Do you know how many types of cryptocurrency wallets actually exist in the market?
If you don’t, there are high chances that you won’t be able to choose the right wallet for yourself and as a result not able to store your crypto safely.
If you don’t believe me, read BlackWallet Hacked: Warns Stellar Community Not to Log Into Site and Bitcoin, Jaxx Wallets Have Security Issues, Cheetah Mobile Warns. These articles tell you about the tales of cryptocurrency wallet hacks. Often new investors are not aware of these facts, and end up picking one of previously hacked crypto wallets. Which is definitely not recommended.
Let us also accept the fact that “one’s cryptos are as safe as their wallets” and different types of wallets are to be used for different purposes at different times.
That’s why in this write-up I want to tell you about different types of cryptocurrency wallets. However, if you are not familiar with wallets, read this:
5 Different Types Of Crypto Wallets
Any type of wallet is simply a combination of your private key and public address. Based on how and where you store them, you can categorize your wallets in the following segments.
1. Mobile Wallets (Easy access to your crypto assets)
Let’s start with the simplest and widely used crypto wallets type.
Mobile wallets for Bitcoins and altcoins are the most used wallets right now on the market and it is so because they are mobile-based and also easy to use.
For popular cryptocurrencies, you will find mobile wallets compatible with both Android and iOS and for less popular ones you can expect a decent Android version atleast.
But before trusting a mobile wallet, one should do the due diligence of it based on the following factors such as:
- Private keys – Wallets where you control your private keys.
- Ease of use – Elegant UI for ease of use.
- Development community – Active development community.
- Backup & security – Backup and restore features.
- Compatibility – Compatible with different operating systems.
Mobile wallets are the fourth most secure way to store your cryptocurrencies because they are always connected to the internet (hot wallets) and can be flawed by its development community itself.
Some mobile wallet suggestions:
Note: I highly suggest you to read about the security risk of mobile, desktop and web wallets. This will help you dive deep into the world of crypto wallets, and help you make a more informed decision.
2. Desktop Wallets (Ease of use, but not very secure)
Desktop wallets for Bitcoins and cryptocurrencies are installable software packs that are available for most of the desktop operating systems such as Mac, Windows, Linux.
Any cryptocurrency that is serious about itself will launch their desktop versions of wallet on day one itself.
But as it is your desktop or laptop that often connects to the internet, you need to follow the basic security measures such as antivirus and anti-malware software and a strong firewall.
Currently, there are many desktop wallets available for Bitcoins and other popular cryptocurrencies that one should use instead of keeping their cryptos on exchanges.
Desktop wallets are the third most secure way to store your cryptocurrencies.
3. Paper Wallets (Not very relevant anymore, but good to know info)
Back in 2008, when Bitcoin was launched, paper wallets were the only secure way to store this popular cryptosset. This is why, only a select few was able to buy and store BTC back in the days. Thanks to technology advancement and wider adoption, now there are other type of wallets that helps in storing crypto assets.
However, for the information purpose it is a good idea to read and learn about paper wallets.
Paper wallets are not for everyone because they are a tad bit technical and requires a high level of caution from the user. It is so because in a typical paper wallet you just print your private keys and public addresses on a piece of paper and start transferring your bitcoins or altcoins on it.
Needless to say, as it keeps your private keys offline, it is another secure way of storing your cryptos but not all cryptocurrencies offer paper wallets.
Still, for all the popular cryptocurrencies you will easily find paper wallets and can use them easily with caution. Read: How To Make A Bitcoin Paper Wallet & How To Spend Bitcoins.
They are the second most secure way to store your cryptocurrencies.
Note: As technology has advanced, people mostly use Hardware wallets instead of paper wallet.
4. Hardware Wallets (Recommended crypto wallet type)
I saved the best for the last, as this type of crypto wallet is recommended for long term investor. In fact, hardware wallets is the most secure type of cryptocurrency wallets that you can use.
Hardware wallets, as the name suggests, are hardware devices build specifically for handling private keys and public addresses.
