Wallet Series #1
When you buy and sell cryptocurrencies, you will need a wallet. There are five major types of cryptocurrency wallets and you will most likely find that you will need multiple wallet types for each coin. Each has its own safety measures and varying levels of security. To best protect your assets, you will need to utilize a combination of the various wallet types. If you want to know more about the actual use and technical information of cryptocurrency wallets, check out this blog post.
The most common wallet for getting into cryptocurrencies is the online wallet. They can be accessed via your web browser either by a website or by an extension.
- Ease of use and obtainability- These wallets are very simple to setup and use daily.
- No lag time- They are online and have the connection via the web already setup. This means you won’t have any issues with lag or wait time for your transactions like you sometimes do via an offline wallet.
- Can be used with a VPN service- These wallets can be used and accessed via a VPN service or browser such as TOR. This will increase your security and allow you to be more anonymous if that is a priority for you.
- Exchange ability- Many online wallets will exchange your coin for another for little or no fee. This is mainly because your coins are not actually there, they are just held by the online wallet provider. They don’t become yours until you are transferring it out of the wallet.
- Security- Like any online website your account and your money are susceptible to online scams, malware, hacking, and rely directly on the website security to protect your finds.
- Your coins are not really your coins- Your coins are on stored by the third-party, in this case the wallet website server, they are not actually in your possession.
- Downloads- Some online wallets might require you to download their extension for your browser or some other information. This leaves you open to malware, key loggers, and viruses.
In addition to online wallets, microwallets are a subset of online wallets. If you are dealing with any kind of transactions with microcoins (small amounts of coins), you will probably need a microwallet. These wallets are just online wallets that allow you to save up your small micro transactions and then withdraw when you get to a certain threshold. See our blog about microwallets to learn more.
Mobile wallets are a great addition to your wallet collection if you use your currencies when you are out and about. A mobile wallet allows you to have instant access to your funds in the wallet, via your smartphone. This is great for people who live in an area where they can go purchase things with their cryptocurrencies, such as buying a cup of coffee or a lunch.
- Easy to use- Mobile wallets are extremely easy to use and setup, and most of the time is done in just a few minutes.
- Access- Your wallet can be used where you are.
- QR Codes- You can use QR codes to receive and send cryptocurrency anywhere you can take your phone.
- Security- The hands down biggest disadvantage is your security. Smartphones are not very secure and can be hacked into easily.
- Malware/Viruses- Like online wallets, you will be downloading the app and having to do transactions within the application. If you were to get a key logger, malware or virus on your phone all your coins may be lost or stolen.
- Lose of Access- If you lose/break your phone and for some reason didn’t secure your keys appropriately, you may be totally locked out of your wallet and have no access.
A desktop wallet is considerably more secure than a mobile or online wallet. In general, desktop wallets are wallets you can download and install on your computers hard drive. They can be used online or offline. Unlike mobile and online wallets, most desktop wallets are coin exclusive, meaning they only hold one coin type per wallet.
- Easy to use- Most of the desktop wallets you will find will have a very simple setup process that most people can do with no issues.
- Privacy- Your wallet is not on a third-party server so you have more privacy with your coins.
- Cold Storage- One big advantage of desktop wallets is the ability to connect or not connect to the internet. This means you can have an old computer be your crypto storage hub, if you never connected it to the internet.
- Security risks- You are downloading software and there is always some risk in doing that even from trusted sources. Ensure you do a scan on the wallet software before installing just to be safe.
- Internet connection- If you are connected to the internet on your computer and you have a desktop wallet setup, you could be open for attack on your hard drive, and lose your wallet.
- Compatibility- Sometimes you will need to address some compatibility issues. Because the desktop wallet deals with money, it has some security settings that might conflict with your computer. This is not that common but I have seen it happen.
- Storage Space- It is generally recommended to have at least 40-60 GB for EACH wallet, therefore some people find desktop wallets to be very space consuming on their computer.
View all our recommended desktop wallets. (Coming Soon)
Hardware wallets are the current industry standard for holding any amount of crypto currencies that you will be holding for a longer term. Most everyone has a hardware wallet if they have any substantial amount of coins. There are a few options out there for hardware wallets, with various features. Check out our recommendations to pick the right one for you.
- Security- If used in good practice, your hardware wallet is one of the most secure wallets you can have for your crypto storage.
- Features- Each hardware wallet has different features that you might want to look for. I talk more about them in the hardware wallet review/blog.
- HODL-Although it may sound silly but hardware wallets are great for holding crypto for a long time. You can drop some coins on it and forget about it. Come back in a year and you might have made some money. It just makes it less likely you will spend/use it like your mobile or online wallets for those impulse buyers/panic sellers.
- Setup- They are a little bit of a pain to setup if you are new to crypto. They come with instructions and are not that hard, just a few more steps than other wallet choices.
- Price- Unlike the options above, hardware wallets are not just software, and you will need to purchase them. They are not unreasonably priced and are HIGHLY recommended for storage of larger amounts of cryptocurrencies.
- Availability- Due to a lack of manufacturers for hardware wallets and there is a hugely booming crypto industry. They are often sold out and so you must wait for them to become available or risk buying from third parties. ***If you come across this issue, make sure to purchase only from AUTHORIZED dealers.
Paper wallets were the way that most people stored their cryptocurrencies before hardware wallets were created. They are the most secure way to store your coins regarding security, but they do have some disadvantages because of that.
- Security- Hands down the most secure ways to store your crypto coins.
- Hacking- Because these wallets are totally offline (literally on paper) you can’t get hacked.
- Privacy- Because nothing about this wallet ever touches a computer or server, all your keys and information is secure, and stored in the wallet itself.
- Limited use- As a result of the increased security, you will have to go through some extra steps to use your paper wallets effectively.
- Setup- The setup itself is not that complex, but it does require some knowledge of cryptocurrency and how the wallet works. It can be confusing for some people to understand.
- View all our recommended places to setup a paper wallets. (Coming Soon)
These are the 5 types of crypto currency wallets. They all have their disadvantages and advantages. While, I personally have all of these wallet types and multiples of each one, you will need to figure out what works best for you. They all have their purpose and as long as you deal with your security and management properly, you shouldn’t have any issues with your crypto currencies. Make sure to check out the articles on each of the wallets to see our recommended wallet options!