We are living in an era where the financial sector is seeing the dawn of a revolution. Cryptocurrencies are readily being adopted and being invested in by people all around the globe. Blockchain technology has become a favorite of innovators and crypto enthusiasts are pushing it forward. If you are an active part of this community then you might be facing the classic case of finding the right digital wallet. You might have gone through cryptocurrency wallet guides or read about their types but it is critical to weigh all pros and cons before selecting it. Which is why today, we will be sharing a complete guide on how to select the most secure cryptocurrency wallet type.
Cryptocurrency Wallet and its Types
A cryptocurrency wallet is used to store the private and public keys of an asset. It is a bit complicated in nature and can differ greatly from normal e-wallets due to its ability to interact with blockchain technology.
These wallets are usually of the following five types:
- Online Wallets: Online wallets are powered by the cloud and are accessible via multiple devices as long as they are internet enabled. These wallets are extremely convenient thanks to their practical nature but require additional security layers. Their only flaw is security due to their susceptibility to theft and various online wallet provider scams which is why one needs to be extra careful when choosing this wallet type.
- Desktop Wallets: Desktop wallets are downloaded and installed on your machine (Laptop or PC) like any other software. These wallets are safer than online wallets as no third-party is involved. However, they can be compromised and you can lose all your crypto investment if your machine is infected, hacked or damaged.
- Mobile Wallets: Mobile wallets are installed as applications on your smartphone and a user needs to create an account in order to use them. Mobile wallets are convenient and can be used for payments in physical stores. But you can lose your assets if your phone gets stolen or breaks down.
- Hardware Wallets: Hardware wallets are portable devices such as USBs with the crypto private keys which allows a user to make transactions simply by plugging them into any device that is internet enabled. These wallets are expensive, secure and compatible with multiple web interfaces. These wallets are offline majority of the time which is why the dangers of being hacked are eliminated.
- Paper Wallets: Paper wallets consist of a physical copy of a user’s public and private keys. They sometimes come with QR codes as well. These wallets are the safest way to store crypto assets. Users can carry out the transactions using the public and private keys or by simply scanning the QR codes.
Cryptocurrency Wallet Criteria
So, now you know about the type of wallets that are available in the market but the ever-growing list of crypto wallets can be a little overwhelming for many individuals. A user needs to be clear how they will use their wallet which is why we have listed a few questions that can help you in choosing the best option.
- Usage Frequency: Is the wallet going to be used for the everyday transactions or do you need it for storing long-term investment?
- Currency: Are you looking for multiple fiat currency support or sticking with only one?
- Assets: Does your investment plan consists of a single cryptocurrency or are you planning on maintaining a cryptocurrency portfolio?
- Accessibility: What level of accessibility do you require when it comes to your crypto wallet?
By answering these three questions you can significantly narrow down your options present in the market.
Cryptocurrency Wallet Security
Security is a critical component when it comes to cryptocurrency wallets. In order to assess a wallet’s security level, several things need to be considered some of which are listed below:
- Hot Wallet or Cold Wallet: A hot wallet is internet enabled while a cold one is without an internet connection. Hot wallets include online, desktop and mobile wallets while cold ones consist of hardware and paper wallets. A good practice is to keep your funds for daily use in hot wallets and storing the long-term investments in a cold one. This ensures that in case of an unforeseen situation, you do not end up empty-handed.
- User Anonymity: You can be traced using the bits of data found in the public ledgers via reverse engineering. But this process is quite lengthy and needs expert skillset which is why crypto wallets are referred to as pseudo-anonymous not completely anonymous.
The security of the wallet varies from one wallet type to another but at the end of the day, it is a user’s effort that counts. For example, if your wallet comes with only primary security i.e. only the login feature then add a two-factor authentication to it and encrypt it. It is also critical to keep your software up to date with regular updates as they contain the latest security patches. Always keep copies or backups of your wallet so that you do not end up losing everything. And try to keep your assets out of exchanges no matter how famous they are so that in case of hack or bankruptcy incident of an exchange, you do not suffer the loss. These are just some tips that can be used in keeping your wallet’s security.
Choosing a cryptocurrency wallet is an important decision which should be made after careful analysis of all the available options. The final decision of which wallet is the best always rests with you. Select the wallet that fits your criteria and stick with it. If it makes your nights peaceful and stress-free then you have probably made the right choice. So, this was our take on how to choose the best wallet type. If you are looking for Bitcoin-specific wallets then check out our article on how to store bitcoin in this article.