There are several types of wallets that provide different ways to store and access your digital currency. In this guide, we’ll take a look at some of the most popular options, explain why you might choose one type over another, and walk you through some of the key features of these types of crypto wallets.
What is a Crypto Wallet?
A crypto wallet is a digital wallet that can be used to store and transfer cryptocurrencies like Bitcoin, Ethereum, Litecoin, or any other type of cryptocurrency.
Why You Need a Crypto Wallet
Before you can own or use cryptocurrency, you need a digital wallet to store it in. Cryptocurrency wallets are not like the wallets you carry in your pocket.
They are software programs that store your private keys and interface with various blockchains so users can monitor their balance, safely send and receive cryptocurrencies and conduct other operations.
If you want to use Bitcoin or any other cryptocurrency, you will need any of the types of crypto wallets we’ll discuss in this article.
Best Hardware Wallets
Types of Crypto Wallets
When it comes to crypto wallets, they are split into two main categories:
- Hot Wallets: such as web-based, and software wallets ( desktop or mobile app )
- Cold Wallets: such as paper wallets or hardware wallets
What is a Hot Wallet?
A hot wallet is a digital wallet that stores cryptocurrency online. Because hot wallets are constantly connected to the internet, they are more vulnerable to hacks and malware than cold wallets.
That said, hot wallets are much more convenient for day-to-day use, as they allow you to quickly and easily send and receive cryptocurrency.
When it comes to hot wallets, there are three types of crypto wallets available, including hosted web wallets, non-hosted wallets, and software wallets.
1.1 Non-Hosted Web Wallets
Also commonly referred to as non-custodial or self-custodial, a non-hosted wallet gives you a web browser interface for checking your crypto funds or creating transactions, but you must submit your private keys with each setup.
1.2 Hosted Web Wallets
With hosted web wallets, your private keys are stored online and usually provided by an exchange or other online service, and they are typically the easiest option to use. However, these types of crypto wallets also come with some risks, as you need to trust that your provider will not lose or steal your funds.
1.3 Software Wallets
A software wallet is a type of crypto wallet that runs on your desktop device or mobile phone. This type of wallet gives you more control over your funds, as you can store and transfer them directly from your device without needing to rely on a third-party service.
However, software wallets do come with some security risks, so it is important to keep your device safe from hackers and cyber attacks.
Some Popular Hot Wallets Include:
- Web-based (hosted) wallets, such as Coinbase or Binance
- Web-based (non-hosted) wallets, such as MetaMask
- Mobile apps wallets, such as Mycelium or Trust Wallet
- Desktop wallets, such as Exodus or Electrum
How to Set up a Software Wallet?
In order to set up a software wallet, you will need:
- A computer or mobile device with an internet connection
- A cryptocurrency that you want to store in your wallet (Bitcoin, Ethereum, Solana, etc.)
- A wallet address or public key for your cryptocurrency of choice
To set up a software wallet, you will need to download and install a dedicated crypto wallet app on your computer or mobile device. There are many different wallets available, so it is important to choose one that is reputable and secure.
Once you have downloaded and installed the app, you will need to create a wallet address or public key. This is a unique identifier that allows you to send and receive transactions with your cryptocurrency of choice.
Finally, once your software wallet is set up and ready to go, you can begin storing and transferring cryptocurrencies in your wallet. Be sure to keep your wallet address or public key safe and secure, as this is the only way to access your funds.
What is a Cold Wallet?
A cold wallet is a type of crypto wallet that stores the user’s private keys in a secure offline environment. Cold wallets are considered to be the most secure way to store your crypto assets, as they are not connected to the internet and therefore less vulnerable to potential cyber-attacks or hacks.
There are two types of crypto wallets available, including hardware wallets, and paper wallets.
2.1 Paper Wallets
With this type of cold wallet, you basically save your private keys on a piece of paper.
A paper wallet has its own vulnerability, however. If this piece of paper is ever damaged or lost, your crypto assets are also lost forever. For this reason, some people choose to store their paper wallets in secure locations like a safe deposit box at a bank.
2.2 Hardware Wallets
If you’re serious about keeping your cryptocurrency safe, you might consider investing in a cold wallet such as a hardware wallet. Hardware wallets are physical devices that store your private keys and allow you to sign transactions offline, and they are considered one of the most secure types of crypto wallets. This means that even if your computer is hacked or compromised, your coins will still be safe.
Each of these wallets offers its own set of benefits and features, so it’s important to do some research and choose the one that best meets your needs.
Best Hardware Wallets
How to Send Coins from an Exchange to a Hardware Wallet
First, you will need to connect your hardware wallet to your computer. This is usually done by plugging the device into your computer via a USB cable. Once connected, you can use the wallet’s interface to create your wallet address and set up a secure PIN.
Next, you’ll need to add some funds to your wallet. This can be done by transferring coins from a crypto exchange such as Binance or Coinbase into the address displayed on your hardware wallet. When sending funds, it’s important to double-check that the receiving address is correct, as any mistakes could result in losing your coins.
Once you have some funds in your wallet, you can start making transactions. To do this, you’ll need to connect to the internet and navigate to the hardware wallet’s interface. From here, you can choose which coin you want to transact with and enter the amount. You’ll then be asked to confirm the transaction via your hardware wallet’s PIN.
Final Thoughts on Types of Crypto Wallets
When choosing one of the crypto wallet types, it is important to consider both your needs and your level of experience with cryptocurrencies. If you are new to the world of crypto, a hosted wallet or software wallet may be a good option for you, as these options are generally easier to use.
However, if you are an experienced cryptocurrency user and want complete control over your funds, a hardware wallet may be the best option for you. With a good hardware wallet, you can rest assured that your coins are safe and secure at all times.
Types of Crypto Wallets FAQs
What is a Software Wallet?
A software wallet is a type of crypto wallet that runs on your desktop device or mobile phone.
What are the different types of crypto wallets?
There are two main categories of crypto wallets, hot wallets, and cold wallets. Hot wallets include web-based, and software wallets ( desktop or mobile app ) while a cold wallet can be either a physical piece of paper or a hardware wallet such as Trezor or Ledger.
Which are the most secure type of crypto wallets?
Hardware wallets are considered the most secure type of crypto wallets, as they allow users to store their private keys offline. These wallets also offer additional security features like PIN codes and multi-signature support, which make them virtually impossible for hackers or other unauthorized users to access.
Which is the most easy-to-use type of crypto wallet?
The most easy-to-use type of crypto wallet is a mobile wallet like Trust Wallet. This is because you can access your wallet at any time and anywhere using your mobile phone, and easily send and receive payments using a mobile wallet.