When it comes to buying, selling, and trading bitcoin or another cryptocurrency, the storage of your crypto is always one of the biggest priorities. For any trader, it’s important to keep your assets safe and secure from any kind of unwanted access.
Luckily for traders everywhere, there are many kinds of cryptocurrency wallets—each serving a different kind of trading style. Before you create a bitcoin wallet, it’s important to know the nature of your trading style and what kind of wallet will cater to it.
Heading to the Candy Shop
Choosing a type of cryptocurrency wallet is like picking candy at a candy shop—which one are you in the mood for? What sounds good at the moment?
Speaking to that simile, there are different kinds of traders and investors out there. There are people who like to buy and hold, day trade, and many more. Before we dive into the different kinds of cryptocurrency wallets, it’s critical to know the major categories of wallets: hot and cold wallets.
Hot wallets are cryptocurrency wallets that are always connected to the internet. That means that you’ll probably need a stable internet connection to access these wallets. A lot of trading platforms and exchanges make use of hot wallets as users are granted faster access to their storage systems.
Hot wallets are often regarded as less safe than cold wallets due to internet connectivity. The fact that they’re connected to the internet allows them to be targeted by hackers.
Cold wallets, despite some having the ability to connect to the internet, remain mostly offline. This means that although they’re not as accessible as hot wallets, they’re regarded to be safer than hot wallets.
With that being said, here are the different cryptocurrency wallets that cater to each trading style:
There are many kinds of cryptocurrency wallets each serving a different kind of trading style
1. Web Wallets
Web wallets are cold wallets that are accessed via a web browser. These are usually the types of wallets that are provided (for free) by big peer-to-peer marketplaces and cryptocurrency exchanges.
They’re usually cloud-based and in most cases, the wallet is controlled by a third-party service (usually the marketplace or exchange that provides the wallet) and your private keys are stored online.
Not being able to hold your own private keys and its susceptibility to hackers are its biggest cons. However, they’re ideal for potential new traders and people trying out a new exchange for the first time as it allows them to immediately access their wallet and try their hand at trading.
2. Desktop Wallets
Desktop wallets are applications that can be downloaded and installed on your personal computer or laptop—available on most operating systems such as Windows, Mac, and Linux. When you install a desktop wallet on your computer, you will only be able to access your wallet through that computer.
Compared to the other hot wallets on this list, desktop wallets are probably the most secure. However, if you lose access to your computer (i.e. it gets lost, stolen, or broken), there is a good chance of you losing access to your wallet.
Ideally, desktop wallets are for people who are constantly on their laptops/personal computers or for people who prefer a more secure option.
3. Mobile Wallets
Just like desktop wallets, mobile wallets are downloadable applications. Instead of installing them on your laptop or personal computer, mobile wallets—as seen by their name—are installed on your mobile phone.
There are several wallet options on each app store (Android, Google Play, or Apple). Compared to the other wallets, mobile wallets are smaller, simpler, and most importantly, you can take them wherever you go.
Unfortunately, not all mobile wallets will allow you to hold your own private keys. Most will leave control with the exchanges and marketplaces that are issuing them. Nevertheless, these wallets are perfect for people who are on-the-go and for people who like to spend their crypto in the real world.
As more and more businesses begin to accept bitcoin, these types of wallets become more viable (despite their lack of security compared to the other options). If you’re planning to use a mobile wallet, look for a wallet that has an active development community and one that allows you to back up and restore your files (in case of emergency).
4. Hardware Wallets
Hardware wallets, a type of cold wallet, is a physical device that looks like a USB flash drive with an Organic LED screen and buttons to help you navigate through the device’s UI. These types of wallets can connect to the internet (to transact) but they mostly remain offline, making it the more secure storage option for your crypto.
These wallets are ideal for people who are holding a significant amount of cryptocurrency or for people who like to buy and hold. Features like 2FA (two-factor authentication) and the ability to back up and restore your files make it a very secure choice.
The main problem with this kind of wallet is that they don’t come cheap. One of these devices could cost you a couple of hundred dollars which doesn’t make them ideal for new traders and investors. Instead, they’re better fitted for more experienced traders.
5. Paper Wallets
Paper wallets are considered to be a cheaper alternative to hardware wallets. These wallets are literal pieces of paper that hold your private keys and public addresses. When generated, QR codes are printed on a piece of paper, giving you your keys and addresses.
The main problem with paper wallets is that they are not ideal for beginners as they can get a little complicated and technical. They also do not allow users to withdraw fractionally. This means that if you want to withdraw from your paper wallet, you’ll either have to withdraw the whole amount or withdraw nothing. Sometimes, they’re also one-time use—the wallet will become useless after you withdraw.
This wallet is ideal for people who hold assets for a significant amount of time (HODLers).
No Such Thing as a Bad Wallet
With all the types of wallets that have been listed, it’s important to know one thing: there is no such thing as a bad wallet, just wallets that aren’t appropriately matched. Before you choose your main wallet, make sure that you know what kind of trading style you’d like to use.
For example, if you’re mainly using these wallets to send bitcoin remittances abroad, you’d probably use a web or mobile wallet as they are very accessible to anyone around the world. Take into consideration what you’re using the wallet for and then you’ll be able to properly choose a wallet.
Author: Allan Bangirana
Allan Bangirana has a taste for all kinds of topics and usually writes about tech, entertainment, sports and community projects that make a difference in society.