Authors Karina Malina Guy Kavalskiy
A cryptocurrency wallet is a hardware device or software program that enables the transfer and storage of cryptocurrency. There are various types of cryptocurrency wallets, including paper wallets, mobile apps, exchanges and usb-like wallets, each with unique characteristics and functionalities. The security of a cryptocurrency wallet depends on the method used to store the private key, which is a critical component for accessing and managing digital assets. Therefore, selecting a suitable cryptocurrency wallet is crucial to ensure the safekeeping of valuable cryptocurrencies.
What is a crypto wallet?
A crypto wallet is a software application that stores, sends, and receives digital assets, such as cryptocurrencies. It functions like a traditional wallet, but instead of holding physical cash and cards, it holds digital assets in the form of private keys, which are used to access and transfer the assets. Crypto wallets can be divided into two main categories: hot wallets and cold wallets. Hot wallets are connected to the internet and are more convenient for daily transactions, while cold wallets are offline and provide more security for long-term storage. Crypto wallets come in different forms, such as desktop, mobile, and hardware wallets, each with its own set of features and security levels.
If you are an aspiring crypto investor, the first step towards investing in cryptocurrencies is setting up a crypto wallet. This wallet will act as the primary storage and organization tool for your digital assets. Each wallet comes with a unique private key, which is only accessible by the owner, that enables secure access and management of the wallet’s contents. Setting up a crypto wallet is not only for holding purchased Bitcoin or Ethereum from an exchange, but it also facilitates the secure sending and receiving of other cryptocurrencies in a decentralized manner.
How does a crypto wallet work?
Cryptocurrency wallets are like apps you can download on your phone or computer to hold your digital money. They use the internet to connect to the cryptocurrency network.
The cool thing about cryptocurrencies is they don’t have a physical form like paper money. They’re bits of data in a big computer database. Your wallet app collects all the bits of data related to your public address to show how much money you’ve got.
Sending and receiving crypto is super easy with these apps. You type in the other person’s wallet address, decide how much to send, approve it with your secret key, pay a little fee, and hit send. Receiving is even simpler. Someone sends you money by typing in your address, you approve it, and the transaction’s done!
How to use crypto wallet
Crypto wallets come in different shapes and sizes, but here’s how you can send or receive money in general:
To receive coins, you need an address (also called a public key) from your wallet. Click the “generate address” button, copy the weird-looking code or QR thing, and share it with whoever is sending you crypto.
To send coins, you need the address of the receiving wallet. Find the “send” button, type in the other person’s address, decide how much to send, and hit “confirm.” It’s smart to try out a small amount first, just to make sure it works. Keep in mind there’s a fee for sending coins, and that money goes to miners for processing the transaction.
At first, it may seem strange to send money with QR codes or long strings of letters and numbers. But trust us, after a few times, you’ll become a pro!
Pros and cons of crypto wallets
|Chance of making mistakes
|Quick and easy access
|Chance of making mistakes
Using a crypto wallet comes with many benefits, such as having full control over your money. When you have your own private keys, the cryptocurrency is all yours, while money in the bank technically belongs to the bank. Also, cryptocurrencies are decentralized, meaning you can send transactions to anyone, anytime, without censorship since no one controls the network.
But, there are some drawbacks to using crypto wallets. One such downside is that you’re completely responsible for everything that happens since you’re acting as your own bank. Also, getting used to using a crypto wallet may be difficult since it requires a basic level of computer knowledge and understanding of a new financial ecosystem.
Types of Crypto Wallets
Crypto wallets can generally be divided into two categories: software-based hot wallets and physical (hardware) cold wallets. But there are actually a number of different wallet types that fall into those 2 general categories.
Let’s take a look at the three most popular types of crypto wallet.
These wallets are very easy to set up because they are “hosted” directly on the exchange where you buy or sell your cryptocurrency. If you’ve ever bought cryptocurrency from an exchange like Kraken or Bitfinex and left it there, you’ve used a hosted wallet. When you use a hosted wallet, the exchange stores your private key for you. This means that they are also responsible for keeping your private key safe, but it also means that you give up some control over your cryptocurrency, but you usually get more comfort.
A non-custodial wallet empowers you with absolute control over your crypto assets, without involving any third-party entity. These software wallets offer more flexibility and advanced features compared to hosted wallets. For instance, if you plan on buying NFTs or staking cryptos, which involves supporting a blockchain network and receiving rewards, a non-custodial wallet would be ideal.
With a non-custodial wallet, you are the sole proprietor of the private key that enables access to your cryptocurrencies. Therefore, it is critical to safeguard the private key from theft or loss. If the private key is lost, it will be impossible to access your crypto assets. Furthermore, if someone else gains access to your private key, your crypto wallets may be compromised, and the assets could be at risk.
