Apart from Bitcoin, there are currently more than 1500 altcoins in the market today. To use them what you definitely need is a cryptographic wallet. As our common sense makes us think, the wallet is where you store all your bitcoins or other precious altcoins is called a Cryptographic wallet – just like the relationship between your currencies and your leather wallet. That is correct, well, in the simplest term. But since cryptocurrency exists in the digital world, quite obviously, the wallet has to be digital as well. So what it is exactly?
What is Cryptocurrency Wallet then?
A cryptocurrency wallet is basically a software program that holds your private and public keys for buying, selling, and storing crypto coins on different blockchains. It allows you to check your remaining balances and additionally some wallets have swapping features where you can exchange one coin for another.
One thing to note here is that for every altcoin rather address in your wallet, your wallet will have a pair of private and public keys for each one of them.
To help make you understand clearly, throughout the article we will draw a comparison with our good old currency.
How does it work?
First, we would like to set up the ground before delving deep (as far as the scope of the article allows us without going too techy) into it.
Just like you share your bank account number with people who want to send fund to you, you also share your wallet address. But unlike your bank account, you can create as many wallet addresses you like and share. There is no chance that someone else will receive the cryptocoins as no two crypto wallet addresses are same, so there is no breach of security in that.
These unique addresses are alphanumeric in nature, meaning they are a string of characters comprised of case-sensitive letters and numbers. As an example check the Bitcoin creator Satoshi Nakamoto’s wallet address:
Anyone on the blockchain can know how much fund your wallet has and what transaction you have made earlier, but they wouldn’t know your identity. Therefore like cryptocurrencies, these wallets are pseudonymous in nature.
Now, let’s turn our attention back to public and private keys. These keys are also alphanumeric and case-sensitive and, for your information, different than the address you share. And as mentioned earlier, each address will have a pair of private and public addresses.
When you send money, from your bank account to that of others, you need your password which is known to only you. Similarly. in the cryptocurrency and therefore wallet context, this is the role of your private key play. This is your digital ID and you should never share this private key with anyone (like take it to your grave kind!). This is what allows you to transact, withdraw, or do any other transaction from your wallet.
For each private key, there is a public key associated with your wallet address. The public keys are generated from the private keys using a sophisticated algorithm or mathematical computation. That is why the software knows that both keys are linked to each other, and therefore gives you the ownership of the coins.
Now the public address or the wallet address we have ‘talked’ about earlier is actually the ‘hashed’ version of this public key. Note here that these wallet addresses are stored in the blockchain.
Hash is a mathematical computation process which generates a fixed-length string as output for any input. And the best part is there is almost zero probability (near impossible) that anyone can get your public key from your public address by reverse calculation or brute force method, thus making it hack-proof. This hashing is done to add an extra layer of security as well as to compress the long string of public key address.
Before moving forward understand this, figuring out public key from public address is itself nearly impossible, let alone getting your private key from it. However, if you lose your public key you can still be able to generate that from your private key, but if you divulge your private key your wallet is totally compromised.
Now, what about when someone wants to send you cryptocoins?
The wallet does not store any cryptocurrency. When someone wants to send you a certain amount of altcoins or bitcoin, they already have your public address, and what they basically do is just sign off the ownership of those coins to that address. Now you open your wallet and use your private key to unlock the fund. If the private key matches with the wallet address and therefore the public key, you will gain the fund and subsequently equal amount of fund or balance will get deducted from the sender’s wallet. And the record of the entire transaction is stored in that blockchain ledger, there is no physical exchange, period.
So this is how cryptographic wallet operates, and as you have rightly understood by now, wallets act as an interface to that blockchain. This is quite technical, but to use the wallet there is no need for you to understand this, the software will take care of all.
Do Cryptocurrency Wallets Support Multi-coins?
With so many cryptocurrencies flooding the market, do you need a different wallet for each altcoin? Well, that would be quite a mess, isn’t it?
While some crypto wallets do only hold one type of cryptocurrency, most of the wallets out there support more than one altcoins. Take the example of Exodus wallet – it can store multiple cryptocurrencies including Bitcoin, Ether, EOS, and Dash
Some wallets support multiple blockchain-based coins. One thing to note here is that since a majority of other coins and tokens available in the market today are of ERC-20 type i.e. built on the Ethereum blockchain. So most wallets will allow you to store multiple ERC-20 type coins. So all you need is a good wallet and set it up for multiple currency support.
Then there are some crypto wallets that will also allow you to convert one type of cryptocurrency into another type, i.e. you are able to exchange some of your bitcoins for Ethereum coins of equal value. This is possible through a third party integration called ShapeShift. So if your wallet doesn’t have ShapeShift integration, then you need to do additional work to convert one coin for another.
Types of Wallets
Now, as our basic understanding of what wallet does and how it works are out of the way, let’s discuss what are the different type of wallets out there.
There are mainly three different type of wallets – Software, Hardware, and Paper wallets that most people know about. These wallets can also be categorized depending on the level of security and ease of access they offer. But here we would like to take a different route, classify the wallet type in a broader sense and then explain those three we have just mentioned. These wallets
So we categorize cryptographic wallets mainly into two types – Hot Storage and Cold Storage.
Hot Storage or Hot Wallets
Hot wallets or Hot storages are those which are connected to the internet i.e. connected to a peer-to-peer network. These are primarily software-based wallets. Hot wallets are also commonly synonymous with “full-service” wallets. Full-service wallets are programs that carry out all of the necessary functions. Almost all of the best cryptocurrency wallets available on the market today can operate as a full-service wallet.
Now let’s check out what are the advantages and disadvantages of the hot wallets.
Since these are online, the main advantage they offer is convenience and how quickly and easily you can access these wallets. Thus it is very favorable to use it for basic transactions and if you are looking for making immediate transactions or purchase, a hot wallet is the way to go.
