Five Best Crypto Wallets
Cryptocurrency trading revolves around the crypto wallet. A wallet is a ledger file – either stored online, on an Internet-connectable computer or device, or on an offline device – that stores the keys for the coins and tokens. Depending on if the wallet is a “full wallet” or “thin client,” the wallet may also store transaction and balance information and may serve as a network validator.
It is essential to pick the right wallet. Wallets are the devices that not only store one’s token keys, but also send and receive tokens. The wrong wallet opens an investor to unneeded heartache and aggravation or, worse, the potential loss of one’s tokens. Ease of use, reputation, and security are all issues one should consider when choosing his/her wallet.
This article will look at the five best wallets.
The original bitcoin wallet, Bitcoin Core is a top choice for best wallet as it has no corporate identity or entanglements to deal with, as may be the case with a privately-sourced wallet like Coinbase. Existing on your computer, it offers better protection than a hosted wallet and is designed by the same team that designed the bitcoin protocol.
Bitcoin Core is also preconfigured to work with Tor. Tor – formerly known as The Onion Router – is an United States Naval Research Laboratory-engineered, Defense Advanced Research Projects Agency (DARPA, the emerging technology agency of the U.S. Department of Defense)-developed anonymous Internet browser. The browser communicates through “onion routing,” which is an encryption method where a message is layered in multiple levels of encryption and is passed through a network of nodes which strips away one layer of encryption at a time. This results in anonymous communication where the recipient is not aware of where the sender sent the message from. Tor is a necessary tool for circumventing firewalls in countries with extreme Internet censorship.
Bitcoin core works by downloading the entire bitcoin blockchain, turning the user’s computer into a network node. With the blockchain at approximately 160 GB, Core will require a large percentage of the user’s bandwidth to download and process transaction data. While this is advantageous because, as a node, it would make it more difficult to identify payments from your Core wallet to a Core user as the user’s computer downloads network data from everywhere continuously, Core will require the user’s computer to stay online continuously.
“Imagine a scientist reading about an experimental result and then repeating the experiment for herself. Doing so allows her to trust the result without having to trust the original scientists,” the Bitcoin Core documentation reads. “Bitcoin Core checks each block of transactions it receives to ensure that everything in that block is fully valid — allowing it to trust the block without trusting the miner who created it. This prevents miners from tricking Bitcoin Core users into accepting blocks that violate the 21 million bitcoin limit or which break other important rules.”
“Users of other wallets don’t get this level of security, so miners can trick them into accepting fabricated transactions or hijacked block chains.”
Bitcoin Core is available for Windows, OS X, and Linux systems. As open-source software, Bitcoin Core is free to use and to modify.
In contrast to Bitcoin Core, Electrum is a “thin wallet.” What this means is that instead of downloading the entire blockchain, Electrum connects to external servers that verifies one’s balance, process transfers, and records transactions to the blockchain. While this means that Electrum is fast to set up, light on computing resources, and easier to use than Bitcoin Core, it does not offer the same security assurances.
Electrum also offers customization capabilities Bitcoin Core does not. Electrum allows users to encrypt their wallets at setup or the create a “cold storage” wallet which would allow receiving of bitcoin payments, but not sending. This makes Electrum a strong candidate for an investment wallet. Electrum is also a “hierarchical deterministic wallet,” in which one’s key is created from a set of 12 random dictionary words, which form a seed. The user must write these words down and use them to recover a wallet, should reinstallation on a new machine be needed.
As a thin client, Electrum is prone to attacks full wallets are not. Electrum connects to up to ten random servers to safeguard its transfers. Electrum also used a process known as “Simple Payment Verification,” which is outlined in Satoshi Nakamoto’s “Bitcoin: A Peer-to-Peer Electronic Cash System.” “It is possible to verify payments without running a full network node. A user only needs to keep a copy of the block headers of the longest proof-of-work chain, which he can get by querying network nodes until he’s convinced he has the longest chain, and obtain the Merkle branch linking the transaction to the block it’s timestamped in. He can’t check the transaction for himself, but by linking it to a place in the chain, he can see that a network node has accepted it, and blocks added after it further confirm the network has accepted it.”
“As such, the verification is reliable as long as honest nodes control the network, but is more vulnerable if the network is overpowered by an attacker. While network nodes can verify transactions for themselves, the simplified method can be fooled by an attacker’s fabricated transactions for as long as the attacker can continue to overpower the network. One strategy to protect against this would be to accept alerts from network nodes when they detect an invalid block, prompting the user’s software to download the full block and alerted transactions to confirm the inconsistency. Businesses that receive frequent payments will probably still want to run their own nodes for more independent security and quicker verification.”
Electrum is open-source and free to install and modify. It is available for Windows, OS X, Linux, and Android systems.
The first non-open source (proprietary) software on this list, Jaxx is a thin wallet choice for those that trade more than bitcoin. Jaxx allows for the storage of bitcoin, FirstBlood, Aragon, Aion, Maecenas, Basic Attention Token, Brickblock, BlockchainCapital, Bitcoin Cash, Blockmason, Bancor, Blockparty, Bitclave,Cofoindit, Creditbit, Civic, Dentacoin, DigixDAO, Dogecoin, DAPowerPlay, DomRaider, Dash, Edgeless, Enjin, EOS, Ethereum, and 44 other coins and tokens. This makes Jaxx the choice for those that do not want to juggle multiple wallets.
