Blockchain technologies are absolutely contagious and its growing enthusiast circle attracts more and more investors. If you’re one of them, a classic issue you’ll face is discovering the right digital wallet. With growing number of options available for your coins and tokens, it’s critical to find the right mix of performance, security and convenience. This article serves as a quick guide to the available digital wallets.
What is a Digital Wallet?
A digital wallet, also known as e-wallet is a virtual storage of user’s payment and identification information for various payment systems. Digital wallet allows people to streamline purchase process on dedicated services and can also be used together with mobile payment systems.
Crypto wallets are unlike the regular e-wallets. Blockchain itself is a complicated system and choosing the right purse requires effort and research. Let’s distinguish between different types of crypto wallet first to find the best option for your Bitcoin, Ethereum, Ripple or other altcoins.
Cryptocurrency Wallet Types
There are five types of digital storage available for your use: online, mobile, desktop, hardware and paper wallets.
Online Wallet. Online wallets run on the cloud. Therefore, they can be accessed from multiple devices with an internet connection. Like every cloud service, online wallets are practical and convenient. However, they are also more susceptible to theft and often require extra layers of security. Even then, you have to be very careful about choosing the online wallet provider, as they have an extensive scam history.
Mobile Wallet. Mobile wallets are your phone applications. They are very handy since they can be used as a means of payment even in physical stores. All you need to do is install an app on your phone and open an account. In general, mobile wallets are considered to be safer than cloud wallets. The risks associated with mobile wallets are losing your assets in case your phone breaks down or encounters a security breach.
Desktop wallet. Desktop wallets is another popular choice which is also safer than online wallets. They are downloaded and installed on a PC or laptop and are accessible from the installation device. However, if your computer is infected with a virus, gets hacked or experiences external damage, there is a chance to lose all your funds.
Hardware wallet. Hardware wallets store users private keys on a device, typically a USB drive. They are able to make online transactions. However, most of the time they are offline and that is one of their strengths. Various manufacturers make hardware wallets compatible with different web interfaces. Therefore, complete characteristics depend on wallets integrations. Hardware storage is also convenient because of its ability to send and receive currencies by merely plugging them into the internet enabled device and authorizing yourself. Therefore, hardware wallet is the most expensive, but also one of the safest options.
Paper wallet. Paper wallets are by far the safest option to store your digital assets. A paper wallet is a physical copy of your generated public and private keys and can even refer to a printed sheet of paper. You can send funds by transferring the money to wallet’s public address and you can withdraw or send your currencies by entering your private keys or by scanning the QR code on the paper wallet.
Digital wallet security
When it comes to crypto wallet security, it’s important to pay attention to several aspects.
Hot or cold wallet. The difference between cold and hot wallets is that hot wallet is connected to the internet. These are all online and desktop wallets. Cold wallet refers to a wallet without an internet connection, such as hardware device or a paper wallet. When your crypto assets are in the “cold storage”, it means that its access resides offline. However, you shouldn’t keep all of your eggs in a single cold or hot basket. A healthy balance between the two is keeping the long-term funds in a cold wallet and ready to use funds in a hot one.
Anonymity. Although most of the wallets are not connected to your ID, it’s theoretically possible to trace you back via your wallet data. Since blockchain based systems use public ledgers, bits of public data allow for backward engineering of your identity. However, it’s not an easy stunt and requires a high level of expertise. Thus, cryptocurrency wallets are called pseudo-anonymous, which further can be translated to “very close to anonymous”.
Security level depends on the wallet. All coin and token wallets are designed to be secure, but the way security incentives are implemented varies significantly. Primary security means are usernames and passwords, but you should also enable two-factor authentication (if possible), use trustworthy wallets and encrypt your wallet for extra safety. Besides that, make sure to:
- Update your software regularly. Updates often patch latest security holes and enable the most up-to-date security means.
- Backup your wallet. Creating several copies of your software wallet can prevent the worst scenario — losing your fortunes to software or hardware failure.
- Try to avoid keeping your assets in exchanges. Coinbase, Bittrex or Polonex may seem convenient options, but every player who’s been in the game for awhile will tell you this: it’s hazardous to keep your funds there. Over the short history of Bitcoin, there were numerous instances where exchanges have been closed, hacked or just disappeared never to be heard from again. Differently than banks, most cryptocurrency exchanges are not legally bound (yet) to compensate their users, therefore choosing an exchange platform with an excellent reputation is of paramount importance.
- Use a different browser to access your online wallet. Browser extension malware is a classic way to steal your online wallet access. Allocating a specific, and most importantly, clean browser to access your online portfolios will reduce the probability of theft.
- KEEP YOUR KEYS PROTECTED. The most important thing to remember is to keep your keys safe. If you lose your wallet’s private key, you will lose your investment forever.
Which cryptocurrency wallet is the best?
There is no single best option available for everyone. One size doesn’t fit all and when it comes to cryptocurrency wallet, it’s important to consider the following variables:
· Which cryptocurrencies do you trade? Bitcoin or altcoins? How diversified is your portfolio?
· Are you a short-term or a long-term trader?
· How secure are your trading tools and devices and what is the security record of your considered wallet?
· What are the wallets associated costs?
· Is the wallet UI intuitive and user-friendly?
· How mobile and accessible is your wallet? Is it difficult to keep and easy to lose?
· Does it allow you to make quick purchases or sell-offs whenever needed? What is its latency?
Here are some popular wallets that are considered to be safe and reliable in different situations.
Single currency wallets. As a rule of thumb, going for an official currency’s wallet is always a good option. Here are the official wallets of major cryptocurrencies:
Dash: Dash Core.
Most of the time, official wallets are easy to find on the company’s website.
Multicurrency wallets (software). Here are some of the popular multicurrency online purses.
Jaxx Wallet. An optimal crypto wallet software that offers both mobile and desktop applications. Use it to store your Bitcoin, Bitcoin Cash Ethereum, Ethereum Classic, Litecoin, Dash, Zcash and dozens of other cryptocurrencies.
Coinomi. Coinomi supports 64 cryptocurrencies and is one of the best mobile wallets on the market. The only downside is that at the moment it currently works with Android only.
Exodus. Exodus is a solid desktop wallet which lets you store Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, OmiseGo, Qtum, Dash, Bat, Aragorn and many other coins.
Hardware wallets. Although more expensive, hardware wallets are considered to be one of the safest options for crypto investors.
KeepKey. Supports Bitcoin, Ehtereum and majority of other altcoins.
Ledger Blue. Supports Bitcoin, Ethereum and majority of other altcoins.
Digital Bitbox. Supports Bitcoin, Ethereum, Ethereum Classic and other ERC-20 tokens.
Cloud wallets. Although we stressed that online wallets can be dangerous, storing your coins on Coinbase and GDAX are safer than others. Coins in these exchanges are insured, thus providing a guarantee that you will be compensated even if the company is hacked.
A digital wallet may be the most important investment decision. Therefore, it’s worth to invest time and effort into choosing the right one. Although hardware wallets may seem expensive at first, at the moment, they offer the most complete cryptocurrency storage option, combining both safety and functionality. Nevertheless, there are some decent hot wallets as well. The final decision is always yours and you should stick with the wallet which lets you get a sweet good night’s sleep.