So what is the disadvantage of hot wallets? Since the wallet is online it vulnerable to hacking and private key theft. Sometimes you will have a dedicated hot wallet that doesn’t handle key generation. But in rest, most of the cases your hot wallets store your private keys on the internet which are controlled by third-party. Therefore all a hacker needs to do is attack and capture your private key, and all your funds are gone.
Hence it is advisable that you use hot wallets for day-to-day transactions and keep a low amount in it. Let’s check the different type of hot wallets now.
Cloud or Exchange-based Wallet
Popularly referred to as Online Wallets, these are basically web-based wallets that are accessed through a web browser. Therefore it is very easy to access it from any device with an internet connection in an instant. These cloud wallets are very easy to create and the fastest among all to operate. Sometimes, these hot wallets are hosted by exchanges like Bittrex, Poloniex or Bitstamp. Some web or online wallets are capable of holding multiple cryptocurrencies and even offer the swapping between crypto pairs and crypto-fiat pairs. Blockchain.info is a great example of such an online wallet.
Note here that there are also some online wallets that are also referred to as custodial wallets (you do not control your keys directly) since these wallets keep or save your private keys on third-party servers , thus raising a major security concern. Therefore if the server of that exchange is hacked or shut down, your private key and hence your fund is compromised. Mt. Gox is such an exchange which lost most of the bitcoin fund of their users.
Therefore you should not store all your assets on online wallets. These wallets are ideal for small amounts of cryptocurrencies only. We should advise you to use always use reputed exchanges, spread your assets and always enable two-factor authentication to add that extra layer of security. A very good example of an exchange-based custodial wallet is Coinbase. Other examples of online wallets are Coins.ph and GreenAddress.
So in a nutshell,
- Fastest wallets and cover complete transactions
- Some wallets hold or store multiple cryptocurrencies
- Ideal for storing a small amount of cryptocurrencies
- TOR network can be used for more privacy
- You are susceptible to hacking, theft, or phishing scams i.e. a threat to your privacy
- The coin information is stored with a third-party
This is the most common type of wallet in use. Desktop wallets are software that you download and install on your computer or laptop, therefore accessible from that device only. Since the keys are stored in the hard drive of that device, it offers a very high level of security.
These hot wallets are full-featured wallets, giving you access to all the functionality of those cryptocurrencies it can hold. The high security comes from the level of user control it offers, allowing full access to your private or public keys as well as the wallet’s seed, which is used for restoring the wallet (more on this later).
But even if you don’t disclose the key, security compromise is not totally out of the picture. If you lose or damage your device cannot access your wallet. Then there is always the case of virus or malware or keyloggers and hacks. A hacker having remote access, especially over a public wifi, or say if you click malicious links or download files on that computer your wallet can be compromised. Therefore, besides taking precautions you should have a very good anti-virus software, at least an internet security, on that PC.
These wallets can be specific to a single cryptocurrency or it can support multiple currencies. Single-support desktop wallets require a full download of the respective cryptocurrency’s blockchain data, also known as running a full node, to function.
Examples of single cryptocurrency supported desktop wallets are Mist (for Ethereum), Bitcoin Core (for Bitcoin), and the Monero GUI/CLI wallet. Whereas Exodusa and Jaxx are two very good examples of multi-currency desktop wallet.
So in a nutshell,
- Easy to use and full-feature cryptocurrency wallets
- Private keys are not stored with a third-party server
- Offers the highest level of security among all
- Vulnerable to malware, keyloggers, and hacking of your device
- Need to download the entire blockchain data and sync it every time you open
As you have guessed correctly, these wallets run on your mobile as an app – iOS, Android or often times if you just happen to have those windows phone. Mobile wallets very less space compared to their desktop peers, and therefore are much simpler. They are made lightweight as they are only a subset of that blockchain ledger and, hence, it works with Simplified Payment Verification (SPV) technology.
The great benefit of these wallets is of course portability and ease of use. It stores your keys so you can pay anywhere anytime you want. You can also make use of NFC to transfer fund or use the QR code scanning feature, something which other types of wallets doesn’t have.
Some examples of mobile wallets are Mycelium, Breadwallet, Electrum, Coinomi, and Copay. Jaxx also functions as a mobile wallet.
So in a nutshell,
- Very practical, portable and easy to use
- More privacy
- Offers additional features
- Again you can use TOR network for extra privacy
- Your phone is open to malware, keyloggers, and viruses
Some of you have those shared bank accounts either with your parents or wife, right? Multi-signature wallets are just like that. It requires signatures from more than one or of all parties involved to authenticate and complete any transaction. Apart from sharing between people, you can save one key on your computer or laptop and another in your mobile, so you need keys from both.
This type of wallet is more suited for business or family scenario. And the sharing of keys means it offers higher security as even if one key is compromised, the hacker needs all the keys to get hold of your fund. Another additional feature that comes with it is, of course, key backup in case you have lost one of yours.
Electrum, Greenaddress.it, Blocktrail, Armory, BitGo are some of the examples of multi-signature wallets.
- It is ultra-safe, offer the highest level of security
- Aimed more as a wallet for Business
- Not really easy to use and time-consuming
Cold Storage or Cold Wallets
Cold storages or cold wallets are those that are not connected to the internet i.e. they work offline. This means these wallets are either devices like your pen drive or keys printed on a hard copy.
This is very similar to your vaults or safety deposit box in your bank. These wallets store your digital assets as well as the private keys. Given their offline nature, it cannot function alone, and thus they always need a networked i.e. hot wallet to interact with the blockchain to complete any transaction. This is the reason cold wallets are typically used to store cryptocurrencies for the long term.
As they are very very secure, cold wallets are the preferable choice to keep a large sum of digital assets over hot wallets. Note that it is not vulnerable to hack at all, but if you misplace your device, or if it is stolen or say make any error your fund is gone – there is no way to get that back.
The trade-off for that huge boost in security is, with a cold wallet, you have to execute a workflow of online or offline transactions requiring you to physically copying or moving data between different devices.
