’t have to download any software or apps, and you can access your wallet from any browser or internet-connected device.
This type of wallet is also the easiest to use, making it user-friendly for beginners starting with cryptocurrency investing.
On the other hand, if you lose your password or someone else gains access to your account, they could empty all your holdings. Suppose you store your funds on an exchange (like with Coinbase). In that case, exchanges can also lose your funds or freeze accounts for various reasons such as internal policy violations or government regulations (e.g., AML/KYC compliance). Hence, it is essential to select a secure cryptocurrency exchange like OKX for the optimal safety of your digital coins.
The desktop wallet is a software wallet that you can download and install on a desktop or laptop computer. These wallets are suitable for beginners who are just getting started with cryptocurrency. However, they have their drawbacks. Most importantly, they aren’t as secure as hardware wallets.
Your computer must be connected to the internet to access your desktop wallet. This makes it easier for hackers to access the cryptocurrencies stored in your wallet because attackers can potentially gain control over your computer systems. And since private keys are stored in the device, if it is lost or damaged, so too is the digital currency that was on it.
Nonetheless, if you’re just looking for a place to store your crypto and plan on keeping them there long-term, a desktop wallet may be an option worth considering.
Mobile wallets are convenient because they can be accessed from your phone. This makes them useful in real-world situations, like when you want to make an in-person purchase or receive a payment. Not all crypto mobile wallets require an Internet connection, so it could be handy to have one of those if you need to send or receive funds and the internet is down.
Many people are wary of storing their funds on their phones because smartphones can get lost or stolen. Hence, mobile wallet apps need security features like biometric authentication (fingerprint scan). It also helps if a backup feature is present if you need to recover your data from another device.
Hardware wallets are physical devices that you connect to your computer and through which you store your cryptocurrencies. You can think of them as USB drives to store cryptocurrency addresses.
These wallets can store various cryptocurrencies, including Bitcoin and Ethereum. They are the most secure way to store your cryptocurrency and are the best option for long-term storage. However, with this type of wallet, you need the hardware to access your held currencies, so it may not be convenient if you plan to trade often or make regular payments with cryptocurrency. You also need to be careful not to lose or damage them as they won’t last forever and could easily break if dropped onto a hard surface.
What Is the Best Wallet to Store Your Cryptocurrency?
While you may think that since crypto exchanges themselves provide wallets, they are the safest option. However, that’s not the case. Not all exchanges are secure from potential hacks.
Exchanges have been notoriously vulnerable to hacks over the years, with millions of dollars worth of crypto being stolen through phishing scams and bad security practices. The best practice is to move your coins off the exchange as soon as you buy them and into a more secure wallet where they can be held until needed for spending or trading. Well, if not cryptocurrency exchanges, what is the best wallet?
There are plenty of different wallets available today, some software-based and others hardware-based. Software wallets can be used for both mobile devices and desktop computers. In contrast, hardware wallets offer an even more secure alternative by keeping private keys on devices not connected to the internet – but at an extra cost!
Each type of wallet comes with some pros and cons. For instance, web wallets are easily accessible but compromise security. On the other hand, hardware wallets are the safest but are not accessible. Hence, you need to choose the type of wallet based on your requirements and preferences.
Exchanges are not wallets. They might keep your cryptocurrency safe, and they provide a convenient way to buy or sell bitcoin and other cryptocurrencies quickly; however, most of them are centralized. You don’t get to control your own wallet or private keys. If you want that kind of freedom and security, you should keep your cryptocurrency in a wallet you control.