Crypto wallets are an essential part of owning cryptocurrency. Just like cash needs a wallet and online money needs a bank account/e-wallet, a cryptocurrency needs a place where you can access it. A cryptocurrency wallet allows you to access the cryptocurrency you own. A common misconception is that your crypto is stored in your wallet. Instead, the wallet stores the private keys you need to be able to sign transactions from your wallet’s address.
Each wallet contains a private key and a public key. The public key is also known as your wallet’s address. This address is used when you or someone else transfers cryptocurrency to your wallet. It’s very similar to a mailing address, anyone can look up and send things to your address, but it’s not proof of ownership. The private key is what is used to prove ownership of a blockchain address and is what you need to be able to authorize transactions from the address. Following the same analogy, your wallet’s private keys are like the deeds to a property – they show that you’re the owner.
All crypto assets (currencies, NFTs, etc.) are stored on the blockchain and are assigned to specific addresses. So if you buy cryptocurrency, you need to transfer it to an address you own for it to be legally yours.
Why You Shouldn't Store Crypto on an Exchange
When you buy cryptocurrency from an exchange (check out our article on how to buy crypto for more information), the currency is given to the wallet associated with your exchange account. However, the main difference between an exchange wallet and a personal wallet is that the exchange is the one in control of your private keys, which you need to sign transactions. This allows you to buy and sell cryptocurrency easily, but it is also a security risk.
If a hacker gains access to an exchange’s information, they also get access to your private keys, meaning they can withdraw all your crypto to a wallet they control. This happened in the Mt Gox hack, where 850,000 bitcoins were stolen in 2011. By not having control of your private keys, you’re at the mercy of the exchange; if they decide they need to limit withdrawals to protect their equity, you have no way of getting your cryptocurrency from them.
When you create a private wallet, you alone are in charge of your private keys, which means you’re not vulnerable to these attacks. Unless you’re actively trading with your crypto regularly, it’s best to withdraw your cryptocurrency to a personal wallet where you’re in control.
A good mantra to have is “not your keys, not your coins.”
Software vs. Hardware Wallets
People store their cryptocurrency in two popular ways: software wallets and hardware wallets. Each has its advantages and disadvantages, so let’s take a closer look at them.
As we mentioned above, the primary function of a crypto wallet is to store your private keys, as this private key is what allows you to make transactions with the crypto you own. Without this private key, there is no way for any hacker to steal your cryptocurrency, so you need to keep this key as secure as possible.
A hardware wallet has a cryptocurrency wallet function built into a piece of hardware that looks similar to a USB stick. You’ll need to install applications on these hardware wallets to make them compatible with different cryptocurrencies. Once you’ve installed the app, your public and private keys will be generated, allowing you to send and receive that particular cryptocurrency. Different hardware wallets support a different number of apps and can run a different number of apps concurrently.
You’ll only be able to access your cryptocurrency when it’s plugged in, as, without the device, you won’t have access to your private keys. In addition, hardware wallets provide excellent security, as they store your private keys on a device that you can store offline (known as cold storage), meaning you have very little chance of being hacked.
Each hardware wallet comes with a PIN or password that you can set up, meaning that if someone were to find your wallet, they wouldn’t be able to plug it in and immediately access your cryptocurrency. It’s also close to impossible for a thief to access your private keys if they were to steal your device. However, hardware wallets are at risk of physical attacks, so they aren’t a perfect storage solution.
These wallets are perfect for long-term storage and cost anywhere between $20 and $250.
In comparison, software wallets are free wallets that are stored on devices such as laptops and desktop computers rather than a dedicated physical device. These wallets are much more convenient if you’re making frequent cryptocurrency transactions, as you don’t have to keep plugging a USB device in and out whenever you want to send some crypto.
When you create a software wallet, you’re often prompted to create a password to use when accessing it. This is done as a substitute for using your private key to access your wallet to make it more secure. If you were to type in your private key every time you accessed your wallet, your private key would be more exposed, and thus your crypto is more vulnerable to being stolen. However, it’s essential you create a very strong password when using your wallet. If someone can guess it, they will have access to your crypto.
While software wallets are more vulnerable because they are on devices connected to the internet for a more significant amount of time, they’re often a lot more convenient as they’re easier to access and display much more information.