The hardware wallets are dedicated devices like your pen drive or USB stick. Hardware wallets are often small devices that makes it portable. Hardware wallets do not require downloading and syncing of the full blockchain. There are some hardware wallets which have an OLED or LCD screen on top for displaying and verifying important details.
Setting up the wallets are easy as all you need to do is simply connect the wallet with your computer or laptop (of course with internet access) via USB port to access the wallet software. Next, you enter your pin, send the fund and confirm your transaction by clicking the button on the wallet case.
The software interfaces are designed to prevent user error. There are some hardware wallets which you can connect to your mobile phone as well. Archos Safe-T mini is such a mobile-friendly hardware wallet.
Depending on which hardware wallet you decide to use, you can have multiple cryptocurrencies and may interface with multiple web interfaces. These type of wallets stores your private key and use encryption method to secure it, therefore you don’t have to rely on the security of a personal computer.
We have mentioned in the cold storage section that if you lost the device, you have lost your fund. Well, not quite so as there is still a hope. There are some hardware wallets that can be restored using seed phrases in case of any damage, loss or malfunction of the device.
So, even if your hardware wallet got stolen, the thief still requires to bypass a user-chosen security such as a pin to access the device. Though the thief may eventually break that protection, this gives you the ‘sufficient’ time to get your replacement hardware wallet, enter your seed phrases, and transfer the fund out of your restored wallet. Therefore hardware wallets are one of the most secure methods of storing your cryptocurrencies.
With so many advantages, surely it has their own sets of disadvantages?
Hardware wallets focus on less user error and therefore simplicity. So it does not download the full blockchain data, which leads to the lack of all the functionality that a full-featured wallet software or a specific cryptocurrency offers. For an example, the Ethereum Mist hardware wallet won’t be able to access the Ethereum DApps features.
The inability to download the whole blockchain data also arises because a hardware wallet has low storage space. Another reason for this is it is not wise to keep a lot of free space, according to the manufacturers. You can therefore only keep a few wallets in the device, and in case you need a new one, you have to uninstall anyone to make space for the new. You can always restore the uninstalled wallet when you require easily though, as the hardware wallet stores that private key.
Another problem with these type of wallet is, unlike desktop wallets, these supports only a limited number of coins. Thus you have to wait for the developers to add support for that unsupported cryptocurrency you want to store.
For hardware wallet examples, you are obviously heard of the Nano Ledger S and Trezor. Then there are others like KeepKey, Ledger Blue, Trezor Model T, CoolWallet S, OpenDime, Digital Bitbox etc. These wallets cost you from $30 up to around $200.
So in a nutshell,
- Stronger security than all the other type of wallets
- Offers recovery methods in case of theft albeit within a short time
- Great for storing a large sum of cryptocurrencies
- Difficult for beginners to understand and access.
- Supports a limited number of cryptocurrencies
- Cannot avail the full features of a particular cryptocurrency
Before hardware wallet came up, the paper wallet was the de facto choice as cold storage but now really an underrated one. A paper wallet can be a piece of software that securely generates a pair of keys which are then printed on a paper or simply the printing of your private and public keys on a piece of paper. You can also print out the QR codes for both keys and just scan that when need it.
If generated in a trusted or safe environment, paper wallets are extremely secure. Since it is saved in a piece of paper, there is neither a centralized agency or a third-party involved nor it can be hacked by any digital means, therefore offering a very high level of security.
If you want to transfer cryptocurrencies on your paper wallet, all you need to do is to transfer coins from your software wallet to the public address of your paper wallet. Similarly, when sending or withdrawing, you just put that keys from your paper wallet to your hot wallets. Thus all you just either enter the keys manually or scan the QR codes of the keys into a software or web wallet.
These wallets are the most inconvenient wallet to use and are really only a method of cold storage. Whenever you want to access the fund, you need to generate the wallet in software and therefore forsake the offline or cold aspect of the wallet. The only way to keep the wallet offline but send the value would be the hand over the wallet document. Well, you can just tell the value to the receiving party but they may doubt you, therefore, it requires a lot of trust in the transaction.
Therefore these type of wallet requires responsible storage as you should create reliable backup copies, in case of loss or damage to the wallet, and keep those safe as well.
For example, Bitcoin Armory and BitAddress.org are two such software that can help you create and print your paper wallet.
So in a nutshell.
- Hack-proof as the private key is not stored on a third party server. In fact, it does not even involve internet connectivity
- Requires more effort to move the cryptocurrencies around
- It asks for more technical understanding
When to Use Which Wallet?
If you want a one-liner, we would ask you to follow the golden rule of most cryptocurrency traders follows – Consider your cold wallet as your “bank account,” and your hot wallet as the “checking account.”
You should only keep as many funds in a hot wallet as you need for your immediate and smaller transactions i.e. anywhere from $50 – $1000 worth of cryptocurrencies depending on how much you are willing to risk. This ensures that you can minimize the loss of funds in case of a server hack or hacking of your private key. You can think of this as losing just the amount of cash you have on your wallet and therefore can afford to lose in case of a pickpocket.
Also due to the relative ease of use and convenience, hot wallets are great for transacting small amounts on a day-to-day basis across multiple platforms. For other, look at the cold wallets. However, there are some software wallets that allow you to encrypt the wallet files (some parts of a wallet program) which contain their private keys. Though this feature increases the security of the hot wallets quite a bit but comes nowhere close to the security of the cold wallets. We would always advice use a hot wallet in conjunction with a cold wallet for maximizing security.
Now if you are a crypto investor looking for long-term investment then cold wallets are the way to go for sure, specifically, buying a hardware wallet will be a smart choice. Though there is very limited compatibility with popular hot wallets, the scenario is changing fast.
Keep the majority of your funds i.e. in excess of a few hundred dollars or whatever you can’t afford to lose. Many full-service wallets out there will provide an offline instance of your wallet. To stay in complete control over your private keys and the assets they secure, however, use a dedicated cold wallet you control.
So, in short, you may refer these points –
- Use exchange wallets for accessing exchange services, such as crypto-to-crypto conversion or cashing out for buying something.
