In this guide, we’ll look at crypto wallets, how they work and what different types of wallets there are. At the same time, we’ll go over the features and services wallets commonly offer, what to look for when choosing a crypto wallet, and common mistakes to avoid as a beginner.
Although keeping crypto on one of the major crypto exchanges is common practice among (new) crypto investors and traders, this is certainly not the most secure way to store your crypto. If you’re looking to keep your crypto safe and secure, the importance of finding a trustworthy wallet can’t be overstated.
Crypto wallets are generally much more secure than exchanges and there are many intuitive and user-friendly wallets available nowadays. Each wallet has its ups and downs, and what the best wallet is for you comes down to your personal preferences.
To help you find a suitable wallet, we’ll take a look at the features and services you can expect from a crypto wallet, and we’ll highlight a few of the most trusted crypto wallets out there.
What Are Crypto Wallets?
Crypto wallets can be either online software or offline devices. Their main purpose is to store a user’s private and public keys. A public key is a long string of letters and numbers which is open to everyone and can be shared to receive funds. In contrast, a private key, also a long string of letters and numbers, can only be seen by its owner and is used to sign off on transactions and access funds. Wallets encrypt private keys to ensure security and usually, unlike exchanges, give a user full custody over the assets.
Exchanges normally have custody over cryptocurrency holdings on behalf of their customers, explaining why exchanges are such popular targets for hackers. Whereas wallets in the beginning days of crypto had quite limited capabilities, modern crypto wallets offer their users much more.
Wallets allow users to send and receive crypto and many of them offer a variety of additional features that we will discuss further in this article. These features include built-in exchanges, staking capabilities, charts, portfolio data, and more.
Types of Crypto Wallets
Cryptocurrency wallets can be classified into two categories “hot” or “cold”, depending on how the private keys are stored. Hot wallets are also referred to as “software wallets” and cold wallets are also known as “hardware wallets,” even though a paper wallet (another type of cold wallet) isn’t a hardware wallet.
Hot wallets are connected to the internet and this category can be split into three subcategories: desktop wallets, web wallets, and mobile wallets. Desktop wallets are downloaded onto a desktop or laptop computer and are generally considered to be the most secure hot wallet.
The most recognized desktop wallets on the market are:
Web wallets can only be accessed online through a web browser or app, making them more vulnerable to attack. The most recognized web wallets on the market are:
Mobile wallets are smartphone apps downloaded from the app store or, in some cases, built-in features that come with a phone (for example HTC Exodus, Samsung Galaxy S10, KlaytnPhone, Sirin Labs Finney, Pundi X Blok on Blok, etc.). The most recognized mobile wallets on the market are:
Cold Wallets (recommended way of storing crypto)
Cold wallets are wallets that are not connected to the internet and therefore less vulnerable to hackers. As with hot wallets, there are different types of cold wallets, namely hardware wallets, paper wallets, and steel wallets.
Hardware wallets are small USB-like devices used to store a user’s private key for optimal security. Paper wallets are simply a piece of paper with a user’s public and private keys written on it, while steel wallets solve one major problem to which papers are vulnerable – nature’s elements. Naturally, paper can degrade or get destroyed through fire and water. Using steel avoids these possibly unfortunate occurrences.
IMPORTANT: Cold wallets are more popular among long-term holders as it’s more complicated to access one’s funds making it the safest way to hold your digital assets.
The most recognized hardware wallets on the market that can be acquired safely on Amazon:
- Ledger Nano S (check price on Amazon here);
- D’CENT Biometric (check price on Amazon here);
- KeepKey (check price on Amazon here);
- Trezor Model One (check price on Amazon here);
- Trezor Model T (check price on Amazon here).
It is worth noting that hardware wallets are especially popular among long-term holders as it’s much harder to gain unlawful access to a cold wallet than a hot wallet.
The most recognized steel wallets on the market that can be acquired safely on Amazon:
- ColdTi (check price on Amazon here);
- Billfodls (check price on Amazon here);
- SteelWallet (check price on Amazon here);
Hardware Wallet or Software Wallet: Which to Choose?
There are different reasons why investors choose to use either a hardware wallet or a software wallet. However, it is not uncommon for users to use a combination of different wallets to keep their funds safe.