It is a USB-like device with an OLED screen and side buttons to navigate through the interface of the wallet and comes with its native desktop apps for different cryptocurrencies. It is a device which you can connect to a PC or mobile device via USB even on an infected device.
Since your seed word are shown on external screen (hardware wallet screen), and private key is also stored on the hardware wallet, it makes your crypto storage super secure. Here is an image of popular Ledger Nano X wallet, in which you can see the screen and buttons to navigate.
This is also one of those device that has Bluetooth feature, and you can connect with your phone or even laptop.
A hardware device typically costs between $39-$450 but it definitely worth owning from the point of view of the safety of your cryptocurrencies. Most popular hardware wallets that now allow you to store more than 22 cryptocurrencies (including BTC) and +500 ERC-20 tokens.
There are more than 10+ crypto hardware wallets in the market, and to make your choice easier, I have earlier written a guide on best hardware wallets of 2021.
If you wanna know more about how hardware wallet works, here is a video tutorial series on Ledger Nano S wallet:
And lastly, needless to say, they are the safest way to store your cryptocurrencies.
5. Web Wallets (Least secure, but usable)
Web wallets are hot wallets that are always connected to the internet and can be accessed via different internet browsers such as Google Chrome, Firefox, and IE etc by going to URLs such as https://xyz.com.
The private keys are held online in these kinds of wallets in your browser itself in some web wallets and they are also prone to DDOS attacks.
A simple example of web wallet is storing cryptocurrencies on a crypto exchange. The most important thing you need to know here is, you don’t have access to your crypto wallet private key. That also means, if tomorrow the exchange got hacked or shutdown, you would lose your cryptocurrencies.
This is why you should keep only those cryptocurrencies on an exchange, that you are actively trading, rest you should move to your hardware wallet (most secure) or a mobile wallet (medium secure).
Web wallets are sometimes hosted wallets (You don’t have access to the private key) and sometimes non-hosted (You control private key/seed word) too, depending on what type of wallet you are using. However, we always recommend you to use “non-hosted wallets” so that you can control your funds always.
Some non-hosted wallets:
Some hosted wallets:
They are the least secure type of wallets if you are using a hosted wallet because they are safe as long as they are not getting hacked or DDOSed.
2021 Tip #1: You can use a combination of Metamask + Ledger Nano X to enjoy the accessibility of a web wallet and security of a hardware wallet. How to do that? Will, share in an upcoming article.
2021 Tip #2: Thanks to new technology called “Walletconnect”, not people are moving to mobile wallets which supports this feature, and making web wallet little outdated. You can use mobile wallets such as Trust wallet, Argent instead of web wallets.
If some aspects got too technical for you, do not worry. Rather read my earlier guide on:
- Bitcoin Private key: Everything You Need to Know
- What Is Mnemonic Phrase & Mnemonic Passphrase? (Also known as seed words)
What’s your Crypto wallet type?
|Types Of Wallet||Name Of Wallet|
|Hardware Wallets||Ledger NanoX|
|Mobile Wallets||Samourai Wallet|
|Web Wallets||Coinbase wallet|
In the above table, I have deliberately listed down the different types of crypto wallets in an order moving from safest to less secure types of wallets.
But it doesn’t mean only the safest wallet should be used. It means one needs to understand the strengths and weaknesses of each type of wallet and use it accordingly.
So go ahead and enjoy this post and let me know your thoughts in the comment section below. Also, do share which type of wallet do you use the most and why.
Harsh Agrawal is the Crypto exchange and bots expert for CoinSutra. He founded CoinSutra in 2016, and one of the industry’s most regarded professional blogger in the fin-tech space.
An award-winning blogger with a track record of 10+ years. He has a background in both finance and technology and holds professional qualifications in Information technology.
An international speaker and author who loves blockchain and crypto world.
After discovering about decentralized finance and with his background of Information technology, he made his mission to help others learn and get started with it via CoinSutra.
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- 5 Different Types Of Crypto Wallets