- Use online wallets when convenience is valued above all else.
- Use mobile wallets for those quick on-the-fly transactions to your stores
- Use desktop wallets when you have that technical know-how and ease of use is not a priority but security is very important. It is fit for sending or storing a moderate amount of fund or for tasks like online shopping.
- Use hardware wallet for utmost security and a very large amount that you are not going to need soon.
- Use paper wallet for long-term saving
- Use multi-signature wallet for business purpose and beyond utmost security!
We would urge you to use a combination of a few or all type of wallets depending on your needs. Like you can keep your crypto savings in a paper wallet and your long-term (say your retirement or important purpose) fund in a hardware wallet. Then fill up your exchange wallets when you need to trade, and keep a sufficient portion of your crypto coin in your mobile wallet for those retail shopping, or deposit some into an online wallet for quick spending cash.
Whatever wallets you choose to use will ultimately depend on your personal ideas and purpose for using cryptocurrency.
How secure are these wallets?
To answer this question, it is evident that due to their connection with the internet, the hot wallets are much much more at risk of getting hacked than the cold wallets. While a paper wallet offers the most security, an exchange wallet or web wallet offers the least. But no matter which wallet you choose, if someone has access to your private key, they have your fund. So let’s check one by one.
The hot wallets due to their connection with the internet are prone to get hacked. Though there is a various level of security measures employed by these wallet services, hackers always have a creative method to get hold of your keys and data. These are some ways they do that –
- Malware – A type of software specifically designed to damage, disrupt, or gain unauthorized access to a computer system. It includes viruses, spyware, adware, nagware, trojans, worms etc.
- Virus – A specific type of malware designed to replicate and spread
- Keylogger – A type of surveillance software that once it is installed on a system, can record and send every keystroke made on that system.
- Remote access to your device – Gaining access to your computer remotely so that they can manage all or part of it (think of remote desktop)
- Phishing – A type of social engineering attack (email, instant message, texts or calls) used to steal user data by pretending to be a trusted source.
Additionally, if you send cryptocurrencies to a scammer, there is no way you can revert that transaction. Therefore there are certain precautions and preventive measures you should take to not fall for these traps while using crypto wallets.
Keep Updated Software
Always make sure that you are using the latest version of all the safety software required beside your wallet. Hackers always try to override the inbuilt security, so by regularly updating to the latest version you have far greater chance of avoiding that.
Add an Extra Layer of Security
It is always a great idea to keep adding as much layer of security as much you can. Make your passwords alphanumeric, long and complex and avoid common words or your or family member’s birth dates. Enable password authentication for every transaction. Choose wallets that have a good reputation and offer additional layers of security features such as two-factor authentication and additional pin code requirements, or a code sent to your mobile which you have to enter every time you have to open your wallet.
As mentioned earlier, It is always a good idea to consider a wallet with multi-signature capability. Authenticating a transaction using two or more separate devices enables you to have that extra security you need. If one of your devices is lost or stolen or hacked, the criminal would still need access to your other devices to access your fund.
Backup Your Wallet
It is always good practice to keep a backup of your wallet and do that on a regular basis. You should always keep an encrypted copy of your wallet (including private keys) in a secure place, preferably off-line. For offline wallets, you need to create and write down a backup password phrase so that you can still regain access if anything happened to your wallet. In this regard, cold wallets provide the backup you need to restore your wallet even though it gets stolen, as explained earlier.
As per Wikipedia, these backups come in different forms like:
- An encrypted file like wallet.dat or wallet.bin which contains all the private keys.
- A mnemonic sentence from which the root key can be generated, from which all the private keys can be recreated. Preferably these words could be remembered or written down and stored in other physical locations.
When both the private key and the backup are lost then your cryptocurrency is lost forever. Therefore, we would suggest you keep at least one backup on a thumb drive or CD to ensure that you have a hard copy as well.
In case you are using the Coinbase wallet, opt for their vault service to add an extra layer of security to cryptocurrencies you aren’t actively using or trading.
Again remember the golden rule – “Store just a small amount on hot wallets, and keep the rest safely in cold storages.”
Transaction Fees Involved with Wallets
This is a bit difficult to answer directly. So let’s take a look at the different fees crypto trading demands. There are mainly 3 types of fees associated with cryptocurrencies –
- Exchange Fees
- Network Fees
- Wallet Fees
For every crypto trading or transactions, every exchange charges an amount. This fee varies from exchange to exchange. For example, Bittrex charges 0.25% flat fees for every transaction, regardless of if it is a buyer or seller. Binance charges a flat 0.1% fee for executing trades from both buyers and sellers but uses limit or market orders for transactions. On the other hand exchanges like Poloniex, Kraken and Bitfinex follow a maker-taker (seller-buyer) model for charging transaction fees based. These three exchanges lower their transaction fees when you have more trade volumes than a set threshold.
Network fees are the fees you have to give to the miners for verifying every transaction on the blockchain. Every blockchain has their own way of collecting transaction fees. For example, when you buy bitcoin from Bitfinex and give your public key to send it to your wallet, this transaction request is sent to the Bitcoin network. A miner receives a full block containing multiple such transact requests, and upon verification of that block receive a payment. This reward comes from all the parties requesting transaction verification.
As miners set their fees, with an increasing number of users, you have to outbid others to prioritize your transaction. What this means is the fee you set for yourself is not dependent on the amount you are sending but on the length of the code to be solved. For example, the median transaction size of 226 bytes would require a transaction fee of $0.12.Therefore a large sum worth of crypto is always favored over a small one as the transaction fee is the same for both.
Now you can set your total transaction fee, pay a higher fee than others and your transaction is processed faster, pay a lower fee and you have to wait for hours or even days to get it verified, in some cases your request getting discarded. There are some wallets that let you set up your fee preference in those wallet settings. But most wallets have a predetermined transaction fee to get the transactions processed within a certain time frame.