Both hardware and software wallets generate a recovery (seed) phrase when you first create your wallet, which you can use to recover your private keys if your wallet is lost, destroyed, or if you forget your access PIN/password. These phrases consist of 12 to 24 random words which you can use to import your crypto assets into a new wallet. These phrases are just words, which are easier to remember than random alpha-numeric characters, but the words must be written correctly when you’re importing your wallet.
An offshoot of software wallets, phone wallets are designed for mobile devices, making them highly convenient as you can make cryptocurrency transactions wherever you are in the world. In addition, mobile devices (particularly iPhones) are less prone to malware than desktop computers, meaning that it’s less likely your cryptocurrency will be hacked from your phone wallet.
The best mobile wallets will allow you to set up a PIN or a password to make your wallet even more secure. These wallets also generate recovery phrases when you create your wallet, which means you can still access your cryptocurrency even if you lose your phone. They’re often free to download and use and offer the same functionality as a desktop app.
Top 5 Hardware Wallets
The first hardware wallet was created in 2013, and in the decade since, some fantastic devices have come to market. Let’s take a look at the best ones.
Ledger Nano X
Frequently cited as one of the best bitcoin wallets on the market, the Ledger Nano X is everything you need in a hardware wallet. It supports over 5500 different cryptocurrencies and can hold 100 different currencies simultaneously. It has a fantastic screen, improved security features, and even BlueTooth functionality so that you can manage it from your phone.
Supported Platforms: Windows 8.1+, macOS 10.14+, Linux, iOS 13+, Android 7+
Supported Cryptocurrencies: 5500+
Concurrent Apps: 100
Ledger Nano S Plus
The Ledger Nano S is a cheaper alternative to the Nano X that still has all of the essential features. It also supports over 5500 cryptocurrencies and allows you to have 100 currencies simultaneously. While it doesn’t have BlueTooth, it has a great screen and is perfect for those who are looking for a hardware wallet while on a budget.
Supported Platforms: Windows 8+, macOS 10.8+, Linux, Android 7+
Supported Cryptocurrencies: 5500+
Concurrent Apps: 100
Trezor Model T
Another established heavyweight in the hardware wallet industry is Trezor, and their flagship device is its Model T. While it’s the most expensive device on our list, it has the capability of holding all supported cryptocurrencies simultaneously, unlike the Ledger, which is limited to 100. So if you’re heavily diversified, this is the device for you.
Supported Platforms: Windows 10+, macOS 10.11+, Linux, Android
Supported Cryptocurrencies: 1200+
Concurrent Apps: 1200+
Trezor Model One
The Trezor Model One is the answer to Ledger’s Nano S/S Plus. They’re similarly priced and have similar functionalities. Some prefer the slimmer form of the Nano S Plus, but the Trezor Model One has a bigger screen, which may tip the balance for some people.
Supported Platforms: Windows 10+, macOS 10.11+, Linux, Android
Supported Cryptocurrencies: 1000+
Concurrent Apps: 1000+
The Ellipal Titan is a unique hardware wallet on our list as it has its own battery and functions as its own device. Once you have created an account on the device, you need to link it to a mobile app to be able to manage it. It’s a great little device that supports over 10,000 currencies across 44 blockchains, and the phone management app makes it convenient to make transactions.
Supported Platforms: Android, iOS
Supported Cryptocurrencies: 10,000+
Concurrent Apps: 10,000+
Top 5 Software Wallets
While hardware wallets offer a lot of security, software wallets are the most popular way to access your cryptocurrency. There are plenty of different options to choose from depending on the particular cryptocurrency you’re looking to store, so let’s look at the best options.
Metamask is the perfect software wallet for any cryptocurrency on the Ethereum blockchain. It works right in your browser, making it easy to connect to decentralized exchanges such as Uniswap. There’s even the option to buy Ethereum directly from your wallet, meaning you don’t have to bother with exchanges. The only downside is the lack of Bitcoin support.
Supported Platforms: Android, iOS, Chrome, Firefox, Edge
Supported Cryptocurrencies: Any ETH-based token.
Thanks to its simple and intuitive user interface and security features, one of the best phone wallets you can use is Trust Wallet. It also supports an eye-watering 4.5 million assets across 65 blockchains, so whatever coin you’re looking to hold, you can hold it on Trust Wallet.
