Going into 2022, one of the most important themes for crypto investors has to be security. You want to make sure that everything is secure with your coins. 2021 was a relatively good year for the market when it comes to security, but hackers are always on the prowl.
As an investor, there’s no doubt that you’ll be working with crypto wallets. Like your real wallets, these services help store your money and keep it safe. However, wallets come in different types. Knowing which option works for you will be very important - especially if you’re a beginner.
Here, we’ll look into the different types of crypto wallets and explain their pros and cons. In the end, you should know better about crypto security for your own good.
What is a crypto wallet?
A crypto wallet helps to store your coins. However, since cryptocurrencies don’t actually exist in physical form, a crypto wallet stores proof that you own specific coins.
A crypto wallet stores two things - your private key and public key. The public key is your wallet address - that long, alphanumerical code that you send to people who want to send coins to you. It’s basically like your bank account.
On the other hand, the private key is a code that you use to authorize transactions from the wallet - like the password to your bank’s mobile app. Your wallet stores both and is connected to the cryptocurrency’s blockchain. So, when a transaction is carried out using your wallet, your balance is updated automatically.
Types of Crypto Wallets
We currently have different types of crypto wallets, each with its own pros and cons. Security begins with you, but it is also important that you select the right type of wallet for yourself as well.
Here are the categories:
Hot Storage Wallets
When you hear hot storage, we mean crypto wallets that are directly connected to the internet. They could come in the form of desktop software, mobile phone applications, or online service providers. The fact that they are connected to the internet is what makes them “hot.”
Most hot wallets are free. However, they carry an inherent risk since they are connected to the internet. Hot wallets can always be hacked, and hackers themselves are getting more adept at their work these days.
The available hot storage wallets include:
As the name suggests, desktop wallets are wallet apps that run on your computer. Your coins are stored on your computer, and you’re in control of them. There’s a little-to-none possibility of a thor party freezing your funds, and you can be flexible.
But, with a desktop wallet, you’re also responsible for the safety of your funds. You need to back the wallet up and ensure that your computer is free of malware.
Some top desktop wallets include Bitcoin Core, Electrum, and the Atomic Wallet.
These wallets operate on your mobile phone. They tend to be the most convenient for easy payments since you can just scan a QR code and make the required transaction.
Like desktop wallets, mobile wallets require that you handle security. S, you’ve got to make sure that your phone is secured and protect your funds from theft or misplacement.
Some top mobile wallets include Exodus, TustWallet, MetaMask, and more.
With a web wallet, you get a browser-compatible wallet that can work on mobile and desktop. You don’t get the full control that you’d get with a mobile or desktop wallet, but these wallets can also be pretty convenient.
Most web wallets are browser extensions. But, this also makes them a bit dangerous since hackers could easily clone them and trick people. There have been many cases of this happening in the past, so be careful when downloading them.
Some top web wallets include the Coinbase Wallet and the Blockchain Wallet.
Cold Storage Wallets
Cold wallets are different from hot wallets in one primary point - they’re not connected to the internet. This means that hacking them is especially challenging.
However, the fact that they’re not connected to the internet means that you can’t use cold wallets to complete transactions on the go. Essentially, you’re trading convenience for security.
Cold wallets are physical devices. They’re portable and encrypted, and they allow you to download and carry your coins with you wherever you go. With your funds being stored offline, it’s incredibly easier to ensure security. You're pretty safe as long as you don't lose your device.
Some popular cold wallet manufacturers include Trezor, Ledger, and KeepKey.
Which Option is Best?
As always, this depends on you. If you have a lot of cryptocurrencies, we recommend a mixture. Keep some coins in a hot wallet, so you can conduct transactions or send them out whenever you can. At the same time, those coins in cold storage can be left alone for security reasons.
You can always move your money around based on necessity and convenience. Just make sure to keep it safe.