Brief Overview of Crypto Wallets

After you’ve bought Cryptocurrencies, the next challenge becomes storing them. If your only investing a small amount and plan to make frequent trades, you’re might be fine just leaving it in a trusted exchange such as Coinbase if you have the right security setup on your account. Also note that, Coinbase just came out with a new feature called Coinbase Vault, which serves as a way for users to have ‘cold storage’ (well get to that in a minute) on their account.

If your investing a more significant amount for the long term, it’s definitely a must to move your cryptos to a wallet. The reason behind this is that centralized exchanges like Coinbase hold your private keys, so if someone were to hack them, all your information would be vulnerable.

This is where Wallets come in, as they serve as an easy and secure way to send and receive Cryptocurrency, as well as store your coins for the long term. Some wallets can hold multiple Cryptocurrencies such as Bitcoin, Ethereum, and more. There are also some wallets that come with a built-in third party application like Shapeshift that allows you to exchange from one coin to another. This way, once you’ve bought the amount of Crypto you want and have transferred it to a wallet, it’s possible you would never have to use the exchange again unless you want to cash out into a fiat currency such as the U.S dollar.

The main way to categorize wallets is the distinction between Hot wallets and Cold wallets. The difference is that hot wallets are connected to the internet and cold wallets are not. Since hot wallets are connected to the internet, they are more convenient but less secure than cold wallets.

I’ll start out with the least secure option and work my way down to the most secure.

Hot Wallets
Online Wallets (AKA Exchanges)

While I don’t personally consider these to be wallets, people will often refer to exchanges as “Online Wallets”. These wallets are the most vulnerable type because your not in control of your private keys. For this reason, it’s recommended that you don’t store your cryptocurrencies on these wallets or only use them for storing a small amount.

The nice thing about them is they come with the exchange, so if say, the price of Bitcoin runs up dramatically and you want to sell out, its right there in your exchange so you don’t have to wait to transfer your Bitcoin from your wallet to the exchange.

Software wallets

Then there are hot wallets that are decentralized meaning you are in control of your private keys. They are still connected to the internet, but because of their decentralized nature, they have an increased level of security compared to an exchange.

With software wallets, there are two basic types.

Mobile wallets
Desktop wallets

A mobile wallet is just an application on your phone that you can download and store your cryptos on. Having a mobile app makes it the easiest for people just getting into crypto, which is likely the reason Coinbase has had so much success as an exchange.

A couple good examples are:

Mycelium for android
Breadwallet for android and IOS

Desktop wallets are an application on your computer that where you can store and manage your cryptos. They are generally considered more secure than mobile wallets.

A good desktop wallet is Exodus, which supports many different coins. They are known for having a great user interface with graphs to so you how much of each coin you own, as well as a built in exchange so you can go from one to another.

Jaxx wallet, which has both a mobile wallet and a desktop wallet, also has a chrome extension which makes it easy to send and receive Cryptocurrency without installing software on your desktop.

Cold Wallets
Then there’s cold wallets, aka “cold storage.”

This is the most secure because its not connected to the internet at all. This way hackers can’t get in and steal your crypto’s unless they steal your 12 word passphrase. But just like anything else, the more secure something is the more difficult it usually is from the users perspective.

There are two main types of cold wallets:

Paper wallets
Hardware wallets.

Paper wallets are what they sound. It’s a piece of paper that you can print out and send money to via the public key provided. It is a very safe way to store cryptos because its not connected to the internet at all. The big disadvantage is the inconvenience factor and the risk of losing your paper wallet. It’s easy to set up your paper wallet and send cryptocurrencies to it but it’s a bit of a pain to retrieve your crypto from it.

You can create a paper wallet here:

For Bitcoin: bitaddress.org

For Ethereum: myetherwallet.com

For Litecoin: liteaddress.org

Keep in mind to store your paper wallet somewhere safe and make a copy. Also keep in mind its important to generate and print your paper wallet when your NOT connected to the internet. So when you get to the website turn off your wifi so your not online.

Here’s a good video on how to set it up:

Hardware wallets

Hardware wallets look like a USB drive. They are generally considered the safest way to store your cryptocurrencies and are a top choice among crypto enthusiast.

Despite them seeming like some kind of stealthy spy tool, they are actually pretty simple and easy to use. One nice benefit to the hardware wallet as compared to the paper wallet is it can be used interactively, meaning you can send AND receive cryptos as opposed to a paper wallet where you have to import it to software to get the cryptos out.

The main hardware wallets are the Trezor and the Ledger Nano S.

The downside is they can be somewhat pricey.