Hardware wallets, often called “cold wallets” or “cold storage wallets,” are physical devices that resemble a USB stick. They provide a secure way to store your private key, which is essential for accessing your cryptocurrency on a blockchain network. The absence of an internet connection and the device’s physical presence make hardware wallets one of the most secure methods for storing cryptocurrency. Cybercriminals can’t access your crypto assets without physically possessing the device.
However, hardware wallets have a few disadvantages. For example, hardware wallets from popular manufacturers like Ledger and Trezor can be expensive. Also, if you lose your hardware wallet, you’ll need a recovery seed to regain access to your cryptocurrency. If you lose the recovery seed, you may permanently lose access to your crypto assets.
Cold and Hot wallets
It’s very simple here. Cold – not connected to the Internet, Hot – always connected to the network.
What other types of wallets are there?
Paper wallets are like paper documents that hold important information about your cryptocurrency, such as public and private keys. You can keep these documents in a safe place and they are highly secure because they cannot be hacked online. Paper wallets are perfect for long-term savings, but you cannot use them for online purchases because you must move the funds to another wallet first.
Online wallets can be easily set up using a web browser. They work through the internet and store your cryptocurrency in an app or software. This is convenient because you can send, receive, and use crypto like you would with a bank account or payment system. However, online wallets are more vulnerable to security issues and can be hacked. Look for the most secure wallet online and keep your keys offline. When possible, use 2FA verification, such as security keys, instead of SMS verification.
Desktop wallets can be downloaded onto your personal computer. They are secure and easy to use. Before selecting a wallet, make sure your computer meets the software requirements and that the wallet supports the cryptocurrency you want to use. Desktop wallets are less flexible and portable compared to other wallets.
Mobile wallets are apps that you can install on your smartphone. They are easy to install and use and are a great additional option for storing cryptocurrency.
USB crypto wallets are similar to hardware wallets and are small devices that you can connect to your computer to store your cryptocurrency. They are secure and portable, making them great for those who want to access their crypto on the go.
Each category of cryptocurrency wallet serves a unique purpose based on the individual user’s objectives, despite sharing a common functionality.
What type of wallet is best for me?
If you have a lot of daily transactions, it’s more convenient to use a Mobile Wallet. If you trade on the Exchange, you most likely have all your capital “hosted” on the exchange and use their wallet. If you are an investor who will make 1-2 transactions a month, and you operate with large sums of money, then it makes sense to get used to a hardware wallet right away.
Check our basic recomendation in table.
|less than 10k USD
So, basically a crypto wallet is like your own personal crypto bank account that you have complete control over. You’ve got software wallets that are super easy to use, but then you’ve got hardware wallets that are a lot more secure. Before you jump in, make sure to do your research to figure out which type of wallet is the best fit for you.
What conclusion can be drawn from table above? For 99% of people, a mobile wallet is the perfect solution. Especially if it’s a custodial mobile wallet like Cropty wallet.
There are tons of hot wallets out there, and most of them can handle a bunch of different cryptocurrencies, and even some NFTs (non-fungible tokens). Plus, a lot of them are hooked up to exchanges where you can buy and sell crypto.
The main things that set crypto wallets apart are:
- How many different types of digital assets (cryptocurrencies, tokens) they can hold?
- How easy is it to move your crypto offline, to a cold wallet?
- Do they have built-in features for staking or rewards programs?
How to set up a crypto wallet?
To get started with a crypto wallet, you’ll usually need to provide some personal info and create a password. The setup process usually involves a two-step verification system, just like with online banking.
If you’re using a non-custodial wallet, you’ll likely need to download an app. You won’t usually have to provide personal info or even an email address, but it’s crucial to keep your private key safe. If you lose or forget this key, you could be locked out of your crypto.
Popular hardware wallets come from companies like Ledger and Trezor. While they can be expensive, it’s important to buy directly from verified sellers and avoid the secondhand market. Once you have your hardware wallet, you’ll need to download the accompanying software from the company’s official website.
Best crypto wallets 2023 to choose from
What is a good cryptocurrency wallet? First, it is a safe wallet, and second, the one that meets your needs. We have chosen for you 9 best, in our opinion, wallets from different categories and we will analyze each of them in details.
|best for beginners
Let’s dig deeper into each of the above crypto wallet.
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what is an NFT
what is Defi
What are non-fungible tokens?
How to invest in NFTs
How to buy NFTs
How to sell NFTs
Investing in NFT art
Investing in music NFTs
Investing in NFT games
robinhood crypto wallet
does Robinhood have a wallet for crypto?
Is crypto wallet safe on Robinhood?
Where is my Robinhood crypto wallet?
How do I make a crypto wallet in Robinhood?
Can I transfer crypto out of Robinhood?
When I sell crypto on Robinhood Where is my money?
What are the advantages of Robinhood Wallet?
Is Robinhood Wallet decentralized?
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coinbase wallet address
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Extras (newly added)
best crypto wallets for mining