Comparing Hot Wallets, so you don’t get burned.

There are many places one can store their crypto, more often than not, novices leave their crypto on the exchange the place they traded their country’s currency for cryptocurrency.

If there is one lesson that you can take from this article, it’s this one… DO NOT DO THAT.

The sole purpose for the existence of crypto, is to take control away from institutions, by giving control back to the individual.

May users believe that leaving their crypto on an exchange is congruent to leaving your money in a bank account at a bank.

An exchange is a completely different beast to a bank, banks need to comply with very strict legislation, they need to comply with privacy acts, and data protection acts, and they are underwritten by other banks and or insurances, they have also been around for a lot longer and have had multiple attacks which they have learned from.

Generally when you have your money in a bank, your money for all intents and purposes can be considered safe, the same cannot be said for crypto-exchanges, no matter how popular you believe they are.

Many exchanges have been hacked, and wiped clean, there is no recourse once this happens your money has effectively vaporized.

As said above, even if one could prove the safety of these exchanges, you would still be effectively acting against your own interest, and against the ethos of the blockchain movement by resigning control of your wealth to unknown institutions and or individuals.

Are you saying that there is no case for any crypto being stored on an exchange?

Exchanges make sense if you are exchanging fiat for crypto or if you are constantly trading. If that is what you use exchanges for, then leave as much coin as you would be prepared to lose on the exchange, all other coins should be transferred to a device where the keys are fully within your control, to either a Hot, Cold/Hardware or a Paper Wallet.

What exactly is a hot wallet?

A hot wallet describes a device that you own that is connected to the internet, where you can “store” your cryptocurrency.

At this point, I think I need to clarify something, your cryptocurrencies will always exist within the blockchain which they are part of, and will never actually reside on your device or on an exchange, so when we are talking about transferring coin to one of these devices, we are merely talking about transferring access to that coin.

You are effectively transferring the “key” or the password that will unlock access to that cryptocurrency to your device.

For those who are a little more technically astute, you would now realise that a hot wallet is a better outcome than leaving your currency on an exchange, as you now own and control the keys to your own currency, however they are now residing on a device that is connected to the internet. This in turn introduces some level of risk when it comes to hackers gaining access to your keys.

I think I understand what a hot wallet is, but what is a cold or paper wallet?

A cold wallet describes the storage of your keys which are on devices which are not connected to the internet, there are 2 main types of cold wallets:

Hardware Wallets — These allow you to store your crypto securely on a device that does not connect to the internet, the device has its own access control, so even if it is stolen it will be useless to the thief unless they have your PIN or Password required to access the device.

Paper Wallets — A paper wallet is the simplest form of offline storage, this is either a print out of your keys onto a piece of paper, that can be stored safety in a secure fireproof storage and even done so in multiple locations, however if someone gains access to your paper wallet, they will have access to your crypto immediately.

Most crypto also allow you to write down a seed phrase or random sequence of words, which will allow you to regenerate your keys, so the safest option may be to store portions of these seed phrases in different locations (different geographic locations), that way if someone gains access to a portion, they will not be able to gain access to your crypto without finding the other pieces of the puzzle, and in turn if your cold storage devices are destroyed or stolen, you will be able to combine these pieces of the key to gain access to your cryptocurrency.

I would like to say that for the majority of blockchain investors, a hot wallet is sufficient if you have chosen it wisely, and the purpose of this article is to assist you to do just that.

For those that have a significant amount of wealth in crypto, then cold storage is your best and safest option.

Let’s begin with the comparisons

I am going to compare these based on the following criteria

1. Keeping with the ethos of blockchain and the cryptocurrency movement and not asking the user to divulge personal information
2. Ease of use
3. Security
4. Notifications
5. In wallet exchange ability (being able to trade your crypto for different types without having to put your crypto on an exchange)
6. Tokens / Coins supported
7. Platforms where this wallet is available.

BRD — Bread Wallet (4.5/7)

1. No personal information is required to be divulged
2. Out of all the wallets, this wallet was the easiest to use
3. You can define a PIN and or user TouchID (Finger Print Biometric Access)
4. There do not seem to be any notifications if transfers to your wallets are conducted.
5. There is no ability to exchange coins with each other directly through the wallet
6. It supports many coins (too many to list)
7. This is available on the iOS and Android app stores.

Jx — Jaxx Wallet (5.5/7)

1. No personal information is required to be divulged
2. This wallet is aimed at the more advanced user, however it has an unbelievable user interface.
3. You can define a PIN and or user TouchID (Finger Print Biometric Access)
4. There do not seem to be any notifications if transfers to your wallets are conducted.
5. There is the ability to exchange coins with each other directly through the wallet
6. It supports many coins (too many to list)
7. This is available on the iOS and Android app stores as well as the desktop and web.

Mycelium Wallet (2/7)

1. No personal information is required to be divulged
2. Relatively easy to use.
3. I was not prompted to create a PIN, and there doesn’t seem to be any obvious place for you to define one, so I am going to go with.
4. There do not seem to be any notifications if transfers to your wallets are conducted.
5. There is no ability to exchange coins with each other directly through the wallet
6. It only supports BTC
7. This is available on the iOS and Android app stores.

Electrum (3/7)

1. No personal information is required to be divulged
2. Advanced Features, decent interface
3. You can define a PIN however no TouchID (Finger Print Biometric Access)
4. There do not seem to be any notifications if transfers to your wallets are conducted.
5. There is no ability to exchange coins with each other directly through the wallet
6. It only supports BTC
7. This is available on Android app stores, and Desktop, however is not natively available on the iOS store.

I hope you have found this article helpful, if you did click on the applause icon.