Supported Platforms: Android, iOS
Supported Cryptocurrencies: 4.5m+
If you’re looking for a bit of privacy when it comes to your crypto activity, Atomic Wallet is the best choice for you, as there are no accounts, verification, or KYC when you create your wallet. While it doesn’t support as many currencies as other wallets, they have a dedicated ERC-20 wallet for any tokens on that blockchain. You can even buy crypto directly in your Atomic Wallet.
Supported Platforms: Windows, macOS, Android, iOS, Debian, Ubuntu, and Fedora
Supported Cryptocurrencies: 432
Guarda Wallet is a secure crypto wallet with full desktop and mobile support, so you can buy and sell crypto wherever you are. You’re able to stake your crypto directly from your wallet, as well as purchase crypto with your bank card.
Supported Platforms: Windows, macOS, Linux, Android, iOS
Supported Cryptocurrencies: 400,000+
With an excellent, easy-to-use interface, Exodus is one of the most popular crypto wallets on the market. The way it displays your portfolio is reminiscent of a stock portfolio, with graphs and charts showing the performance of your coins. It even has built-in browser support, so you don’t have to download an app directly onto your machine.
Supported Platforms: Windows 10+, macOS 10.12+, Linux 4.10+. iOS12+, Android 8.0+
Supported Cryptocurrencies: 233
Choosing the Wallet That's Right For You
We’ve covered some great wallet choices, both hardware, and software, but how do you know which one is right for you? If you’re still unsure, ask yourself these questions:
- What type of cryptocurrency am I storing?
- How often am I going to be making crypto transactions?
- How much cryptocurrency am I looking to store?
- How worried am I about security?
The first question you need to ask yourself is what kind of cryptocurrency you’re looking to store. Unfortunately, no crypto wallet supports every currency on the market, and some of the more obscure, low market cap coins may not be supported by hardware wallets. In this case, your only option would be to use a software wallet – ideally one created by the creator of the coin you own.
The next question you need to ask yourself is how often you will make transactions. If you’re not going to be making many cryptocurrency transactions and have bought it as a long-term investment, you’re better off going with a hardware wallet. Software wallets are great if you’re constantly moving your money on and off exchanges, but hardware wallets are ideal for long-term storage.
If you’re storing a large amount of cryptocurrency or are particularly worried about security, your best option is to go for the more expensive hardware wallets. These wallets are easier to use, support a larger number of cryptocurrencies, and offer additional layers of security that some of the cheaper options may not support.
Crypto Wallet Tips
Being fully in control of your own money can be a little daunting at first, especially when using software you’re unfamiliar with. However, all it takes is a little getting used to, and you’ll soon be fully at ease with sending and receiving cryptocurrency. Here are a few tips if you still feel overwhelmed.
- Don’t put all your eggs in one basket – If you’re storing a large amount of cryptocurrency, it’s worth diversifying your portfolio across several different wallets so if one becomes compromised, you won’t lose the majority of your crypto.
- Use cold storage for long-term savings – Keeping hardware wallets offline is the most secure way to store your crypto over a long period of time.
- Backup your wallets – It always pays to keep an extra copy of your recovery phrase and private keys offline in case you lose access to your wallet. Keep them in a secure location, like a safe, which is unlikely to be compromised.
- Always double-check addresses – When sending cryptocurrency, it’s best practice to double-check the destination address. If you get it wrong, there’s no way to recall the cryptocurrency back.
- Beware of Phishing – The easiest way for hackers to access your cryptocurrency is to get you to give them your password/private keys. Never give out your wallet password or private keys to anyone; always double-check the veracity of the wallet software you download.
Once you’ve made the jump and bought your first cryptocurrency, you need to keep it safe, and the best way to do that is to transfer it to your very own crypto wallet. You may be tempted to keep it on an exchange as it’s more convenient, but exchanges aren’t like banks; there’s often no recourse if your account is hacked or the exchange prevents withdrawals. Part of why cryptocurrency is so appealing is the ability to completely control your money, with no 3rd party intervention necessary. So move your crypto to your wallet, and be fully in control of your money.
Always remember, not your keys, not your coins!