Software wallets, such as the previously mentioned desktop and mobile wallets, are popular due to their ease of use and the possibility to transfer funds instantaneously. One simply has to install the application on a pc or smartphone and can start using it right away.
The downside of software wallets is the vulnerability to hacking because of their connection to the internet. Although more secure than in the past, online wallets are still often attacked by hackers looking to breach the wallet’s security, sometimes with millions of dollars in crypto stolen as a result.
Consequently, hardware wallets and paper wallets are popular alternatives to store one’s crypto. Since they are not connected to the internet they are much less vulnerable to attack and therefore ideal for storing larger amounts of crypto. The modern generation hardware wallets are also much more user-friendly than previous versions.
The downside of cold wallets is the fact that it’s more cumbersome to access one’s funds or transfer crypto. A hardware wallet will first have to be connected to a pc or smartphone to give a user the ability to use the funds stored on the wallet.
Although the crypto on hardware wallets is incredibly hard to steal, the hack of Ledger’s user data in July 2020 made users vulnerable to phishing emails and even personal threats. Ledger is a company behind some of the most popular hardware wallets on the market, competing mainly with Trezor’s hardware wallets.
There is also evidence that tampering with devices to steal a user’s funds is a technique commonly used by criminals, highlighting the importance of only buying hardware wallets directly from a company’s website or shop.
Cryptocurrency Wallet Features
Storing and encrypting a user’s private key remains a wallet’s primary function, but wallets provide their users with a wide range of other features in addition to this.
At first, cryptocurrency wallets only gave users the basic functions of storing and transferring funds. However, the wallets evolved together with the cryptocurrency space and now offer more possibilities to keep their users satisfied.
Below are listed some of the most useful and popular features wallets have to offer:
- Storage – This is the most basic feature of a wallet and its primary function. Wallets encrypt private keys and give users custody over their crypto. However, some wallets are custodial, meaning that the wallet has custody over the crypto.
- Transaction – Another basic feature of crypto wallets. Wallets allow users to send and receive crypto easily and instantaneously, with coin support differing per wallet.
- Built-in Exchange – This function allows users to easily convert crypto within the wallet, so users don’t have to send it to an exchange first. Some of the most popular wallets offer their users the possibility to swap instantly between a growing number of cryptocurrencies.
- Customizable fees – To send crypto, users normally have to pay a transaction fee, which can be quite expensive. To keep fees under control, some wallets offer users the possibility of setting their own transaction fees. A lower transaction fee usually means a longer time for the transaction to go through.
- Staking – Proof of Stake (PoS) has become a popular alternative to Bitcoin’s Proof of Work (PoW) mechanism and the second-largest blockchain, Ethereum, has also switched to PoS. Some wallets allow their users to “lock up” a certain amount of crypto to receive staking awards. They receive these awards since their locked-up crypto is used to validate transactions on the network.
- Lending – This is another way for users to earn passive income by putting their crypto to work. Some wallets offer their users the possibility to lend out their crypto and receive interest in return.
- Customer Service – Using a cryptocurrency wallet can be complicated, especially for beginners. Hence, having the ability to contact someone who can assist with issues relating to a wallet is helpful. Some wallets have become so popular that the companies behind them now have full customer service departments.
What to Look For When Choosing a Wallet
There are hundreds of crypto wallets to choose from and the number is growing by the day. That means users have a lot of different options to consider.
Each crypto wallet has its ups and downs and targets a different audience, making it a daunting task to navigate the world of crypto wallets and choose the right one for you.
To help you make the best decision, we’ll go over the most important things to keep in mind when choosing a wallet.
The credibility of a wallet is paramount as users need to be able to trust a wallet and the company behind it to feel comfortable storing their crypto in a wallet of their choice.
There are many events that could lead to a loss of credibility, hacks and data breaches being some of the most common.
Therefore, it’s advisable to look at a wallet’s track record and reputation. Check if there have been any (major) security breaches. If so, then that’s a red flag that can’t be ignored. See how the wallet is rated by other customers and if there are any repeat complaints.