Though all most all blockchains have increased the number of transaction processing capability to lower the fee, still it all comes down to how much you are willing to pay for faster processing. There is also some transactions where you don’t have to pay any fee at all.
Now there is another fee involved for using the crypto wallet. Where is this fee coming from? Well, you do store your coins there and you want them secure. This needs constant software development and these updates are not provided for free.
Also while creating a new address for a specific cryptocurrency on your wallet, the network of that cryptocurrency will also verify that and this true for whether you are using a personal wallet or an exchange wallet. And whether you will be charged for that depends on the particular blockchain the cryptocurrency is based on.
This wallet fee, available for you to check on the wallet settings, is very nominal. This fee goes to the wallet provider, and therefore vary from company to company. Note here that in the case where there is a wallet fee, you will be charged on the very first deposit you make to that wallet.
Are cryptocurrency wallets anonymous?
We have briefly answered this question before in this article already, but let us elaborate here. Blockchain protocols are not anonymous rather pseudonymous. What this means is the wallet does not have your identity or name in it, but it stores various sorts of data about you like all of your transaction records, both in and out, that particular wallet address made, with which addresses along with how much amount spent on each transaction. This is due to the open source and public nature of the transaction blockchain ledgers.
Normally it is very difficult to link your real identity by tracing your wallet address. However, there are ways to do that. One such is related to exchanges. With the government now regulating the crypto exchanges, if you want to purchase cryptocurrency using actual money, you have to submit a KYC and other documents. Meaning the exchange will link your actual identity to your wallet address as soon as you withdraw your funds to your wallet.
Now though seem an attractive proposition, there is a downside to full anonymity for sure. Yet there are efforts underway to make anonymity and privacy easier to achieve such as the DarkWallet project. The project is seeking to boost the anonymity and privacy level by incorporating stealth addresses and coin mixing.
Which Cryptocurrency Wallet is the Best?
Now that you know the different type of wallets out there, it is time to focus on picking the best. There are many wallets available in the market and some of them are really good. But they offer real value depending on what you are looking for i.e. what is in your priority list. You should scan the web for all those wallets but before selecting what is best for you, we suggest you should always answer the following questions –
- Do you need a wallet for day-to-day purchasing or just for buying and holding cryptocurrency for an investment?
- How much amount of cryptocurrency you need to hold? Is there any lump sum you want to hold for a long term?
- Do you plan to use several cryptocurrencies or just a single one?
- Would you need access to your digital wallet only from home or anywhere anytime?
- Is security your utmost priority?
- How much you value your privacy?
- How much you would sacrifice on security front for ease of use? Or how tech-savvy you are?
- Do you need to share your wallet with someone else?
- How much you are willing to pay for the wallet?
- Do you trust yourself to safeguard your wallet, or do you want to delegate that task to a third party?
We urge you to take some time to assess what you need and then select the most suitable wallet(s).
Review of Different Wallets in Details
First, let’s review some of the best Hardware wallets available in the market today.
Ledger Nano S
The Ledger Nano S wallet, a product of a France-based startup, is a compact USB device based on a smart card. It is made of brushed stainless steel and plastic. It is roughly the size of a small flash drive, measuring 98mm x 18mm x 9mm and weighing in at 16.2gm. It has an OLED screen on top which with the help of the two buttons you can check all the information there only.
It is a battery-less device which you need to connect to a PC or mobile device via USB port (connector type B). It is supported in Windows (7+), Mac (10.8+), Linux, as well as on Chrome OS and Android. When you want to send coins to someone, you just need to plug the device into your computer and enter your private pin number.
Note here that choosing a secure four-digit PIN is one of the first steps the Nano S will ask you to do. If you fail to give the correct pin thrice, the device wipes itself. Next, you need to back up your recovery phrase. This is a great feature that the device offers a 24-word recovery phrase which can be used to recover your account on another ledger device if it is stolen. Next, you install the Ledger Apps or integrate with the software wallets of your choosing.
The device is compatible with the following software wallets – Ledger Wallet Bitcoin, Ledger Wallet Ethereum, Ledger Wallet Ripple, Electrum, Copay, Mycelium, GreenBits, MyEtherWallet, and BitGo.
The price of the Ledger Nano S is a bit high at $93 USD or about 78 euro, if you have a large amount of cryptocurrency to keep, it is definitely well worth the investment.
- Screen, as well as the device, is protected by metal swivel cover
- Third-party apps can run from the device and currently, there are 18 installable apps
- When recovering wallet from seed, the whole process can be done from the device without even connecting it to a computer
- Out of all the hardware wallets available in the market, Ledger Nano S support most altcoins – about 718 cryptocurrencies according to the site including Bitcoin, Ethereum, Ripple, Zcash, XRP and interestingly Fido U2F
- It can simultaneously run 5 – 18 device applications.
- Very affordable, giving a very high-value proposition
- Integrates with a large number of software wallets
- Not as advanced wallet software (no transaction labeling)
- No ability to create hidden accounts
- No password manager
- Not as reputable as other leading hardware wallets like Trezor yet.
Created by SatoshiLabs, Trezor is the world’s first secure Bitcoin hardware wallet and it is ideal for storing large amounts of bitcoins. Like Ledger Nano S, this is also a USB stick like device with an OLED screen on top for showing important information. Trezor cannot be infected by malware and never exposes your private keys thus making it as safe as holding traditional paper money.
Trezor is open source, very transparent, easy to use with all technical decisions benefiting from wider community consultation. Trezor has a very intuitive interface and is Windows, OS X, and Linux compatible. Trezor can also be connected to iOS and Android mobiles as well as tablets via USB port. It is best to use it via Google Chrome and Mozilla Firefox browsers for guaranteed support.
One of the few downsides of the Trezor wallet is that it must be with you if you want to send bitcoins. This, makes Trezor best suited for investors, inactive savers or people who want to keep large amounts of Bitcoin highly secure.
There are a lot of hot wallets you can use in conjunction with Trezor such as Trezor wallet, Mycelium, Electrum, Electrum-DASH, Etherwall etc.
