As the popularity of cryptocurrencies rises, so do cryptocurrency wallet hacks. Therefore, understanding the critical basics before choosing a wallet can be the difference between keeping your virtual wealth for eternity or waking up to a hacked and empty virtual currency wallet. This beginner’s guide to cryptocurrency wallets will teach you everything you need to pick the right wallet for your coins. Apart from exploring the different types of wallets, we shall also look at what to consider when selecting a crypto wallet.
Types of cryptocurrency wallets
Hardware wallets
These are among the most secure cryptocurrency storage platforms available today. They are physical devices that resemble a USB stick and are connected to a computer via a cable, although some like Ledger Nano X support wireless connections via Bluetooth. Hardware cryptocurrency wallets are considered offline or cold crypto storage platforms since you connect them to a computer, and subsequently the internet, only when you need to make a transaction such as a deposit or a withdrawal. The major hardware virtual currency wallet brands are Trezor, KeepKey, and Ledger.
Software wallets
These can be termed the opposite of hardware wallets and considered hot wallets. They take a digital, not a physical form. Think of them as apps on your smartphone, laptop, or desktop computer. Although they are convenient, they present a higher security risk compared to their hardware friends since they are vulnerable to hacking. If you are a beginner looking for a guide to cryptocurrency wallets, you can start with popular software wallets such as MyEtherWallet, Atomic, and Exodus. Sub-categories of software wallets include desktop wallets and mobile cryptocurrency wallets.
Web wallets
Web cryptocurrency wallets are wallets that are accessed by using a web browser. They include MetaMask and wallets offered by cryptocurrency exchanges such as Binance, Bybit, and Coinbase. While they provide convenience, especially to individuals interested in cryptocurrency trading, they have a lower security score compared to hardware and software wallets. These wallets are considered to be hot or online wallets because they live on the internet making them an easy target for malicious actors like hackers and scammers. Despite their convenience, most of them are custodial, meaning that you don’t actually hold the private keys to your virtual wealth.
Paper wallets
Here, you write your private and public keys on a piece of paper. Being a cold wallet, Paper crypto wallets are considered the most secure since they can’t be hacked but they aren’t as convenient as software and web crypto wallets. Just make sure not to misplace the paper.
Things to consider when choosing a cryptocurrency wallet
Now that we know the different types of crypto wallets, this beginner’s guide to cryptocurrency wallets won’t be complete without looking at the criteria for choosing the best crypto wallet to use.
- Ease of use – This can also be combined with what you want to do with the stored cryptocurrency. First, a crypto wallet needs to be easy to use when conducting basic transactions such as deposits and withdrawals. Second, what do you want to use the funds for? For frequent cryptocurrency traders, a software or web wallet would be an ideal choice. Hardware or cold wallets are ideal for those looking to hold their coins for a long period in one place.
- Security – Security is another key factor in choosing a cryptocurrency wallet. Go for wallets that employ a layered security approach such as a combination of PIN, SMS, and Google Authenticator when login in or conducting a withdrawal. For software, hardware, and web wallets, go for wallet providers with a known security reputation.
- Backup and recovery – How easy is it to recover your wallet in case you lose it? Choose wallets that are easy to back up and recover.
- Compatibility – Compatibility issues are likely to manifest in software wallets that are operating system-specific. Some wallets may operate optimally on iOS and not on Android-powered devices or MacOS and not Windows-based computers.
- Reputation – Choose a wallet that has good ratings and one that has stood the test of time. For exchange-based wallets store your funds with a reputable cryptocurrency trading platform.
Final words
While this ultimate beginner’s guide to cryptocurrency wallets gives you a comprehensive overview of the first steps in the world of virtual currency wallets, it’s recommended you do your own research (DYOR) before settling on a crypto wallet.
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