It’s a good sign if a wallet is open-source as this increases transparency. Lastly, make sure to download the official version of a wallet as there are many look-alikes out there operated by scammers.
#2 Coin Support
There are thousands of cryptocurrencies on the market, but each wallet has its own unique coin support. Although many wallets offer the possibility of storing hundreds of different coins, they might not have the coins you’re looking for. Information about coin support can normally be found on a wallet’s website, so it’s good to do a little research on that before downloading a wallet.
If a coin is supported by a specific wallet, it doesn’t necessarily mean that it also offers all the features you’re looking for. For that reason, it’s important to look at the overview of coin support on a wallet’s website. There one can normally find more detailed information, such as:
- Mobile Support;
- Desktop Support;
- Hardware Wallet Support (for connecting a hot wallet to a cold wallet);
#3 User Experience
Although the first users of Bitcoin, and cryptocurrencies in general, tended to be “techies”, the asset class has gone mainstream and today’s users don’t necessarily have the technical know-how to operate a complex wallet. As a result, wallets must be easy to use and offer a great user experience.
Some of the older wallets, such as Electrum, haven’t changed much since they were first launched and can be challenging to use for beginners. Other wallets, such as Exodus and Jaxx, have a great interface and user experience as their main selling points.
To find out more information about a wallet’s ease of use, search for user reviews to see what other users’ experiences have been like. With hot wallets, you can also download the wallet and see how easy it is to navigate before transferring any funds.
It can also be helpful to look up reviews on YouTube to get an idea of how user-friendly a wallet is.
No matter how many features a wallet offers, the main reason investors store their crypto in a wallet is to keep their assets secure. The importance of a wallet’s security can’t be overstated as major hacks still take place regularly.
To see whether a wallet has adopted the best security practices, there are several things to consider:
- How does the wallet store private keys? You don’t want your private key to be stored on a company’s server since that means giving up full control.
- Does a wallet offer two-factor authentication? Without 2FA, hackers using keyloggers can log into your account after getting access to your password.
- Is the hot wallet you’re looking at compatible with a hardware wallet like Trezor or Ledger? This allows users to enjoy the ease of using a hot wallet while keeping their crypto as secure as possible on a hardware wallet.
#5 Customer Support
It might be useful to have a helping hand when one encounters problems using a wallet, especially for beginners. Luckily, many companies behind crypto wallets offer (24/7) customer support.
Most of the time a customer support email address or phone number can be found on a company’s website, usually on a dedicated customer support page. Many websites also offer a live-chat option, allowing users to instantly chat with a customer support agent.
It’s not always necessary to go to the website as some wallets have built-in customer support, allowing users to get problems resolved without leaving the wallet. Conveniently, most companies also have an extensive FAQ on their website.
As the crypto space has developed at a quick pace, a built-in exchange is something many users now expect and demand from crypto wallets. Buying crypto on an exchange and sending it to a wallet can be more expensive, and is more cumbersome than swapping between coins in a wallet.
It’s also beneficial for the companies behind the wallets as users don’t leave the wallet to make crypto transactions. Things to consider before using a wallet’s exchange are transaction speed, fees/rates and if promised amounts are actually received.
The hardware wallet company Ledger has also played into customer demand by creating an application called Ledger Live which is used by investors to exchange cryptocurrencies and can be easily connected to their device.
Whether a wallet has an exchange and more detailed information can normally be found on a wallet’s website. As seen on the image below, wallets normally give a user information on exchange rates before a transaction takes place.
The Most Popular Crypto Wallets
We’ve mentioned many different wallets throughout this article, but which wallet is truly the best for you will largely depend on your unique needs and wants and your experience with crypto.
In the following list, you’ll find out which wallets are the best for beginners, security, affordability, mobile and Bitcoin.
Recommended for Beginners: Exodus
Exodus is very suitable for beginners because of its good user experience: it has a great user interface and shows users live charts and portfolio data. Exodus is a desktop wallet and there’s also a mobile version available for both Android and iOS users.
Both versions allow users to store and exchange more than 100 cryptocurrencies and give them the necessary security tools for optimal safety. The downside of Exodus is that 2FA is not available, which can potentially pose a risk to security.
