The safety of storage has always been a concern for all crypto traders. It is becoming even more important as the rate of crypto fraud increases. Reports show that thieves managed to steal over $14 billion worth of crypto in 2021. Let’s learn more about crypto wallets, their types, and how to choose the best one for you specifically.
What Is a Crypto Wallet?
A crypto wallet is a storage for digital coins where you can host private keys to your cryptocurrencies and access them via a connected application. Some of them also allow you to receive and send varying amounts of crypto. It is essential not to forget and not to share your private key with anyone.
Crypto wallets can have many forms. It can be an app, a part of an exchange platform, or a physical object that fulfills the storing function. You can even write down your private keys on a piece of paper and place it somewhere safe — and that would also be a wallet.
Types of Crypto Wallets
When it comes to choosing a crypto wallet, there are two prevalent types: hot and cold wallets. Here are the in-depth descriptions of both.
This kind of storage doesn’t require access to the Internet. It allows you to store crypto offline. The two major types of cold wallets are hardware and paper ones. They share the same working principle but are very different in their physical manifestation.
When you see a hardware wallet, you may think that it is just a flash drive or a USB stick. Indeed, such storage is one of the most secure ways of hosting crypto. To use a hardware wallet, you need to connect it to your computer. A seed phrase, which can be up to 24 words in length, replaces conventional keywords and protects your wallet from thieves.
Here is the list of top-rated hardware wallets:
- Ledger Nano S
- SafePal S1
- SecuX V20.
The limitation of hardware wallets is their cost. They are way more expensive than other types of storage and can be priced from $30 to as high as $1,000 based on the brand, type, and built-in features.
This is basically a paper-printed image, which comprises your private access keys. Usually, it is presented as a QR code. The main feature of this wallet is that it cannot be hacked. However, it can be easily damaged, burned, cut, or stolen.
Here is the list of resources that generates private keys in the form of QR codes to print them on paper:
This type of storage requires a stable Internet connection to operate, as it works online. There are two major types of hot wallets: custodial and non-custodial ones.
Custodial wallets are those which hold your assets in custody for you. This means that your private data, as well as keys and passwords, are managed by a third-party organization. This way, you do not have full control over your assets. However, they take off the burden of responsibility for the safety of your crypto.
One of the vivid examples is the Binance wallet. This custodial storage allows you to connect to the Binance exchange platform and take advantage of its features in a few clicks. You can easily exchange ETH to XLM or any other pair and get crypto in your wallet effortlessly.
Non-custodial wallets have exactly the opposite working principle. With such storage, no one will hold your private keys for you. However, you will need to take personal care and remember passwords and other log-in details.
One of the most popular non-custodial wallets is Trust Wallet. It allows you to store several cryptocurrencies and control private keys and seed phrases yourself. It also offers the opportunity to stake your coins and earn rewards — one of the most popular choices is VeChain staking.
Which One Should You Choose?
So, which wallet should you choose to store crypto? It depends on your needs, budget, and level of expertise in this industry. If you are a beginner, start with custodial wallets, which are easy to set and cheap or even free to use. If you are concerned with your privacy and independency, go for non-custodial wallets. If you don’t want to store crypto online, try paper wallets. Finally, hardware wallets are your choice if you are okay with investing in your crypto storage.