Oddly enough, Ripple is not supported, but there have been indications that the team is actively considering the token.
What distinguishes Jaxx is its integration of ShapeShift technology. ShapeShift allows for the seamless transfer of one cryptocurrency to another. So, if a Jaxx user wants to convert his Dash to bitcoin, all it would take is two button clicks to make it happen. Jaxx also allows easy wallet balances switching and a 12-words key like Electrum.
“The Jaxx mission is to support a wide range of exciting blockchain projects. Jaxx curates the world of smart-contract, distributed ledger, and blockchain offerings to identify high value opportunities for you,” the Jaxx website reads. “Jaxx is to blockchain as Netscape was to the internet; Jaxx makes it easy to access and manage your blockchain world. We continuously integrate access to new projects, tokens, and cryptocurrencies.”
Jaxx is weak, however, in processing microtransactions, such as from “faucet mining” or from transaction fees. Faucet mining is a form of cloud-based mining where webpages impose a type of Java-based malware onto your computer, forcing your system to mine cryptocurrency in the background. A faucet mining website usually allow users to get a share of the harvested coins in exchange for looking at several ads. Jaxx will queue such payments or may freeze should the volume of the payments become too great to handle. This makes Jaxx a poor choice for a mining wallet.
Jaxx is available as a Chrome extension, for iOS and Android for mobile, and for Windows, OS X, and Linux for desktop. The latest version, introduced after it was discovered that one can extract the master seed for Jaxx-encrypted computers to remotely steal coins, is called Jaxx Liberty, but is currently in its beta version. Until a stable version of Liberty is available, caution is advised when using this software.
Another non-proprietary wallet, Exodus is similar to Jaxx in the sense that it utilizes a 12-word seed for keys and that it has multi-token support. Exodus differs with Jaxx in supporting Ripple and its own dollar-backed stablecoin, TrueUSD. Exodus also features ShapeShift support.
“During the months we’ve spent perfecting the Ripple wallet, many of you wrote in expressing your enthusiasm for XRP and asking us for a timeline for when we would add it to Exodus,” the Exodus website reads. “Your emails, Slack messages, and tweets pushed us to deliver this functionality to you and we thank you for keeping us motivated. Nothing keeps us on our game more than hearing your thoughts about what you want to see in Exodus, and we encourage you to keep speaking your mind to us on our social media channels and in our inbox.”
“The fun doesn’t stop with Ripple! We’ve also added TrueUSD (TUSD), our first stablecoin, for sending, receiving, and exchanging as well. As if two new assets weren’t enough, customers running Mac operating systems can now automatically update their wallets in-app (Windows is next folks, stay tuned!) and we’ve also added support for Digibyte S-addresses. Jeez, I am looking at this list and I think it is safe to say the devs worked their butts off this time.”
While the presence of TrueUSD adds needed and convenient “ballast” against market instability, it does add counterparty risk. Cryptocurrency, being detached from fiat currencies or real-world assets, carry no inherent counterparty risk, or the risk to each party – as defined by Investopedia – of a contract that the counterparty will not live up to its contractual obligations. Stablecoins, like TrueUSD, must maintain a reserve of a fiat currency to stabilize its price. Should that reserve become compromise or if the fiat currency’s price collapse, so does the stablecoin.
Exodus is available for Windows (64-bits only), OS X, and Linux. Exodus supports bitcoin, Litecoin, Ethereum, Dasj, Golem, Auger, Decred, Aragon, Gnosis, Basic Attention Token, and 22 other tokens. Firstblood, Metal, SingularDTV, and Ethereum assets such as DigixDAO, Tron, VeChain, Icon, Binance Coin, and Dragonchain support is also available for wallet services. Exodus also features a customizable skin allowing for localization and client aesthetic changes.
Ledger Nano S
A list of best wallets would not be complete without a member of the “hard” wallet family being present. “Hard,” “cold,” or offline wallets are physical drives (flash drives, removable disks, or removable hard drives) that store a wallet or a paper printout that lists the private keys (and, in the case of ERC-20 tokens, public keys) for a cryptocurrency portfolio.
These types of wallets are considered preferable for long-term storage as they are not hackable. Removed from the Internet, one would have to have physical possession of the device to access the keys and – in the case of a non-paper wallet – be able to defeat the encryptions.
The Ledger Nano S is considered the industry-standard for secured wallets. Resembling a USB flash drive, this standalone device is designed to do one thing: protect crypto keys. Designed to be used with or without a computer, the Ledger Nano S has a built-in LCD screen and multicurrency support for almost the entire suite of crypto coins and tokens. The wallet can be secured with a PIN and comes with a recovery sheet for easy wallet restoration.
The device is equipped with a secure chip, which checks to see if the device has been tampered with each time the unit is powered up. The unit is also powered by BOLOS, which prevents external intrusion on the device’s apps.
“While many hardware wallets on the market feature a ‘simple’ chip, all Ledger hardware wallets are equipped with a ‘smartcard chip’, that include a secure element. This kind of chip is used for highly secure applications, such as protecting biometric data on passports or credit card information,” the Ledger Nano S website reads. “Concretely, a secure-element chip is a tamper-resistant hardware platform, capable of securely hosting applications and storing confidential and cryptographic data. In other words, secure element chips are extremely difficult and costly to hack, while “simple” chips, even with software protection, require much less effort.”
“These chips undergo advanced third-party evaluation and certification processes, through certification bodies such as Common Criteria and EMVCo, to attest of their robustness & security.”