Cryptocurrency wallets are places where all your crypto ‘keys’ (which we will discuss later) are stored. They’re a bit like a vending machine in a public place – anyone can insert money into the vending machine, but only those with the keys to the vending machine can remove the money.
There are loads of different types of crypto wallet services. There are app-based cryptocurrency wallet services, offline services, and web-based services to choose from. By the time you finish reading this guide, you’ll be able to pick the right wallet service for your own individual needs as well as start trading crypto safely and worry-free!
First, let’s find out more about what a cryptocurrency wallet actually is
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a software program, online platform, or hardware device that holds the keys you use to send and receive various blockchain cryptocurrency tokens. It literally stores your ‘private’ keys and your ‘public’ keys – the secure way wallets communicate with blockchain cryptocurrency ledgers. It also lets you look at your cryptocurrency balances. The interface, the way the software looks, helps users to understand their cryptocurrency holdings (how much they have in different cryptocurrencies like Ethereum, Bitcoin, or Ripple).
The way blockchain works are that ‘ledgers’ get updated across all ‘nodes’ on the blockchain network. This means all individual ‘ledgers’ are updated at the same time – a wallet doesn’t hold crypto money, but a record of transactions.
Unlike the wallet in your pocket, your cryptocurrency wallet doesn’t store money in the same way a PayPal account stores funds. This is the crucial difference between cryptocurrency wallets and other online money accounts
The Importance of Protecting Your Crypto
Investing in crypto isn’t easy. You need to get a crypto wallet and deposit money into an exchange to buy different cryptos – and we’re not even going to talk about transfers between banks. There are so many different moving parts, and when they’re working as they should be, investing in crypto can be easy. But if one part stops working, it all stops running.
In the world of cryptocurrencies, your mobile phone, your hard drive or removable storage becomes the bank vault. That is what decentralization has done. By cutting out the middleman (banks and governments), crypto has made people more independent, but this all comes at a risk.
By making you more independent, it also places all the responsibility on you to make sure your cryptocurrency is safe.
Different Types of Cryptocurrency Wallets
Do you want to store cryptocurrency on a smartphone, a computer, or offline? There are a lot of different ways you can own a cryptocurrency wallet. This section will outline the different wallet technologies available, and the advantages and disadvantages involved with using them.
Hardware Wallets
Hardware wallets are one of the safest ways to store cryptocurrency investments. They are what is known as “cold storage”. This means it is offline and it is more secure than “hot storage” wallets (like software wallets or web wallets). Therefore, in my opinion, this is the best cryptocurrency wallet type to choose from.
The hardware wallet differs from the paper wallet in that it provides high built-in security. The hardware wallet, which looks like a USB flash drive, has advanced security. This means the device cannot be accessed by people without the correct password. It helps to greatly improve security.
However, remember that hardware wallets have drawbacks as well. If they get corrupted, you may not be able to restore them. What is more, since hardware wallets are physical devices, you might lose them. However, such recommended cold wallets as Ledger Nano S provide you with the word seed that can be used to restore it.
Price is another disadvantage. The fees of paper, web or app-based wallets are a lot less than hardware wallets. This is because you’re buying digital safety. It’s a USB drive with excellent memory and security. They start from $70-$99+, and some cost upwards of $2,000 dollars!
If you plan to trade cryptocurrency with some regularity and would like offline (‘cold storage)’ crypto wallet protection, hardware wallets are a good choice. Remember, this is like owning a safe deposit box. You need to remember the access code because no one else can help you access it if you forget the code.
Ledger Nano S
Ledger Nano S is one of the most popular and reliable hardware wallets. It supports more than 1,500 cryptocurrencies and keeps expanding the list. The main reason why Ledger is so recommended is security.
Just like other cold wallets, Ledger Nano S keeps your private keys within the actual device – offline, meaning that there’s completely no need to worry about cyber attacks. You also have to select a pin code and get a 24-word recovery phrase that’s needed in case you forget a pin or lose your device.
Ledger Nano S has an improved version that’s called Ledger Nano X. It looks almost the same, however, has a bigger screen and a few additional functions that improve usability. Ledger devices are made of stainless steel that makes them resistant to physical damage.
Ledger Nano S costs only $59, while Ledger Nano X is more expensive – $119. Even though they come with a price, security should be above it all.
Trezor Wallet
One of the most recommended hardware wallets is the Trezor wallet. I could call it my best cryptocurrency wallet. It is a “bulletproof” Bitcoin wallet and is hyper-secure — it supports Windows, Linux, Max and has one of the best Android wallet apps available for cold storage crypto investment.
The Trezor hardware wallet has full two-factor authentication, a password manager app, and is compatible with ERC-20 tokens. It also provides cryptocurrency support for a range of different crypto coins, including Dash, Bitcoin, and Ether.
It’s easy to use, you plug in the USB adaptor. You connect via the computer and you can reset using the management software included. Total control, total security, and total peace of mind. It’s tiny as well and can fit in the palm of your hand.
Trezor Model T price is costs $169.99. Even though it’s relatively expensive, such a price is completely worth it.
KeepKey
KeepKey is another recommended hardware wallet. It has a huge screen that’s protected by a polycarbonate casing and allows you to see the full cryptocurrency address without the need to scroll back and forth.
Being a hardware wallet, KeepKey is really secure. It provides you with a pin code and recovery seeds. What is more, it has this unique feature that switches pin code numbers from time to time, protecting you from malware copying your code.
KeepKey’s pricing is only $49, which makes it one of the most affordable hardware cryptocurrency wallets on the market.
Software Wallets
Software crypto wallets are “hot wallets”. This means they could be hacked remotely because of internet access. But if you trade in low volumes, desktop software crypto wallets could be the best cryptocurrency wallet for you!
Coinbase
When it comes to Coinbase, the majority of crypto fans know it as an exchange. While that’s true, it also has it’s own software wallet and can be considered as an online or web wallet
Even though software wallets are not as secure as hardware ones, the good news is that you can download and use it completely free. Of course, when it comes to buying or selling cryptocurrency, you will need to go through the Coinbase exchange that charges fees for transactions (average of 3.75% per transaction) just like any other crypto exchange (only fees vary).
Coinbase Wallet versions are available for Apple iOS and Google Android users. If you’re making multiple trades per day, you can keep a part of your assets in hardware wallets or the Coinbase software wallet and the other part in the Coinbase exchange that serves you as an online wallet and trade easier.
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