Are you wondering how to choose the best crypto wallet? Helping you out with this is the primary purpose of this guide. Throughout this guide, we’re going to learn:
- What crypto wallets are?
- How they work?
- The differences between a cloud wallet and a hardware wallet?
- How to choose the right wallet for your needs?
At this point in time, crypto is not an alien topic anymore. Pretty much everyone knows what it is even if they don’t have any investments. Do you want to know how to get started with crypto? Well, the first thing you need to know is how to choose the best crypto wallet!
What is a Crypto Wallet?
The primary purpose of a crypto wallet is the same as a traditional physical wallet. To store your assets. For a traditional wallet, the asset is fiat currency. Or, paper money. Whatever you may want to call it.
Now, the operation of a crypto wallet and a traditional wallet is not the same. See, a regular wallet holds the “physical” money and you can directly take it out or put it in however you like. On the contrary, a crypto wallet holds the keys for your crypto instead of the crypto itself. The coins or tokens are recorded in the blockchain as transaction outputs. So, essentially, a crypto wallet gives you the power to manipulate your assets using the unique keys you have. The change in the number of crypto tokens you have is just the result of a transaction.
The nature of the operation of a crypto wallet is a blessing and a curse at the same time. You get to access your tokens that are safely stored in the blockchain. So, even if someone gets to your wallet, they can’t access your coins. It’s not true for regular wallets. If anyone gets a hold of it, they’re going to take off with the cash.
On the other end of the spectrum is the security issue. If your private keys are compromised in any way, there’s no way you can prevent your assets from being stolen. So, protecting your private keys at any cost is the ultimate security protocol you can follow.
Types of Cryptocurrency Wallets
In the current world that we live in, there are a few different types of crypto wallets. Some are for desktops, some are for mobile devices, and others are hardware wallets.
In general, we can categorize wallets into 2 major types. The “software” wallet and the “hardware” wallet. However, we’re going to focus on “cloud” wallets and hardware wallets in this guide.
A cloud wallet is a further distinction from the software wallets. As the name suggests, it’s based on the cloud just like plenty of other services we use every day. The other common types of software wallets would be desktop wallets and mobile wallets.
Hardware wallets, on the other hand, are completely different from software wallets. Worry not because we plan to cover it in detail in this very guide.
Cloud Wallet vs Hardware Wallet
From the names, you can already tell that we’re talking about 2 completely different types of crypto wallets. Let’s spread our focus evenly on both.
These are crypto wallets you can directly access on the internet. There’s no need to download anything or carry any physical devices with you. These platforms are completely based on the cloud and you can access them anytime you want, from anywhere you want, and from any device you want.
By far, cloud wallets are the most convenient. These are considered “hot” wallets. The concept of hot and cold wallets is not very new in the crypto industry. If you’re not aware, a “hot” wallet is one that’s connected to the internet. It’s connected 24/7 with no downtime.
A “cold” wallet, on the other hand, is one that’s not connected to the internet. You can simply store your keys and disconnect it from any devices and keep it hidden. Using this formula, it’s apparent which wallets are hot and which ones are cold.
Cloud wallets are pretty much everywhere on the internet now. As the number of cryptocurrencies is increasing, the number of cloud wallets is also increasing.
As the name suggests, you can physically touch these wallets. They have a physical presence, sometimes protected by military-grade security! A hardware wallet is a hundred times safer than a cloud wallet from any angle you look at it. However, convenience is a major factor here.
If you’ve been following our guide, you should guess by now that hardware wallets are cold storages. As they’re disconnected from the internet, there’s no way a hacker can track where your crypto keys are.
It’s basically the characteristics of hardware wallets that distinguishes them from all other types. No desktop, mobile, or cloud wallet can match the security level of a hardware wallet.
In most cases, the wallet looks like a USB thumb drive. It might also have other modern connectivity like Thunderbolt. Whatever it is, executing transactions is as easy as connecting the device to your computer and following the instructions. Then, when you’re done, disconnect the drive and keep it safe.
Can I Use a Crypto Exchange as My Blockchain Wallet?
In some cases, you can surely do it. The cases are when exchanges offer an app or a device to store your keys. But fundamentally, a crypto exchange and a crypto wallet are different entities. To understand why you cannot use a crypto exchange directly as a wallet, you need to understand how they work.
A crypto exchange is simply a trading platform for your crypto needs. One exchange can have lots of currencies for exchange including Bitcoin, Litecoin, Ethereum, and so on. The biggest benefit of an exchange is that you can buy and sell crypto based on fiat currency! They do it at a fixed price and offer all the security that you’re going to need.