Though not as much as the Ledger Nano S, Trezor is very close in supporting a lot of crypto coins. Currently, the official site says that it supports about 689 coins including the primary ones like Bitcoin, Ethereum, Dash, Litecoin, ZCash etc. However support for some popular coins like Ripple, stellar or Monero etc. are yet to be added.
Trezor gives you 100% control over your private keys. The wallets content can be backed up by using its 24-letter recovery seed feature, which is generated offline via the inbuilt random number generator and it stays hidden from anyone over the internet.
Like Ledger Nano S, you must set up a PIN code while setting up your Trezor for the first time. Interestingly, on top of your 24-letter recovery seed, you can also add a further passphrase, acting as the 25th letter as an additional layer of security.
In terms of Trezor wallet fees, the only cost is the outlay of the device which is currently available to users from just €89. The most expensive model, the Trezor Model T + Cryptosteel, is available for €229 (excluding VAT). It offers a damage-resistant vault for recovery seeds alongside the newest Trezor wallet. The cheapest Trezor One White would cost you €69. There are two more models in between.
- Good security and privacy
- It is a 100% cold storage
- Easy to use a web interface,
- Has an inbuilt screen
- Open source software
- It is beginner-friendly.
- Still faces security attacks through its firmware
- It is not hierarchical deterministic
- Very costly
- Must have the device to send bitcoins
Bread Wallet, now known as BRD, is a simple mobile Bitcoin digital wallet that makes sending bitcoins a breeze. It is available for iOS (iPhone as well as Apple watch) and Android mobile users. There is no server involved while sending or receiving bitcoins, hence it is a standalone client, meaning there is no saving of user data or private keys in the server, hence you are in full control of their funds at all times. It also means you have greater privacy.
Bread Wallet has a very clean interface with a lightweight design, making the wallet operation fast, thus a pleasure to use for both beginners and experienced users. It offers swipes and fingerprints as well. Another feature of Bread wallet is that its enhanced security capability as it automatically generates a new wallet address for every transaction. But it lacks the two-factor authentication security feature.
Though Bread is free to use, you will need to pay fees to the bitcoin network when you make bitcoin transactions. The recent updates have made the wallet capable of adjusting transaction fees on a priority basis, thus giving its users the option to pay more for faster transactions. Your bank or a third-party service used to link your account to your wallet may charge you a fee when you buy bitcoin through the Bread app.
A promising news is the company has plans to support a few altcoins in near future.
- Very good privacy and security
- It is beginner friendly
- Simple and clean User Interface. It is easy to use.
- No signup or registration is required to get you started
- It has a built-in customer support section
- It is an open source software
- It is completely free
- It connects to the bitcoin network directly
- No web or desktop interface available
- It lacks numerous features
- Currently, it does not include replay protection for potential forks in the blockchain
- For the direct purchasing of bitcoin, it uses third-party apps
- Have received numerous complaints of app freezing
If you are an advanced user searching for a great Bitcoin mobile digital wallet, then opt for Mycelium. The mobile wallet allows Android and iPhone users to transact bitcoins and keep complete control over them. Apart from supporting bitcoin, it also allows you to switch back and forth from bitcoin to regular fiat currency i.e. US dollars, euros, etc. No third party can freeze or lose your funds.
Mycelium is regarded as one of the best for bitcoin. With enterprise-level security far superior to most other apps, features like encrypted PDF backups and cold storage, with an integrated QR-code scanner, secure chat service, and a local trading marketplace, Mycelium is definitely a feature-rich wallet.
Mycelium Wallet offers five type of accounts – HD (Hierarchical Deterministic), Bit ID (open protocol), Single Address Accounts, “Watch Only”Accounts, and Hardware (for offline devices) Accounts.
The wallet is free to use, however, there is transaction cost for miners. Mycelium’s miner fees range from 0.08 mBTC/kb for low priority transaction to 1 mBTC/kb for highest priority, where 1 mBTC equals 0.00100000 BTC.
Some other noteworthy features of Mycelium are –
- You have 100% control over your private keys unless you export them they are always in your device
- It doesn’t need to download the blockchain, just install on mobile and run in seconds
- Mycelium manages multiple accounts and never reuse addresses (BIP32, BIP44)
- Connection to the Bitcoin network through their supernodes
- Watch-only addresses & private key import for secure cold-storage integration
- It also secures your wallet with a PIN
- It is compatible with other bitcoin services through bitcoin URI handling
- It offers support for BIP38 Keys
- Find other people to trade Bitcoins with in person using our Local Trader feature.
So what are the pros and cons of the mobile wallet?
- Offers good privacy
- Offers advanced security
- It is feature-rich
- It is open source in nature
- It integrates with a wide range of services, including hardware wallets like Ledger and Trezor
- The wallet is free to use
- Fast connection to the bitcoin network.
- No web or desktop interface available
- It is not for beginners
- There is no ability to sign messages
Exodus is a desktop wallet that is a relatively new wallet. It has no mobile version and thus only supports Windows, Mac OS, and Linux platforms. You need to directly download and install the wallet into your computer.
The strongest suit of Exodus wallet is its incredibly intuitive, easy-to-use, and beautiful user interface. It is designed for people who have yet to use an exchange i.e. it is very much beginner-friendly so that they can easily complete transactions step by step.
One of the great things about Exodus wallet is that it has a built-in shapeshift exchange thus allowing users to trade between altcoins and bitcoins inside the wallet itself. The wallet clearly shows the amount you are going to get in the trade in both crypto and fiat values, including the current spread of the transaction.
You can keep about 40 cryptocurrencies including Bitcoin, Ethereum, Ethereum Classic, FunFair, Gnosis, Golem, Litecoin, OmiseGo, Qtum in your Exodus wallet. The real-time pie chart portfolio it offers is great for calculating and organizing your savings.
