When first getting involved with cryptocurrency, there are few things that need to be done before getting started. This includes looking at the market and doing research on which coins are best suited for you. After doing this, you are ready to make a purchase. But how do you receive your crypto? This brings us to the first step in trading cryptocurrencies: creating a wallet. But these aren’t wallets like the one you carry in your back pocket and in order to find the correct wallet for your needs a better understanding of the technology is necessary.
What Is A Crypto Wallet?
We often say cryptocurrencies are “stored” in wallets; however, this is not technically true. Funds are actually stored on the blockchain: that vast, decentralized ledger that forms the back-bone of the crypto world. In reality, wallets contain important data that allow a user to access these funds on the blockchain, and if properly managed should ensure the secure storage of these assets.
A wallet contains a private key and a public key. The public key, or address, is the numerical string that is viewable by anyone and is used when sending funds to your wallet. It can be thought of similarly to the address that the Post Office uses to deliver letters: the whole world can know your address, send you letters and postcards but still not enter your house.
Crypto Wallet Security
The private key, on the other hand, must never be made public. The only person that should ever have access to it is the wallet owner: this is the key to your house and all the valuable belongings stored inside. Any person holding the private key for a wallet has unlimited access and control of the funds within it, and there is very little recourse for a user that has allowed their private key to be compromised.
Another important facet of most wallets is a seed phrase. While not necessarily stored on the wallet, this 12-24 word mnemonic is generated alongside it and is used to recover a wallet if the private key is lost or the wallet is damaged or destroyed. This seed phrase must be stored in a secure place and be treated as equally valuable as the private key since, if compromised, can be used to acquire the private key for a wallet.
Choosing The Best Cryptocurrency Wallet
These days there are more crypto wallets than you would imagine and when entering the crypto sphere research and due diligence are necessary: there have been many cases of scams using phishing software to steal funds as well as hacking attacks and unscrupulous providers. It is also important to understand what your requirements for a wallet are. Long term storage? Everyday spending? Trading across multiple currencies?
First, let us look at the different types of crypto wallets.
All wallets can be broken down into two categories: hot wallets and cold wallets. Hot wallets refer to some form of software that connects to the internet while cold wallets store data offline. They each have traits that make them better suited to different investment strategies, lifestyles and crypto spending habits.
The Different Types Of Crypto Wallets
The five wallets types are desktop, mobile, hardware, online and paper wallets. They all have pros and cons and different qualities that better suit different needs. Desktop wallets function using software that is downloaded onto a desktop computer. They provide a high level of security and many users choose these platforms because they are familiar with desktop computers and feel comfortable managing funds with this configuration.
Mobile wallets operate similarly, using software (apps) and are becoming more popular due to the proliferation and popularity of mobile devices and smartphones. They are great for everyday use and transactions on-the-go, but sacrifice some of the security of other wallet types. We all know how easy it is to hack a smartphone, so it is best that only small amounts of crypto are kept on these wallets.
Online wallets store data on servers with varying levels of security and can be useful for regular trading. Many crypto enthusiasts do not recommend using online wallets because they are owned by a third party and are far more susceptible to hacking and other online security threats however there are some online wallets that are worth examining.
Paper wallets are the most low-tech, and some would argue the most secure wallets. However, with the development of more advanced hardware tech, paper wallets have fallen out of favor by many users. In their simplest form, they are a piece of paper with the public and private keys of an associated wallet printed on it. Hardware wallets are electronic devices similar to USB drives that store private keys and other integral data and are virtually unhackable. They use multiple layers of security to ensure that private keys never leave the device and many can integrate with other programs like desktop wallets to provide a safe and smooth transaction process.
Let’s look at some of the more popular crypto wallets of 2019 so far.
Desktop Wallets – Perfect For Staying In Control
In the crypto world, where scams are prevalent and projects can disappear as fast as they appeared, longevity is an important factor, and Electrum has it. Founded in 2011 Electrum has been part of the crypto sphere for just about as long as anyone. But Electrum has more going for it than just time. It is estimated that 10% of all Bitcoin transactions utilize Electrum.
Created by Thomas Voegtlin, Electrum is an open-source desktop program that is free to download. Electrum is a lite wallet, meaning the entire blockchain does not need to be downloaded on the computer. This increases the speed of the program and is appealing to users because it saves them time and space on their computers. It is compatible with Windows, Linux and Mac operating systems and a new Android version have been launched to provide mobile use.
Another appeal of Electrum is the relatively small transaction fees—the default rate is 0.2mBTC although this can be scaled up to reduce transaction times. Electrum is a great wallet for storing Bitcoin: its straightforward interface makes it easy to send and receive funds and keep track of your assets. Electrum is also compatible with many hardware wallets, making it ideal for managing large sums of crypto funds.
Prioritizing Crypto Wallet Security
Electrum is considered one of the more secure desktop wallets due to its multi-layer security protocols. However it is important to note that it is a hot wallet that is connected to the internet, so there will always be the integrity of the PC itself as well as malware to take into account. That being said Electrum offers two-factor authentication and strong private key generation to provide secure storage. A multi-sig feature is also available, requiring an additional user to verify a transaction before it is broadcast to the blockchain. The TOR network can also be integrated into Electrum, providing users with an added layer of privacy.
Electrum utilizes seed phrases to provide a sound recovery protocol should a user lose their private key or their computer is damaged or destroyed. Seed phrase procedures are an important factor in choosing a wallet and should be treated appropriately.