On the contrary, a crypto wallet cannot convert any currency to another. In fact, you already know that a wallet doesn’t even hold the cryptos. It just allows you to execute transactions based on the unique keys.
The good thing is that reputed exchanges like Binance and Coinbase offer wallets for the users. While you’re going to need to use both separately, the process will become a lot more streamlined.
How Do Cloud Wallets Work?
To understand how cloud crypto wallets work, you might first want to know how anything on the cloud works.
The term “cloud” came from the idea of storing things on the internet where you technically don’t need any physical space. Google’s cloud services like Drive, Sheets, Docs, etc. are prime examples that we use on the daily.
A cloud server is centralized and it distributes resources to the nodes that need them. In exchange for a fee, of course. But most of the service providers don’t charge the end-users for limited use. That’s why you get to use Google Drive or Google Sheets for free up to certain storage.
Following this paradigm, we can land on cloud wallets. So, your crypto keys are essentially stored on a cloud server. You surely have your login credentials to enter your designated space. Just like no one else can access your Google Drive data, no one can access your cloud wallet data as well.
The biggest benefit of using these wallets is that they’re not confined by the number of devices or the location of the device. Rather, you get to access your keys from anywhere in the world. Although the same can be said for a mobile wallet too, there’s something about the convenience of a cloud server.
Are Cloud Cryptocurrency Wallets Safe?
If the comparison is with hardware wallets, then no. It’s as simple as that. We’ve already said once that no other wallet can compete on the level of a hardware wallet. Sure, the cloud wallets are giving you access to the keys in no time. And that’s the biggest risk.
As these are hot storage, they’re always connected to the internet. It also means any potential hackers are getting constant access to your wallet and have all the time in the world to try and crack the code.
A big area of concern when you use cloud wallets is counterparty risk. In terms of economy, the counterparty risk implies that one of the parties in a monetary transaction defaults on its contractual liabilities.
In simple words, you never know when the cloud wallet may steal your assets and leave you empty-handed. It’s just the nature of the world.
The best way to approach this challenge is to have backups of your wallet. You should already have a seed that you can use to restore the wallet. While a simple restoration works in most cases, it’s better to have backups anyway.
Another quick tip is using a strong password. Now, we know it sounds cliché because every single website on the internet now requires a somewhat strong password to begin with. But as you’re storing sensitive information, you should give it some extra attention. Don’t use your phone number, birthdays, anniversaries, etc. even as a section of the password. Think of something that no one else can think of.
Now that you know pretty much everything there is to know about cloud wallets, why don’t we go over the best ones and look at their features?
Comparison Table of Top Cloud Wallets for Bitcoin and Other Cryptos
Exodus is probably the most popular software wallet of our time. It offers both cloud storage as well as cold storage for your private keys. It’s completely free to download and hold your keys. You only need to pay for the miner’s fees.
To access all the assets, you get a desktop app too. But you don’t have to use it if you don’t want to. The wallet supports over 100 types of crypto, including NFTs!The best feature in our opinion is that it can be integrated with the Trezor Hardware wallet. You’re going to learn about it in the hardware wallet section.
SoFi is often considered the best cloud wallet for beginners. It’s neither a traditional exchange nor a wallet. Rather, it’s a brokerage platform that allows you to get acquainted with the paradigm without risking too much.
When you open your SoFi account, you can use it to manage all of your assets as well as the investments from a single account.The drawback, however, is that there are fees for every single transaction. You can do them in fiat currency, starting from a mere $10. Every time you complete a transaction, SoFi is going to charge 1.25% of the transaction.
It’s not only available for desktop users but also for mobile users. You can download the corresponding apps from Google Play and AppStore. More than 16,000 people have already put their faith in the wallet and so do we.Apart from being a crypto wallet, you can use Payeer as a regular e-wallet too. You can use it for shopping at the accepted merchants and transfer funds all over the world.
As it calls itself “E-wallet loaded with features!”, we can’t disagree. You can get started with a free account and store up to 9 types of crypto tokens. Needless to say, it includes the major ones like Bitcoin, Ethereum, Litecoin, Ripple, and so on.AdvCash has one of the cleanest interfaces among all the cloud wallets. It has a premium black tone all over the interfaces. Along with buying, selling, and exchanging crypto, you can get your hands on a crypto card too!
Coinbase is primarily known for its exchange platform. But it also offers an amazing cloud wallet, the Coinbase wallet. You can download it for free from the Coinbase website.