Every time your payment is processed the wallet charges a transaction fee which is given to the blockchain networks and not kept by Exodus. Exodus favors speed and reliability over lower fees, and therefore this fee is adjusted as per the changes in the blockchain network. As of now, there is no provision to manually adjust fee.
Since Exodus is a desktop wallet encrypt and store all your data in your computer, meaning you are always fully in control of your keys and data. It provides a very simple guide to backup your wallet. During backup, it doesn’t store your keys on the server. When you need to restore the wallet, the team also email you a secure link (protected by a 12-word passphrase and Exodus “key”) to reactivate your wallet. Though they take security very seriously, the team has not offered two-factor authentication.
- Good privacy & security
- It is engineered keeping beginners in mind
- Intuitive interface with powerful charting tool at your disposal
- It is a very easy-to-use wallet
- It has built-in trading and portfolio functions
- It supports multiple cryptocurrencies
- Offers automatic fee adjustment
- The wallet is free
- Offers great prompt support
- No web interface or mobile app
- Limited security features
- No two-factor authentication
Jaxx is a multi-chain mix wallet that offers support for more than 65 cryptocurrencies including Bitcoin, Ether, Ether Classic, DAO, Dash, Litecoin, Zcash, REP, and Rootstock. Jaxx has been designed to deliver a smooth Bitcoin and Ethereum experience.
You can use the Jaxx wallet on a variety of platforms like Windows, OSX, Linux, Chrome OS, Android, and iOS as well as on devices such as tablets and mobiles. Jaxx also offers a connection through Firefox and Chrome extensions. It is designed to sync and function across all devices.
Another great feature of Jaxx is it allows in-wallet conversion between Bitcoin, Ether and DAO tokens via Shapeshift exchange facility and by importing or sweeping Ethereum paper wallets. This is very crucial for traders and investors. Any other coin added in future by the developers will also use this facility. In addition to cryptocurrencies, Jaxx also allows you to hold fiat currencies.
In the case of the desktop version, you need to manually enter sender’s addresses, but for the mobile version, you just to simply scan the QR code.
Jaxx allows you to select any of the three custom fee options – slow, average, and high fees for needed transactions speed. These transaction fees depend on the blockchain and Jaxx does not collect any of it. Instead, the wallet makes money by facilitating those ShapeShift transactions.
On signing up, Jaxx does not collect any information about you, meaning you have full control of your data. The wallet offers back up facility through a single master seed. In 2017 hackers were able to steal $400,000 in Ethereum and Zcash by hacking the seed phrase. There is no official confirmation of that getting fixed yet. Also, it doesn’t have the two-factor authentication.
So many features and on-going integration of new currencies makes Jaxx is an excellent choice for those who need a multi-currency wallet.
- Offers good privacy and security
- It is a universal wallet with multi-currency support
- It is supported across multiple platforms and devices
- It has an in-built exchange for fast crypto conversion
- Offer great user support
- It is feature-rich
- The wallet is user-friendly
- It is free
- The code is not open source
- can be slow to load
- Unsurity in rectifying the vulnerability in extracting user seed phrase
Created by Bitpay, Copay is a hierarchical deterministic (HD) bitcoin wallet and definitely one of the best digital wallets in the market. Being an HD wallet, it is also the first wallet to incorporate full Bitcoin Payment Protocol, thus always securely verify that funds get transferred to the right addresses. Your address gets changed automatically after every transaction.
This is also a multi-signature wallet, therefore friends and family can share the fund and also it is much more secure since to make every transaction or withdrawal it needs all keys.
The Copay wallet is truly a versatile hot wallet. It has Android, iOS, Windows, Linux, and Mac OS X support, thus it is a desktop wallet, a mobile wallet, and an online wallet enabling you to use it in various devices. The wallet deals only with Bitcoin (BTC) and Bitcoin Cash (BCH) but allows you to give their value in over 150 different fiat currencies.
Two good features of Copay is offering the option to use QR code as well to make payments and to add your payees to your address book for easy access.
Copay has something to offer for everyone. It is simple enough for basic users but has plenty of additional advanced features to attract more experienced traders as well.
Copay uses light nodes which is faster but not as secure as full nodes. The wallet also offers back up feature and you can restore it by using seed phrases.
- Easy to use interface
- Good privacy and security,
- It is a Multi-signature wallet
- Offers multiple platforms and devices feature
- Offers multiple wallet storages
- Open source software
- It is free
- hierarchical deterministic
- It can be slow and unresponsive
- Limited and sometimes slow user support
Armory is an open source Bitcoin-only desktop wallet suited for more experienced users. It gives emphasis on security.
Armory is solely a desktop wallet and there is no mobile version available. The wallet is supported on multiple platforms – Mac OS X, Windows, Linux Ubuntu, and Raspberry Pi.
The wallet allows you to set up multiple wallet addresses the separation of your personal bitcoin account from your business accounts, in case you need it. It also gives you an added layer of security by password protecting your transactions.
On the security front, only a few bitcoin wallets may challenge Armory. The multi-signature support and decentralized lockboxes feature Armory offers, provides users full control over the creation and storage of cryptographic i.e. private and public keys.
Armory also provides cold storage support, which basically allows you to store your private keys offline. Even if someone gets hold of your offline keys, that person would still have to penetrate the wallet’s sophisticated wallet encryption. Armory also works with the Glacier Protocol, which is one of the most well-known and popular cold storage systems for bitcoin.
The customer support now is left with the FAQ section only due to the abandonment of the project. So there is no ticket or email systems, therefore you need to find your solution from the online community. The development team has left the stage, meaning that protection of your assets has been left to you.
The wallet is free to install and use. There is transaction fee involved for sending bitcoin over the blockchain network which is set by the network itself. As a general rule, the network discourages sending less than 0.01 BTC by requiring a fee.
There are also other interesting features Armory offers including one-time printable backups, key importing, GPU-resistant wallet encryption, key sweeping etc. Though Armory takes a little bit of effort to get used to and utilize its full potential, it is nonetheless a great option for more tech-savvy bitcoin users willing to give their funds the best security k.
