Wallets for cryptocurrencies: the best solutions for you
November 24, 2022
Which crypto wallet should you choose to store your crypto? There are different types, but we can summarise them in 3 categories: software, hardware or paper. Let’s describe their respective features, advantages and disadvantages to find out which of them are the best wallets for you, i.e. the most suitable for your needs.
Which crypto wallet should you choose?
Wallets are your access point to the blockchain, where your cryptocurrencies are stored. They keep the public and private keys, the cryptographic codes we need to certify the ownership of cryptos and exchange them.
Key custody, can be handled in different ways and through different types of wallets. Among them, the best are those that suit your specific needs. First of all, if the operation is entrusted to a third party, we’re talking about a custodial wallet. Whereas, if it is carried out personally by the user, it’s a non non-custodial one. Furthermore, the presence of an internet connection distinguishes hot (online) from cold (offline) wallets.
If you have already decided which of these ways you want to store your keys, all that remains is to define which device or programme you will use to manage your crypto. You can choose from 3 categories of crypto wallets: software, hardware or paper.
The best crypto wallets: software, hardware or paper?
Online solutions consist of software wallets, i.e. programmes available in app format for smartphones, computers or usable via websites and web extensions.
Software wallets can therefore be of 3 types:
- Web, such as exchange wallets.
Hardware wallets, on the other hand, are physical media or simple sheets of paper (paper wallet) that store codes offline. To choose the best crypto wallet for you, find out how they work in the following paragraphs.
This type of wallet software essentially consists of a programme to be installed and run on a computer. Desktop solutions are non-custodial: they generate a ‘wallet.dat’ file containing private keys, saved in local memory. The programme then retrieves the information for accessing cryptocurrencies from there. It is a good idea to encrypt the file and protect it with a password, as well as to save backups in secure external storage.
It is possible to extract the private key or seed phrase directly from the file, so that the wallet can be imported to other devices, should the computer break down. Furthermore, although the keys are guarded independently, desktop solutions are still exposed to Internet risks, such as viruses and malware. Finally, it is not as ‘nimble’ as a pocket mobile wallet, although desktop wallets can be ‘portable’.
Mobile wallets are applications that can be downloaded onto smartphones: they open up the daily use of cryptocurrencies, as they facilitate exchanges with practical solutions such as QR codes (which replace the use of long public keys). Mobile solutions are easy to use, but they are exposed to some risks. There are scams that make use of fake apps to steal cryptocurrencies. Be careful, can you recognise the most common scams in the crypto world?
Some mobile wallets allow the autonomous storage of private keys, such as Trust wallets, and then the setting of an easier password for access.However, for this type, there are mainly custodial solutions, such as the mobile version of exchange wallets.
Web and exchange wallet
Web wallets are accessed through a browser, without downloading software or applications, possibly by installing a simple extension or plug-in (as in the case of Metamask). To trade daily from any device connected to the internet, through simple interfaces, web solutions are the best crypto wallets, as long as you watch out for online scams!
Among these solutions are exchange wallets, an example of a custodial hot wallet: in addition to enabling quick exchanges, they open up instant purchases and sales of cryptocurrencies, because centralised exchanges hold private keys for you. In addition, exchange wallets, such as Young Platform‘s, allow depositing and buying and selling in fiat currencies, assisting you in every operation related to your account through the support service.
In general, web wallets are the most suitable tool for beginners. Even more so are exchanges. After welcoming you with KYC, they will guide your first steps into the crypto world with a secure, easy and convenient solution.
Hardware wallets, such as Ledger and Trezor, are physical devices similar to USB sticks in which private keys and seed phrases are registered. It is impossible to buy cryptocurrencies directly from a hardware wallet, just as it is necessary to install special software to transfer them to and from the physical medium. However, some DEX and web wallets allow you to connect your hardware wallet to exchange crypto.
Being ‘offline‘ by nature, hardware solutions are the best example of a cold wallet. Since they are kept away from the Internet, they have an advantage in terms of security, but are usually less practical than an exchange wallet and difficult to use. They also enjoy the benefits of autonomous key storage, but come at a cost (in the hundreds of euros) where software wallets are usually free. In general, they are the best crypto wallets for experts who want to store their cryptocurrencies offline and for a long time (Holding).
Paper wallets were one of the earliest solutions for managing cryptocurrencies, but are also nowadays largely unused. These are simple pieces of paper, on which private keys and addresses are written, or printed in the form of QR codes. Only by importing the keys of a paper wallet into software, or by scanning the QR code via a mobile wallet, can you actually make use of the funds. An impractical solution, which assumes that private keys are immune to hacks as long as they are only on paper.
However, a piece of paper can be stolen, is easy to lose, is easy to destroy, and above all, every paper wallet is ‘disposable‘. It is impossible to transfer only part of the funds, as each outgoing transaction moves the entire balance. By sending just a part of the balance to a second address, the remaining cryptocurrencies would be moved to a change address randomly generated by the blockchain protocol if not manually set, thus causing the irreversible loss of unused funds.
Today, mobile wallets have replaced paper wallets as the solution for proximity exchanges via QR codes, while hardware wallets are the modern alternative for ‘cold’, offline storage.
If you are still undecided* on which type of wallet to choose, you can take a different approach. Start with the cryptocurrencies you want to store or trade, e.g. by considering solutions for Bitcoin, in order to discover the best crypto wallets for you.