Electrum does have its shortcomings as well. Unfortunately only Bitcoin is supported; considering there are hundreds of different coins and assets currently on the market, dealing strictly in Bitcoin can be extremely limiting. The user interface is also not the most aesthetically pleasing and some critics argue that is not as intuitive as some other wallets and is not well suited to new traders. There have also been some cases of
Electrum wallets being hacked through coordinated attacks, although their development team responded appropriately and were able to combat the attack before more funds were lost.
Overall Electrum is a good, reliable wallet that provides users with a good platform for trading. While it is limited to BTC many users find that with all the services provided and the high level of security, Electrum’s positive traits outweigh its negatives and it is considered one of the best desktop wallets available. Any Bitcoin enthusiast interested in desktop wallets should definitely look into Electrum.
Exodus is a multicurrency wallet released in 2016 and it has garnered lots of attention since its debut. As with all hot wallets, Exodus is not ideal for users with large amounts of crypto to store. Keeping that in mind, it is a good choice for newcomers to the crypto sphere as well as more advanced traders: free to download, featuring an elegant, easy to use interface and packed full of features, Exodus is worth further investigation.
A lite desktop wallet Exodus saves the user the trouble of downloading the entire blockchain in favor of increased performance. Exodus, which is free to download, also stores over 100 different coins: Bitcoin, Litecoin, DASH and Ethereum as well as dozens of other altcoins. ERC20 tokens can also be stored on Exodus. In fact, any ERC20, even if they are not listed as supported, can be stored on Exodus. Given the number of new projects utilizing these tokens this can be useful for any trader actively following new token development and project releases.
Exodus is compatible with Windows, Linux and Mac operating systems and through a partnership with Trezor can be synched with their hardware wallets. This benefits Trezor users—they are able to take advantage of the well-designed interface—as well as Exodus users that have large sums of crypto funds to manage. Users are also able to increase overall security by storing their private keys offline in an integrated hardware wallet.
Exodus uses strong private key generation protocols to ensure security, and despite the fact that it does not employ two-factor authentication or a multi-sig feature, many in the industry still stand by Exodus as a safe and secure wallet for crypto funds. Exodus employs a 12 word seed phrase recovery method to ensure the long term safety of your wallet. As with any other hot wallet, the security of your funds is only as good as the hardware the wallet operates on, and proper anti-virus and malware detection software should always be implemented.
A Wallet Full Of Features
One cool feature that Exodus offers is an in-built exchange system. Through a partnership with ShapShift, Exodus allows users to exchange currencies without ever leaving their wallet. When dealing with the number of available currencies that Exodus does, this can be a very useful tool for traders. While these exchanges are not free—a small spread, usually between 2-4% on most pairs, though the exact amount is listed at the time of exchange—most users agree the convenience of the feature outweighs the fees.
Exodus does have its weaknesses as well. Critics question its security: neither two-factor authentication nor a multi-sig feature are available. This means that, potentially, a simple keystroke logger on your computer could enable a hacker to access your private key and all your funds in the wallet. Critics also take issue with the fact that Exodus is not open-source. It also lacks any kind of fiat feature meaning you cannot purchase crypto using a credit card through Exodus.
While Exodus is not perfect, it has a lot going for it. Its user interface is well designed and functions smoothly, and though its developers stress it is not intended to store large amounts of crypto its partnership with Trezor makes it ideal for managing large funds using an integrated offline wallet. The exchange function is a clever, well-applied feature considering the vast array of coins and currencies that are supported. For beginners and experienced traders alike, Exodus is a solid program and is definitely worth looking into when hunting for a desktop wallet.
Online Wallets – Offering More Convenience
Online wallets are undoubtedly the least secure of any crypto wallet and anyone interested in using one should be sure to do all the research they can in order to fully understand the risks involved. That being said, online wallets can be extremely convenient and have gained some popularity in recent years. Guarda is arguably one of the best.
The Guarda Web Wallet supports dozens of coins, including ERC20 tokens, and can be accessed by almost any device with internet capabilities. This liberated quality is one of the most appealing aspects of Guarda. It could be especially useful to people with multiple devices that do not want to be tied down to any single piece of hardware but still need to remain in control of their funds.
Another useful feature is the built-in exchange function. Thanks to a partnership with Changelly Guarda offers users with almost instant exchanges across any of the crypto pairs they hold. In conjunction with the ability to purchase crypto with fiat currencies directly through the wallet, Guarda proves to be extremely convenient, with real world appeal.
Guarda is a non-custodial wallet, meaning that private keys are never in the possession of a third party: all private keys and user information are stored on the device used to access the web wallet and are automatically deleted when logging out. This ensures that even if their servers are compromised user’s private keys are not exposed. Seed phrases are employed to provide customers with the ability to generate backups of their wallet.
Guarda offers a convenient and easy to use wallet that gives users the freedom of access from practically anywhere in the world, without being tied to one specific device. While there are inherent risks to using web wallets, if used appropriately—i.e. small amounts of crypto, proper device security maintenance—Guarda can provide a useful tool for managing crypto assets and is worth further investigation for anyone interested in online wallets.
How To Choose The Right Crypto Wallet
All wallets have their own positive and negative attributes: strengths and weaknesses that must be understood in order to make an informed decision. Many users prefer the security provided by desktop wallets along with the well-developed, aesthetically pleasing user interfaces that many of these wallets offer. While they sacrifice something in the way of security, many users find that online wallets serve their purpose and allow a freedom that other wallets cannot. In the end, it comes down to personal preference, but as with all things crypto, it is of the utmost importance to remember that the only person responsible for the safety and security funds is you: do research, read, listen and learn.
Put your new knowledge to the test
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