As Web3 and cryptocurrencies grow, learning about important tools such as crypto wallets is fundamental. It is the first step for anyone who wants to deal with digital assets. A wallet allows receive, send and even trade currencies like bitcoin, ethereum, bnb and other digital assets such as nfts. However, these wallets are not the same as traditional ones. With several options available it’s important to consider important factors such as security, convenience, user experience, and cost. In this article we’ll cover and explain everything about crypto wallets to help you decide between the most suitable option for your requirements and experience. so, what is a cryptocurrency wallet?
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a digital storage where users can manage, store, transfer, interact with decentralized apps, exchange digital assets such as ethereum, bitcoin, NFTs and even interact with the whole ecosystem. While physical traditional wallets just allow holding cash and cards, crypto wallets don’t hold the assets themselves; instead it is stored by cryptographic keys. There are two types of wallets that uses cryptographic keys, hot and cold wallets:
Hot Wallets vs Cold Wallets
Understanding the difference between hot and cold wallets it’s important to make the perfect choice between so many options:
- Hot wallets are always connected to the internet, making them ideal for interacting with decentralized applications (Dapps), holding, sending, receiving, trading currencies and NFTs. Normally are found as software wallets, browser extensions and mobile apps. Some popular options are metamask, phantom, base wallet or trust wallet. Even with all these positive benefits, Hot wallets are most likely to be vulnerable to malware and hacks since it’s connected to the internet. For this reason it is not the best election to hold assets over a long period of time.
- In contrast to hot, cold wallets can be found as USB drives or paper with keys, both are always disconnected from the internet, being at the same time the major advantage. This provides higher security to potential hacks or malware, being very suitable for storing a large quantity of funds at long term if it’s not necessary to use it frequently.
Choosing between cryptocurrency wallets will depend on each person's needs, while hot wallets have higher compatibility with decentralized apps and it’s better to utilize it frequently, it could experience more risks for potential malware or hacks as it’s always connected to the internet. On the other hand, cold wallets are not connected to the internet, enjoying enhanced security, but could not be the best option for interacting frequently with crypto.
Types of Crypto Wallets
There are three similar, but different types of cryptocurrency wallets: software, hardware, and paper wallets. All the wallets have been created for the same purpose, storing the public and private keys. However, each has pros and cons in terms of security, user experience, convenience or security. So, what types of wallets exist?
Software Wallets
Software wallets are commonly hot wallets, accessible through a pc, smartphone, or web platforms. Making them an excellent choice for interacting regularly with cryptocurrencies, NFTs and decentralized apps.
- Desktop Wallets: Desktop wallets can be downloaded and utilized only in a pc, giving users total control over their public and private keys. It’s considered a safer option than web wallets, but demands high levels of knowledge as it’s less intuitive than other mobile or extension wallets. Examples: Electrum and Exodus.
- Mobile Wallets: It’s possible to download mobile wallets through a smartphone in the play store for Android or app store for IOS, some popular examples include trust wallet, phantom, and metamask. Making them convenient for trading and interacting with decentralized apps quickly at any time, anywhere, being popular for managing frequently small amounts of money.
- Web Wallets: Web Wallets are governed by other entities, and can be accessed through a browser; they're commonly found as crypto exchanges, some popular examples are KuCoin, Bybit, Bitget, Coinbase and Binance. This is convenient for performing leverage trading and quick cryptocurrencies transactions. Including staking, receiving and sending cryptocurrencies. However, as another company is involved in managing your keys requires trust and confidence in their security measures. ‘’Not your keys, not your crypto’’
Hardware Wallets
Hardware wallets are part of cold wallets, offering enhanced security. Hardware wallets come as physical devices, similar to USB drives, where the private keys are stored offline. When a transaction is arranged, the device signs it away from the internet, keeping the keys safe from any potential malware or hacks. Some popular examples but not limited include trezor and ledger, while both devices have a cost, the enhanced security makes this crypto wallets worth and suitable for long term hold of digital assets.
Paper Wallets
Paper wallets are a different type of cold wallet, where unlike hardware wallets, the keys are printed in paper. This nature makes this cryptocurrency wallet invulnerable to malware and hacks since it remains away from the internet. Making them one of the most secure options. However, paper wallets require careful manipulation to avoid damage or loss, otherwise if the keys get lost it will not be possible anymore to access the assets. This makes paper wallets impractical for use frequently, and are often utilized for long term storage of digital assets.
How Do Crypto Wallets Work?
Cryptocurrency wallets work using both, public and private cryptographic keys. Together allowing transactions in the blockchain safely. This concept might sounds complicated, but it’s not:
- Public Key: Similar to any bank account number, where it’s possible to receive deposits from anyone, the public key, mostly known as ‘’Wallet Address’’, can be shared with anyone safely, making it possible to receive funds through blockchain from anywhere in seconds.
- Private Key: The private key also called ‘’Seed Phrase’’, it’s a password of 12-24 random words that gives access to the wallet, this key must remain private and secret. Otherwise if anyone else gets this password, could gain total control over the wallet and assets.
When a transaction is arranged, the private keys sign every transaction, providing ownership and total access to the assets in the wallet without making the keys public.
What Are the Best Crypto Wallets?
The best choice will depend on each user's needs and purpose of the crypto wallets. Whether you prioritize convenience, cost, compatibility, support, or even prioritize security for long term holdings. With several options, there is few that stand out between all cryptocurrency wallets:
- Metamask: Metamask is highly compatible with several decentralized apps, has a friendly interface and supports a large quantity of cryptocurrencies. Metamask is an ideal choice for anyone who wants to interact regularly with the ecosystem.
- Trust wallet: Similar to metamask. However, It could experience some compatibility issues across different Dapps.
- Exodus: Exodus it’s intuitive, and also it’s possible to integrate it with other different hardware wallets like trezor, providing extra security.
- Ledger Nano X: As a hardware wallet is always disconnected from the internet, making it a solid option for security and holding assets at long term, this device also incorporates bluetooth connectivity, striking a good balance between usability and security. However, that robust security has a cost.
- Coinbase Wallet: Backed by one of the biggest cryptocurrency exchanges, thi is one of the best options for users just starting in web3. This wallet strikes a good balance between accessibility, making it a good option for beginners.
With so many options available, the best wallet will aligns with your needs, let’s dive into key factors to consider for choosing one:
- Security: Cold Wallets are disconnected from the internet. This nature enhances their security, making them ideal for holding assets for the long term.
- Convenience: Hot wallets have higher compatibility with Dapps. However, as it’s always connected to the internet, it could face potential security issues.
- Cost: Hardware wallets enjoy enhanced security, but this robust security has a cost which may vary depending on the device.
- Supported Cryptocurrencies: Hot wallets support a large number of cryptocurrencies across different blockchains.
A cryptocurrency wallet is the first step and the key to interact with the cryptocurrency ecosystem.
Need help to achieve your goals? Contact our specialist at Solicy for a free consultation and let’s explore together the best solutions for your needs.
