A crypto wallet is a digital tool that allows users to manage, interact, and store their cryptocurrencies. However, these wallets do not store physical coins or money but instead private and public keys that provide access to your cryptocurrency holdings.
There is a clear difference between a private key and a public key, with the former being the password that gives you access to your crypto funds while the latter is like an account number that allows you to send cryptocurrency. Choosing the right crypto wallet is important for anyone who is looking to buy, or invest in cryptocurrencies
But what makes a good crypto wallet? For starters, you’ll need to find a wallet that seamlessly allows you to receive, swap, and sell your cryptocurrencies. It should also support a wide variety of tokens as there are now over 20,000 cryptocurrencies on the market. While there are many out there to choose from, selecting the best crypto wallet ultimately depends on your individual needs, with security and compatibility being overarching considerations that should inform the choice.
Below we will discuss the different types of crypto wallets and highlight their features, security features, and advantages.
Types of Crypto Wallets
There are two main types of crypto wallets to choose from:
Hot Wallets
These wallets are connected to the internet and are made for easy use. Some examples of hot wallets are mobile, web, and desktop wallets. They allow for quick transactions and are easy to navigate.
Cold Wallets
These wallets are storage solutions to use for cryptocurrencies that function offline making them a safer choice. They can be used for long-term storage and offer the highest security features making it hard to access.
Hardware Wallets
This type of cold wallet stores private keys on a physical device. These types include using devices such as Trezor or Ledger Nano S. A great feature of these types of wallets is that they are resistant to malware.
Software Wallets
These wallets are stored on devices such as mobiles and desktops. Examples of these software wallets include Trust Wallet and Exodus. With additional features built-in for exchanges they make transactions easier to do.
Paper Wallets
This refers to a physical printout of your private and public keys which can be generated offline. They are a secure storage choice, which cannot be affected by online threats such as hacking. However, you need to keep your paper in a safe place to avoid anyone getting access to your funds.
Custodial Wallets
These are third-party managed wallets that keep your private keys secure on your behalf. Examples of this type of wallet include Binance or Coinbase. For beginners, they are convenient and have a great user support system. However, you do not have full control over your funds, making the risk of loss a little higher should the server be compromised.
Non-Custodial Wallets
These wallets allow the user to have full control over their private keys.
Key Factors to Consider When Choosing a Crypto Wallet
When it comes to choosing a crypto wallet, there are some key factors that you have to consider to ensure that you are choosing one that meets all of your digital asset needs. Here are some of the key factors to consider:
Security Features
This is an important feature when choosing a crypto wallet, especially since the threat of hacking and theft is a constant within the digital space. When looking into security features, you need to include measures like having full control over your private keys.
Using two or multi-factor authorization provides an extra layer of security for your crypto wallets. These are most beneficial to prevent anyone else from logging into your account and authorizing transactions.
You should also consider the following when evaluating the UX and interface of a crypto wallet:
Ease of Use
The wallet should be easy to navigate and use, especially for a beginner. Try to find crypto wallets that are straightforward to use and have clear navigation when sending and receiving cryptocurrencies.
Compatibility with Mobile and Desktop
Use a wallet that is compatible with both mobile and desktop devices as this is important to be able to access it from any device at a moment's notice.
Customer support
If you have any issues, a wallet with good customer support is important. You need a wallet that has 24/7 customer support and a responsive support channel available.
Supported Cryptocurrencies
Crypto wallets often support different types of cryptocurrencies. However, some crypto wallets are limited to only a select few. When you are choosing a crypto wallet, consider that you’ll need a wallet that can store all types of crypto if you plan on having multiple crypto types. Some wallets can also only support certain tokens as they are built on a specific blockchain so ensure that the wallet you choose can accommodate the type of tokens you want to store.
Fees and Costs
There are some costs and fees involved when using a crypto wallet. Some wallets charge a fee for transactions such as sending and receiving cryptocurrencies. There may also be a fee involved every time you decide to withdraw from your crypto wallet. There may likely also be an annual or monthly fee for using the wallet services.
Reputation and Reviews
Doing research before choosing a crypto wallet is important as this can help you make a decision. Here's what you need to consider when choosing a crypto wallet.
User Reviews
Other users can either encourage or discourage you from using the wallet based on their reviews of their experience using the wallet.
Industry Reputation
Check the history of the wallet provider to ensure that it has a good industry reputation. You can do your research and check if there have ever been any major hacks or security breaches with it in the past. Knowing this information can help you decide if the wallet is suitable for your needs.