Crypto Wallets: which one is right for you
Wait, can’t I just leave my crypto on the exchange I purchased them on? Well, that depends on a few factors, but let us start from the beginning.
Your crypto wallet is what you use to interact with a blockchain network and falls under one of three categories: a paper, software or hardware wallet.
Now, there are different use cases, but the tl;dr is hardware wallets are the most secure method of storing your crypto, with software being the most convenient and paper wallets being widely considered obsolete/unreliable.
The first thing to understand about wallets is that they don’t actually store your crypto. They are merely vessels through which you can interact with a blockchain allowing you to send and receive the required information in order to perform transactions on said blockchain.
Examples of this information include:
- Your public keys
- Your private keys. Never share this with anyone as it will mean they are able to access your crypto. Also remember, if you don’t own the private keys, you don’t own the crypto. Looking at you, Robinhood! Your private keys (or seed phrase) will also allow you to access your crypto on any device and that’s because your crypto never actually leave the blockchain, they just change from one address to another.
- An assigned address that you will use to receive or send crypto to and from your wallet, which acts as a location on the blockchain. It’s okay if your address is public. When sending or receiving crypto, always ensure you are sending crypto to the right address.
Hot vs Cold
Hot wallets are any wallets that are connected to the internet. Your crypto is very accessible and trading with your crypto is convenient.
Cold wallets have no connection to the internet making them less likely to be compromised by those evil people who want your precious crypto. Cold wallets usually come in the form of a USB drive device that stores a user’s private keys securely. If you’re a loooooooong-term HODLer, this may be the option for you.
A cold wallet is a physical device that uses a random number generator (RNG) to create public and private keys. The device, which is not connected to the internet, is home to these keys, making it a cold wallet and as a result arguably the most secure methods to store your crypto.
Web wallets make it possible to access your crypto, without having to install software – think metamask (browser) and your exchange wallet. You create a password to access your crypto, but in some cases, the provider will hold the private keys. Again, if you don’t own the private keys, you don’t own the crypto. If you’re leaving your crypto on the exchanges, set up multi-factor authentication, anti-phishing code, and withdrawal address management.
If you opt for a desktop wallet, you will be installing software onto your computer and you’ll be able to manage your crypto through that. You will have your private keys, which are stored locally on your computer. Encrypt it with a password as an extra precaution. BACKUP YOUR PRIVATE KEYS AND PASSWORDS because by doing so, you will be able to access your crypto on another device. Scan your computer regularly for viruses, malware etc.
These are very similar to desktop wallets but operate on…you guessed it, mobile devices making it incredibly convenient to send, receive and spend your crypto on the go. Again, BACKUP YOUR PRIVATE KEYS AND PASSWORDS.
Paper wallets are exactly that – pieces of paper with a crypto address and its public and private keys printed on it in the form of a QR code. A major flaw to this option though is that you are only able to transfer the entire balance to an address, making it the wrong option when wanted to send a smaller amount to an exchange to trade or to another address to purchase something. As stated above, this method is somewhat dated and is considered dangerous.
Finally, BACK UP YOUR SEED PHRASE AND PASSWORDS!