- More than 100 cryptocurrencies;
- Compatible with Trezor;
- Built-in exchange;
- Live charts;
- Portfolio data;
- 24/7 customer support.
Recommended for Security: D’CENT Biometric Wallet
The most advanced hardware wallet. It was created by the south-korean company IoTrust Co., Ltd. The company was founded by tech specialists and security experts with over 20 years of security know-how and engineering experience in the development of deeply embedded security solutions.
The firm’s software and hardware engineers have expertise in semiconductor chip technology and development experience with AP chips such as Samsung Exynos, Qualcomm Snapdragon, NXP iMX-6 series.
D’CENT wallet supports Bitcoin, Bitcoin Cash, Litecoin, XRP, Ethereum, ERC20 tokens, DigiByte, Klatyn, and many more (more than 2,100 coins in total; a full list of supporter coins can be found here; you acquire D’CENT Biometric Wallet on Amazon here for $119 + shipping). The company is continuously adding new assets.
- Over 2,100 cryptocurrencies;
- Built-in fingerprint scanner adds convenience and enhanced security for access control and fast transaction signing;
- Multi-IC architecture provides the strongest protection for privacy and private key;
- In case of lost, stolen, or wiped to factory setting, wallet recovery process is optimized for easy and fast recovery;
- 128×128 pixel display allows comprehensive view of your full transaction details and accounts;
- Unlike other products on the market, D’CENT supports secure private key generation from the device without connecting to additional software program.
Recommended for Affordability: Ledger Nano S
Ledger is another manufacturer of hardware wallets and Trezor’s main competitor. The company has launched two models, with the Nano S being the best value for money.
What sets the Ledger hardware wallets apart from the competition is the fact that they come with Ledger Live Software.
Ledger Live allows users to manage their portfolios and send and receive cryptocurrencies, among other things. Using Ledger, investors have access to more than 1,800 cryptocurrencies, some of which users can stake through Ledger Live. You acquire Ledger Nano S on Amazon here for only $59 + shipping.
The devices themselves have highly secure chips and a stainless steel cover, the latter making them very durable. The downside of the Nano S, not the case with the Nano X, is that it can only run three applications at the same time, limiting the number of cryptocurrencies a user can store on the device.
- Over 1.800 cryptocurrencies;
- Ledger Live Software;
- Highly secure chips;
- Stainless steel cover.
Recommended for Mobile: Trust Wallet
Mobile wallets have become increasingly popular and millions of investors use their smartphones to store crypto. One of the most popular and most trusted, with about 10 million downloads in the Google Play store, is Trust wallet. Trust Wallet is owned by Binance, one of the largest crypto exchanges in the world.
Note: Here’s a step-by-step guide on how to buy cryptocurrency (in our case Binance Coin (BNB) on Trust wallet.
The process of creating a wallet with Trust is seamless and it offers users the possibility of buying crypto with a credit card. Users can instantly exchange cryptocurrencies and it’s possible to earn interest on crypto stored in a Trust wallet.
With Trust Wallet, users can also collect and store non-fungible tokens(NFTs), use decentralized apps(DApps), and more. The downside of Trust Wallet is that there’s only a mobile version, so you’ll have to look elsewhere if you prefer a desktop wallet or a hardware wallet.
- Credit card purchases;
- Built-in exchange;
Recommended Bitcoin Wallet: Electrum
Although there are thousands of cryptocurrencies around, Bitcoin is still the most popular cryptocurrency to invest in by a long stretch. Electrum is a desktop Bitcoin wallet that has been around since the first years of Bitcoin’s existence and does not store any other coins.
The wallet was launched under the MIT license and is renowned for its security. The encrypted private keys never leave a user’s pc and security can be enhanced by using the multisig feature, allowing users to split permission between several wallets.
Electrum also supports hardware wallets, meaning that you can check your wallet online while your Bitcoin is safely stored offline. On the downside, Electrum only has a desktop version, and the fact that it’s only for Bitcoin can be a deal-breaker for some.
- Hardware wallet support;
- Two-factor authentication;
- Various user interfaces;
- Electrum was created in November 2011, making it the pioneer in the industry.