The app lets you control all major assets you have for minimal fees. It’s also suitable for storing your NFTs. The benefit of using this cloud wallet is that you can seamlessly benefit from the Coinbase exchange platform too.As of now, Coinbase wallets store all major crypto tokens in circulation. As it likes to brand, “Every ERC0-20 from Aave to ZRX”.
How Do Hardware Wallets for Cryptos and NFTs Work?
Hardware wallets are the latest addition to the crypto paradigm and they’ve been a blessing for all the users. It’s essentially a physical device that holds your private and public keys away from the eyes of the public.
As you may already know, these are cold storages so there’s no way to track your wallet. The great thing about hardware wallets is that one wallet can hold multiple types of keys in one place. While this feature is also present in cloud wallets, using it means putting more assets at risk.
A wallet of this type is often a plug-in device that you can put in your pocket. Or, you can safely store it somewhere else if you want. The idea here is that you’re in total control of whatever happens to the device.
Another great thing about hardware wallets is that many exchanges allow you to trade the currencies directly from them without having to deposit the crypto into an exchange wallet. If the other way around was true, then the whole point of a hardware wallet would be in vain.
Most wallets nowadays are considered “dual purpose”. It means they not only store your private keys but also let you “sign” a transaction from the wallet. So, there are no additional downloads or signing in required. You plug your wallet in and send or receive tokens at your discretion.
Are Hardware Wallets Safe?
Yes, they are. They’re the safest type of wallet you can get your hands on. The “cold” nature is the biggest additional to these wallets’ security. Moreover, you can assign PINs, passwords, and even biometric security to some modern devices!
The devices themselves are also encrypted most of the time. Manufacturers even claim that viruses and malware can’t affect these wallets at all! Apparently, the private keys that are stored in your wallet are never in contact with the internet. You take care of the transactions in a safe bubble created by the safety layers.
Comparison Table of Top Hardware Wallets for Bitcoin and Other Cryptos
There’s no better hardware wallet than Trezor in the current market. It’s known for its “ultra-secure” characteristics and humongous currency support. Apparently, it supports more than 1,500 currencies at once!
Trezor is not even a single type of wallet. There are multiple variants. For example, the Model T is the best of the bunch and it has a screen on itself!To use the wallet, you simply connect it to your computer or even smartphone. After you’re done with whatever you’re doing, don’t forget to disconnect it.
You can buy it directly from Trezon Website.The base model is Trezor One which costs €91 and the Model T costs €249.
Ledger is another widely known hardware wallet that can create a different level of safety for your crypto tokens. There are 2 main variants available in the current market. The Ledger Nano X and the Ledger Nano S.
Both of the wallets are best known for their compatibility with Bitcoin keys. But they support somewhere around 1,800 assets which is a lot from all angles.The Nano S is the base model and it can handle up to 3 applications at a time. The Nano X, on the other hand, comes with Bluetooth and can handle up to 100 applications at once!
Often called the “the coldest wallet”, NGrave Zero features a QR code technology to let you control your private keys. It’s the “coldest” because your private keys aren’t going to connect with the internet even if you want to.The seed that you get when you open the account apparently lasts forever. To back up the claim, NGrave has fortified the device with stainless steel sheets. It’s protected from fire, water, and works like a “BlackBox”.
As the name suggests, this wallet looks like a curved out diamond. It has a 2.8” display on top. There are 3 different variants of this wallet that you can get. The V20, the W20, and the W10.
You integrate multiple accounts in these wallets and oversee them at once. It features “dual connectivity” which is essentially the connectivity with desktops, laptops, and even mobile phones.Remember the display on top? You can manage your tokens inside the wallet right from that display using a few taps of the finger.
Keevo has pretty much revolutionized the hardware wallet paradigm with its wallet, carbon key, desktop app, and premium plus service. But the crème de la crème of its offerings is undoubtedly the seedless recovery feature.
For all kinds of crypto wallets, you get a seed when you first open it. You can later use this seed to recover any information or keys lost from the wallets. If you lose the seed, there’s no way to retrieve any of your assets.Keevo hardware wallet, on the other hand, gives you the opportunity to recover lost or stolen assets even without the seed! It also offers all of the mainstream security features you can expect from a hardware wallet.
If you read this guide from start to finish, you are well-informed about all the vital information you need to decide on the wallet that suits you. Whether you choose a cloud wallet, or a hardware wallet – there are plenty of safe options that we’ve reviewed in this article.