Crypto wallets are an essential tool for securing and accessing digital currencies. And while they keep your valuables safe, these wallets don’t function like traditional billfolds. A crypto wallet stores information proving ownership of your crypto batch while facilitating transactions.
Most crypto wallets support one or a limited number of cryptocurrencies. Perhaps unsurprisingly, the most widely accepted currency is Bitcoin. These wallets come in different shapes and sizes, each offering varying degrees of accessibility and security.
The Importance of Crypto Wallets
Crypto wallets don’t hold actual tokens, which are located on a blockchain. Instead, wallets store private keys that give you access to your crypto coins by certifying that you own them. If you ever lose your private key or if it’s compromised for any reason, you’ll lose access to your coin stash. That’s why crypto wallets play a crucial role in keeping your crypto safe.
Types of Crypto Wallets
These wallets are split into several categories: paper, hardware, desktop, mobile, and web wallets. Each has its own set of advantages, but the most significant disadvantage relates to how connected they are to the internet. The most secure wallets are those that are completely cut off from the internet and aren’t exposed to potential cyberattacks.
This is a largely obsolete method that involves printing out a private key on a piece of paper. Although mobility is one of its most significant advantages, this type of crypto wallet is prone to getting damaged, lost, or stolen. Whatsmore anyone can copy down the contents of the paper.
There is another problem. As paper wallets need to be printed, it’s worth noting that every printer has internal storage. Anyone can gain access to your private key once they read the printer’s stored data. As such, it’s recommended that you print or write down seed phrases instead – 12 to 24 random words. If you lose seed phrases, you still have your private key.
Special storage devices like USB drives carry private keys with minimal access to the internet. These are only connected to a PC when you want to manage your crypto coins. As an added security feature, most hardware wallets have anti-malware or antivirus protection, reducing the chances of your private key being compromised. But all this comes at a price. The starting price is typically around $100, and it goes up depending on the list of supported cryptocurrencies and other features.
These wallets should not be confused with hardware wallets. A desktop wallet is software installed on a computer that acts like any other crypto wallet. Specific desktop wallets may have unique features, such as exchange integration to trade cryptocurrencies or node software.
The most significant disadvantage is a moderate connection to the internet, which makes desktop wallets prone to malware attacks and viruses.
Similar to their desktop counterparts, mobile wallets are apps that save private keys. Most of them are compatible with iOS, Android, or both operating systems. The biggest plus with mobile wallets is that you can quickly pay with crypto coins, thanks to QR code scanning or near field communication (NFC). The problem is that many fraudulent apps appear like authentic wallets and have crypto-malware stashed inside.
Online sites and services that store private keys are called web wallets. They’re constantly connected to the internet, so you can easily access your private key from any device. The main downside is the vulnerability that comes with being connected to the internet.
You could lose a private key due to a malware or phishing attack or give the wrong person access to your web wallet. We recommend using web wallets that have two-step encryption for additional protection.