If you own any crypto assets, you need to make sure you have a solid understanding of crypto wallets. Failure to use a secure and reliable method of crypto storage can lead to a complete loss of funds.
Keep reading to learn what exactly is a crypto wallet, how to use a crypto wallet, which are the best crypto wallets, and why using crypto cold storage is almost always the best solution.
What Is a Crypto Wallet?
A crypto wallet is the crypto world’s answer to bank accounts.
In its purest form, a crypto wallet has one purpose: to store your public and private keys.
No crypto is stored on your wallet; instead, it lives on the blockchain. The set of two keys allow you to access and use the coins you own.
Not sure what a blockchain is? Read our guide to find out.
How to Use a Crypto Wallet
As the crypto industry has grown, so too has the number of crypto wallets available. Predictably, each wallet has its own set of features and quirks to try and lure users. Some even let you send crypto via SMS.
At their core, however, all wallets work in the same way. To receive money, you need to use the public key. The public key can be shared with anyone.
The private key lets you send money out of the wallet. Anyone who has a wallet’s private key can perform a transaction, so it’s vital not to share it.
Storing private keys in the most safe and secure way possible is the primary goal of every crypto wallet. A lost private key can never be restored; the assets held in the wallet will be locked forever.
Which Is the Best Crypto Wallet?
Many different types of crypto wallets exist. There are online wallets, offline wallets, mobile wallet apps, hardware wallets, and even paper wallets and crypto credit cards.
But which of these is the best solution—which is the best crypto wallet available today?
In 2020, the only type of wallet worth considering is a crypto hardware wallet.
They are physical devices, typically about the size of a USB stick, which store the private keys for all your crypto assets. All the most important crypto coins are supported, and the newest models support thousands of different tokens. Some even have features such as Bluetooth payments.
If you lose your wallet, you can restore the coins into a new wallet, as long as you have the recovery key.
Ledger Crypto Wallets
Of the two, the Nano X is the newer device. It hit the shelves in early 2019. It supports more coins and has more memory than its predecessor. Both devices use the Ledger Live app to integrate with your PC or Mac.
Other hardware wallets worth considering include the Ellipal Cold Wallet 2.0 (which we also reviewed), and anything made by Trezor. Just make sure you fully understand everything about Trezor devices before you hit the shops.
Any crypto wallet which is not connected to the internet is called a “cold wallet.” Paper wallets were the original cold wallets. The concept is as rudimentary as it sounds; your private keys are printed on a piece of paper, often in the form of a QR code, and you need to store the paper in a safe place.
Needless to say, there is no comparison between paper wallets and hardware wallets in terms of features or security. A hardware wallet is almost always the better option.
Ideally, you should avoid paper wallets at all costs. The only real advantage of a paper wallet is that it’s entirely free to create. Hardware wallets are often more than $100.
Check out our guide on how to print a paper wallet if you want to learn more.
The least secure form of wallet are the ones found on exchanges.
Not only are these hot wallets (more on that shortly), but they are also at the mercy of the exchange’s internal security. Crypto exchange hacks are all too common, with billions of dollars frequently vanishing.
The problem isn’t limited to the smaller, fly-by-night operations. Even some of the best crypto exchanges in the world have been affected.
Robinhood Crypto Wallet
In early 2018, the darling of millennial investing—Robibhood—finally brought its crypto offering online.
Unfortunately, if you want to become a serious crypto investor, you should give Robinhood a wide berth.
The selection of coins is limited, you do not have control of your private keys, and you cannot withdraw your crypto from the platform. You will also be subject to Robinhood’s controversial “payments for order flow” practices, meaning your trades on Robinhood aren’t really free at all.
Instead of using Robinhood to invest in crypto in the US, do your research and choose one of the best cryptocurrency exchanges for Americans instead.
Crypto Wallet Apps for Mobile
Several crypto wallets are available for both Android and iOS. Because they are hot wallets, it’s vital that you choose an app with a good reputation.
We also love non-custodial wallets. They operate on a peer-to-peer basis and are open source. One of the best non-custodial wallets is Unstoppable.
(Note: Mobile operating systems are capable of doing more than merely storing Bitcoin. For example, you can use an Android device to mine crypto.)
Crypto Wallet Security
Before you start using a crypto wallet, make sure you understand the security implications of doing so.
Hot Wallets vs. Cold Wallets
All crypto wallets can be divided into one of two types—hot wallets and cold wallets.
A hot wallet refers to any type of wallet that maintains an active internet connection. That includes browser-based online crypto wallets, exchange wallets, and mobile wallet apps.
Conversely, a cold wallet does not have a web connection. Paper wallets and hardware wallets are both forms of cold storage.
A cold wallet is much more secure than a hot wallet; there is a much lower risk of being hacked. The tradeoff is ease-of-use. While companies like Ledger and Trezor have made their devices as painless to use as possible, the nature of hardware wallets means they will never be as convenient as web-connected crypto storage solutions.
Remember, the assets on a wallet are only safe if you have possession of the private keys. You should never share them with anyone.
And to reiterate—if you lose your private keys, there is no way to recover them; you will lose access to your assets permanently.
Many people are surprised to learn that most wallets are not private. Sure, some Bitcoin wallets are anonymous, but anyone can see the balance of your wallet using a blockchain explorer. That’s how we know about some of the most notable Bitcoin wallet addresses on the network.
If you don’t want anyone to be able to see how much is in your wallet, use one of the world’s most private cryptocurrencies instead of Bitcoin.
Learn More About Crypto
We earn commission if you purchase items using an affiliate link. We only recommend products we trust. See our affiliate disclosure.