Common Mistakes When Choosing a Bitcoin Wallet
It isn’t difficult to find stories about people who have lost significant sums of money due to mistakes of their own. So-called “Wallet Recovery Services” have made a lot of money by helping crypto holders figure out their forgotten passwords and seed phrases, according to research by The New York Times.
Listed below are some of the most common mistakes made by beginners:
#1 Losing a Seed Phrase
A seed phrase is a series of words, usually twelve or twenty-four, created by a wallet. These words give you access to the crypto stored in that wallet. If a user breaks or loses a device with a crypto wallet on it, the crypto is not necessarily lost forever.
Simply installing the wallet on another device and entering the seed phrase will give a user access to the funds. A broken or stolen hardware wallet isn’t disastrous as buying a new one and entering the seed phrase will give you access to your funds.
Keeping this seed phrase somewhere safe and secure is essential and there are many ways to do so. Some investors go out of their way to protect their seed phrase by purchasing a steel wallet, which doesn’t corrode, is fireproof, acid-resistant, and is incredibly hard to destroy.
#2 Fake Wallets
Another common and preventable mistake is downloading a wallet from an unofficial source or buying a hardware wallet from an unofficial shop. Scammers make lookalike hot wallets to lure in unsuspecting cryptocurrency investors, whose devices will subsequently be infected with malware.
Misspelling a URL can also cost you dearly, as scammers pay significant sums of money to buy domain names such as “Wwwblockchain.com” and “hlockchain.com.” Users thinking they are on Blockchain’s official website will lose the funds they send to the fake web wallet.
#3 Not Having Adequate Security
Although the wallets we’ve discussed in this article are generally more secure than keeping crypto on an exchange, the level of security differs significantly per type of wallet. With the crypto market hitting a market cap of $2.6 trillion for the first time in October 2021, there’s a good chance (long-term) crypto holders have seen their portfolio value increase significantly.
It’s easy and convenient to keep your crypto on a desktop wallet or web wallet, as setting up a hardware wallet can be quite complex. However, hot wallets are a popular target for hackers as the crypto market grows in value and wallet companies normally don’t return stolen funds to users.
Therefore switching from a hot wallet to a cold wallet is worth considering to ensure optimal security for crypto holdings. It is very important to buy a hardware wallet from a vendor’s official store as scammers sell devices that have been tampered with.
Choosing the right wallet for you can be difficult as the number of wallets has grown significantly together with the crypto market. In this guide, we’ve discussed what crypto wallets are, what the different types of wallets are, and what features and services they offer.
To make the choice easier, we’ve shown you what to look for when choosing a wallet and we’ve discussed some of the most popular wallets for different categories of investors. Lastly, we’ve highlighted some common mistakes that can be avoided by taking proper action.
Trying out some of these wallets before transferring any (sizable) amount of money can help you find out which one’s the most suitable for you.
FAQs About Crypto Wallets
What is a crypto wallet?
A crypto wallet can be either a device, software program, or website which encrypts and stores a user’s public and private keys. These keys allow a user to send and receive cryptocurrencies and without ownership of a private key, it’s impossible to sign transactions. Modern crypto wallets often offer more features and services, such as: Built-in Exchange; Customizable fees; Staking; Lending; Customer Service
What is the most trusted crypto wallet?
A good crypto wallet has the security of its clients’ funds as its priority, but a great user experience and convenience are also things many users demand from a wallet nowadays. Important factors to consider are a wallet’s user interface, customer service, exchange(if available), and rates, among others.
In our opinion, a crypto wallet’s trustworthiness can be judged by its adherence to the best and most advanced security practices. One has to consider a wallet’s track record and reputation as well as its transparency. Some of the most trusted wallets are: Nano Ledger X (hardware wallet); Trezor Model T (hardware wallet); Exodus (desktop and mobile); Trust Wallet (mobile-only); Electrum (desktop-only).
Is a hardware wallet better than a software wallet?
Hardware wallets are more secure than software wallets because they aren’t connected to the internet unless they are temporarily connected to another device which is. That being said, setting up a hardware wallet can be complex for beginners and it’s harder to access funds. Thus, it depends on your personal wants and needs whether a hardware wallet is the best choice for you.