- Good privacy
- Great security features
- Multi-signature support
- Hierarchical deterministic or HD support
- Reputed and established brand
- Great cold storage support
- It is open source
- It is free
- Only accessible via the desktop client, no mobile support offered
- Definitely not for beginners, deep security features make it difficult to use
- Lack of two-factor authentication
- Only FAQ
Green Address is a user-friendly Bitcoin wallet and an excellent choice for beginners. It is considered one of the most secure wallet, as given their HD characteristics, it uses new addresses every time for every incoming transaction. The wallet also has a “watch-only” feature, allowing you to check your balance or conduct transactions without fully accessing your wallet.
Note here that GreenAddress does not store your keys, not even in an encrypted version anytime. The wallet is free to download and install and there no other fee involved than the usual transaction fee.
GreenAddress is available through Apple App Store, Chrome Web Store, Google Play and F-Droid. It is accessible via desktop, mobile and online with apps for Chrome, iOS, and Android. Its user-friendly nature arises from the fact that it seamlessly integrates the mobile and desktop platforms, making it one of the most flexible HD wallet in the market.
As enhanced security features, the wallet offers support for multi-signature addresses, two-factor authentications, a paper wallet backup, and instant transaction confirmation.
A downside is that Green Address is required to approve all payments, so you do not have full control over your spending.
- Offers solid security
- Offers multi-platform and devices support
- It is a multi-signature wallet
- It is beginner-friendly
- It is open source software
- It is free.
- Offer average privacy
- Here the third party must approve payments.
Developed by the Luxembourg-based software development company, Blockchain, Blockchain.io is one of the most popular Bitcoin wallets. You can access the wallet from any browser or smartphone. The wallet is compatible with iOS, Android, and Web and the user interface is intuitive. It supports only Bitcoin and Ether.
Blockchain.info offers two different additional layers – while the users using browser may choose to enable the two-factor authentication feature, the mobile users have the option to activate a pin code requirement every time the wallet is opened.=
There is three level of security the wallet offers. Level one consists of email verification, passphrase, and password hint. The second level consists of two-step certification and mobile number linking. The third level is Block Tor requests which block IP addresses coming from the Tor network to access your account.
There is a built-in “Security Center” that guides you through the steps on how you can make your account secure, backup your funds and prevent unauthorized access. Blockchain.info does not have access to your private keys although the wallet is stored online and all transactions go through the company’s servers.
Though the Blockchain wallet is free to use, every time cryptocurrencies move in or out of your wallet, you will be charged a small transaction fee. Its platform automatically deducts this fee from your funds depending on both the size of the transaction and the state of network traffic at the time. The wallet also offers an option to select your own bitcoin transaction fee under the “Customise Fee” setting.
- Offer advanced security features like two-step verification.
- You may choose to check out your balance in your local currency.
- UI design is very intuitive and therefore can be easily navigated.
- It is an HD wallet
- You can pair your web wallet with a mobile device by scanning a QR code.
- You can directly buy and sell coins through your Blockchain wallet.
- It is an online wallet, so more vulnerable
- Identity verification to access your Blockchain wallets may seem cumbersome
- You cannot purchase cryptocurrencies with fiat directly through Blockchain Wallet.
- Has a history of outages
- It requires third-party trust
Now let’s quickly check two more wallets.
Coinpayments is basically a web-based crypto wallet. The sheer number of cryptocurrencies that it support and stored in their online wallet account (more than 900) has given rise to its popularity. There is no limit to how many you can store either. It also allows automatic conversion of more than 55 crypto coins without incurring a fee and multiple wallet creations.
The wallet is free and there are no charges for registration. The website only cut the transaction fee when you transfer your crypto coins from one place to another place through their wallet.
Coinpayments is one of those few online wallets whose payment are accepted by hundreds of online stores, meaning you can simply use your digital currency from your Coinpayments wallet to purchase online things in almost everywhere rather than just use it for the trading purpose. It does that by providing shopping cart plugins. Some of these carts are Magento, Blesta, PrestaShop etc.
It uses a unique feature called PayByName, which simplifies the authentication and makes the exchange of funds quicker.
Though Coinpayment is a web-based wallet, yet it does offer a mobile version as well, thus making it a semi-mobile wallet. You can use it on all major OS i.e. Windows, Mac OS, Linux as well as and iOS.
To protect your money from hackers the company has also included the vault feature. This makes the process of money transfer difficult and requires having a set amount in the account for withdrawal. The Coinpayments wallet has integrated BitGo in their wallet to make it faster, especially for Bitcoin, and more secure.
However, it suffers from slow transaction fees as reported by some users.
Launched in February 2018 by Airbitz, the Edge Wallet is the latest crypto software wallet. Though the firm exclusively launched the wallet for Bitcoin in 2014, due to security issues the company had to rebrand it and add latest technologies to make it a feature-rich cryptocurrency wallet.
The wallet has integrated Spaceshift technology in it thus allowing users to exchange cryptocurrencies within the wallet.
The most important feature of this wallet is its easy-to-use interface. It takes only a minute to create a new account with this wallet, as the users need to provide a username, password, and a pin for this purpose. Edge also offers the provision to easily restore the wallet. Also you can transact cryptocurrencies just by logging in without any long verification process.
The Edge Wallet supports multiple currencies – Bitcoin, Bitcoin Cash, Litecoin, Ripple XRP, Augur (REP), Wings, and Matryx, with the company planning to offer support for more cryptocurrencies in near future. The developers can extend the support through the use of simple plug-ins.
Edge Wallet offers two-factor authentication as well as recovery code and seed phrase for account retrieval. The Edge team has recommended that the Wallet that the wallet should be used for storing small amounts.
So finally we are over. We know that this is a lot to take in. But there is also so much more to know about these wallets.
There are so many other different types of wallets with some offering unique features while some have a great recipe for a good wallet, that it is not possible here to discuss those all. Well of course, as we said, earlier it all comes down to how you want to use it and for what purpose.