Firstly, It’s important not to get confused between cryptocurrency wallets and exchanges. The majority of exchanges have mobile apps (For example Coinbase, Binance, etc). These are NOT wallets. They are simple app’s that display the amount of crypto your account on that exchange holds. These can be useful for quickly exchanging between crypto’s and fiat (pounds, euro, dollar, etc) but we don’t recommend keeping your crypto on an exchanges long term as exchanges get hacked and close down resulting in people losing their funds.
A ‘real’ wallet should give you full access to your private key. If you don’t hold your own private keys you don’t have full access to your coins. Of course there are things to consider when using a wallet rather than an exchange to keep your crypto in. If you use a wallet you are responsible for keeping your private keys safe. If you lose them no one can help you.
Another common wallet misconception is that the wallet is actually holding your coins within it. It isn’t, its actually the network that states how much cryptocurrency you have. The wallet is basically a software program which secures your private keys and grants you access to your public address allowing you to interact with the network as well as displaying the amount of cryptocurrency you hold.
There are thousands of different wallets available for all the different coins out there. Some wallets are designed to hold many coins with the same private key whilst some are designed to only work with one specific cryptocurrency.
Wallets can be broken down into 5 main types, all of which have advantages and disadvantages. Below is a list of these but before choosing which is right for you we suggest doing some further research;
Web Based Wallet
Web based wallets are typically cryptocurrency wallets that you access via a web browser. Your private key isn’t stored on your device, instead its stored on a third parties servers. They are a very convinent way to give a user access to their crypto although arguably the least secure.
There any many different web based wallets available, its important to spend some time to research the wallet you plan to use as not all web based wallets can be trusted.
Advantages:
Fast and convenient as they can be accessed from any web browser.
Ideal for holding small amounts of cryptocurrency
Some are able to manage multiple cryptocurrencies, transfer amounts between them, or be directly integrated into an exchange
TOR network can be used for more privacy
Disadvantages:
Susceptible to phishing scams, malware, insider hacking, DDOS attacks, and outdated security measures
You are relying on a third-party to maintain the wallet. Your keys are on a third party server.
Hackers can steal your log on information and easily access your coins.
Mobile Wallet
Mobile wallets are applications (apps) that run on mobile phones or tablets. There are many different solutions available for all the different coins. You’ll find a good selection available for Android and IOS and a few for other OS’s. They are a great solution for people who need to use their crypto ‘on the go’ such as in shops or bars.
All you need to do to get a mobile wallet is install the app on your phone and you can begin using to phone to send and receive crypto.
They are fairly secure as the private key is stored within your phone. However, this can be exploited if the phone is compromised with a virus.
As always, take note of your backup seed, this way you will be able to restore your wallet is your phone is lost, stolen, or damaged.
We’d recommend Coinomi as a good multi-currency mobile wallet. The Coinomi App is available on android from the google play store or IPhone from the IOS Appstore. (Coinomi is also available as a desktop wallet).
Advantages:
Very convenient, especially ‘on the go’.
Keys are stored safely on the phone.
Extremely easy to set up.
Perfect for a beginner who isn’t holding much crypto but wants to start transacting with it.
Some well designed app’s available with some nice features.
Disadvantages:
Keys could be stolen if phone is compromised by virus.
Physical theft of phone could put crypto at risk.
Some app’s are poor at accurately estimating transaction fees, we’d always recommend checking the transaction fee is appropriate before committing to send
Desktop Wallet
Desktop wallets are downloaded and installed on your computer therefore only accessible from that machine. They are generally more secure than online wallets, however, if your computer gets infected with a virus or gets hacked there is a chance you’ll lose your funds.
Advantages:
Fairly secure (assuming computer isn’t compromised or infected).
You control your own keys which are stored on the machine.
A convenient choice for those who trade or transact with crypto from their computers.
Disadvantages:
Harder to use your cryptocurrency whilst on the go.
Risk of theft if the computer is infected or compromised.
Potential risk of theft if computer is stolen.
Some app’s are poor at accurately estimating transaction fee’s, we’d always recommend checking the transaction fee is appropriate before committing to send
Hardware Wallet
Hardware wallets are a piece of physical hardware (typically a USB drive) that plug into a computer or phone to sign transactions with your private keys. They offer a great compromise between security and convenience of use.
There are various makes and models of hardware wallet but we’d highly recommend the ‘Ledger Nano S’ and ‘Nano X’. A good hardware wallet should incorporate complete isolation of your keys from the computer its plugged into. Most hardware wallets come with a desktop application which is used to ‘build’ the transaction. The hardware wallet is then used to sign the transaction but as the keys never leave the device it provides a very high level of security (even if device is plugged into a compromised computer).
Another thing to consider when purchasing a hardware wallet is where you buy it from. We’d recommend only buying from the manufacturer or trusted well reviewed / rated sellers. Avoid ebay.
Buying from unknown sources could result in the purchase of a compromised or hacked piece of hardware which could make your funds vulnerable. Ledgers official shop can be found here.
Advantages:
Very high level of security
Fairly convenient and easy to use
Can be used on computer or with mobile phone whilst ‘on the go’.
Can be kept in a safe or vault when not in use for additional security.
Password or PIN code protection means device is still secure if lost or stolen (most hardware wallets will be wiped if PIN entered wrong 3 times)
Can be easily restored using 24 word seed if device breaks or is lost.
Disadvantages:
Expensive compared with other solutions. Most of the others are free to download
Some hardware wallets aren’t quite as user friendly as some of the mobile phone app’s, this might make them a little daunting to beginners.
Some (especially older models) of the hardware wallets on the market have fairly limited memory. This can quickly fill up if you install and use your hardware wallet for lots of different coins.
Paper Wallet
A paper wallet is nothing but your public and private key printed together. Technically, a paper wallet is a type of cold wallet because it is entirely offline. They offer a very secure solution for anyone holding coins long term as if created correctly its impossible to hack it. The only way to steal the crypto held in a paper wallet is to physically steal the paper itself.
Advantages:
Very secure if created correctly.
Paper can be stored in a safe or vault for additional security.
Disadvantages:
Not convenient to use for anything other than long term storage (as the keys would need to be restored/imported to an online wallet before it can be used)
Paper can easily be damaged by fire or water. It can also be easily lost.
If the computer used to create the paper wallet was compromised or the method used incorrect hackers could still steal the funds
