If you ever wish to buy and sell cryptocurrencies such as Bitcoin and Ethereum from an exchange, you will also need the capability to store it safely, away from prying eyes and the raft of cyber-criminals that lurk online. With the price of Bitcoin, Ethereum and other leading digital assets increasingly high, the most secure option when physically buying Bitcoin and other leading crypto coins is to use a crypto wallet. Our in-depth cryptocurrency wallet guide below will discuss the different types of wallets available and the pros and cons of investing in cryptocurrencies in alternative ways.
If you believe that using a wallet will be too much hassle, you can always invest in cryptocurrencies using contracts for difference (CFDs) via a broker like eToro. Users can place ‘buy’ and ‘sell’ orders based on whether they believe the price of a cryptocurrency will rise or fall without physically owning the digital asset.
For in-depth reviews of some of the most popular bitcoin and other cryptocurrency wallets see below:
What is a cryptocurrency wallet?
Although it is officially termed a wallet, a cryptocurrency wallet would appear to have more in common with an electronic banking account than a physical wallet that you are used to for storing fiat currency.
Of course, blocks can’t just be taken from the ledger that supports Bitcoin, the blockchain. Furthermore, they can’t be stored away in physical form. However, access to the blockchain can be stored via digital codes known as private keys. These keys are similar to an internet banking PIN code. When used, they prove ownership of a public digital code that can be used to access your cryptocurrency addresses.
Subsequently, a cryptocurrency wallet is a way to store access to your digital assets. Once your private and public keys match, you can gain access to and spend your crypto coins if you so wish.
How to choose a wallet?
Now that you’re aware that the main reason you would need to use a wallet is to keep your funds secure, you should consider how you plan to spend your currency.
For long-term cryptocurrency investments where you are unlikely to spend your digital assets quickly, you would typically choose to use an offline wallet such as a hardware wallet, paper wallet or desktop wallet. For more casual use e.g. spending Bitcoins to pay for goods and services, online and mobile wallets are more convenient. If you are new to buying and storing cryptocurrency, read on as we discuss the best cryptocurrency wallets and most suitable wallets for your crypto needs.
Different types of wallets
What is a hot wallet?
A hot wallet refers to cryptocurrency wallets that are wholly online. A hot wallet is not one which keeps digital assets in cold storage, offline. Cryptocurrency exchanges such as Coinbase are regarded as hot wallets given their ability to pay out instant withdrawals online on demand. In some ways, a hot Coinbase wallet can be compared to an “easy access” bank account: one which allows individuals to quickly move around their currency but is at greatest threat of cyber-theft.
It is not advisable to keep large volumes of cryptocurrency stored in a hot wallet, simply due to their fragility to cyber-attacks. Many of the biggest forms of cryptocurrency cyber-crime have involved digital assets stored in hot wallets.
What is a cold wallet?
A cold cryptocurrency wallet is one designed to keep a reserve of your digital assets offline. Individuals that invest in large volumes of Bitcoin that retain a high value prefer to store their assets offline as a security precaution. Typical methods of cold storage for cryptocurrency include USB or flash drives, paper wallets and offline hardware wallets which we will go into in greater detail shortly.
The Trezor wallet is regarded as one of the leading cold storage wallets for crypto investors, guaranteeing high levels of protection and security for its users. Importantly, Trezor enables individuals to maintain their private keys and provide signatures for cryptocurrency transactions offline. Importantly, it also supports multiple currencies, including some of the leading altcoins.
What is a hardware wallet?
Hardware wallets are entirely different to “hot” software wallets as they are designed to store an individual’s private keys within a physical hardware device. They are also designed not to transfer private keys out of the device in plain text format for cyber-criminals to interpret easily. As they are offline and secure devices, hardware wallets are immune from computer viruses such as malware that are designed to steal sensitive data such as public and private access keys from wallets.
If you like the idea of storing your cryptocurrency access within a secure offline device, the Ledger Nano S* is the ideal starting point. The Ledger wallet is not cheap to buy, but it is highly durable and incredibly intuitive, making it easy for beginners to set up and get going.
What is a paper wallet?
Paper wallets are hard copy documents that contain all the necessary information to generate a collection of private keys to access your cryptocurrency online. Again, this is another unsafe method of storing leading cryptocurrency such as Bitcoins unless strict security precautions are taken to protect the documents themselves.
Cryptocurrency wallets for desktop & mobile
If you are becoming a cryptocurrency enthusiast and you are thinking of diversifying your digital asset portfolio, or perhaps a crypto beginner that’s tech-savvy, you’ll want to find the best cryptocurrency wallets that make it easy to buy, sell and trade crypto coins via desktop and mobile devices.
Desktop cryptocurrency wallets are designed to be downloaded and installed permanently onto your PC. Your wallet’s private keys will be saved securely within your hard drive. They are more secure than an online or mobile wallet as they aren’t reliant on a third-party provider to store their data, therefore making it harder for cyber-criminals to steal.
Mobile wallets run through a mobile app on your iOS, Android or Windows Phone device. Their main advantage is that you can quickly access your coins when shopping in a physical store. There are two categories of mobile wallets:
- One stores your coins on your smartphone
- The other enables you to access web-based storage servers.
Cryptocurrency wallet safety
Are there alternatives to opening a wallet?
As we’ve already intimated, the security risks of using hot wallets via the internet and mobile devices are very real. Every day, cyber-hackers are devising plans to gain access to cryptocurrency wallets containing digital assets worth thousands of pounds to individuals. If the idea of buying cryptocurrency and physically storing it seems foreign and risky to you, it’s important to be aware of the alternatives to opening a cryptocurrency wallet.
We’ve already touched on cryptocurrency CFDs, but it’s important to go into more detail on how a CFD broker such as eToro can help you to profit on the price moves of the leading cryptocurrencies without having to physically own it. This is particularly beneficial for long-term crypto investors that don’t buy Bitcoin and other digital assets to use as a form of payment. If you read our eToro review, you’ll discover that the platform is also regulated by the UK’s Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySEC). This ensures that your funds are stored securely and responsibly, with your best interests firmly at the forefront of any company policy.
The best cryptocurrency wallets
Not only is eToro the best platform upon which to place cryptocurrency CFD orders, it is also soon to offer an official cryptocurrency wallet too. Now is the ideal time to sign up to eToro and sample their CFDs system, where the exchange buys the cryptocurrency you wish to trade on your behalf, with the flexibility to implement stop-losses and “take profit” orders too.
The MyEtherWallet is rather unique in that it isn’t strictly a cryptocurrency wallet per se. Instead, it is an intuitive interface designed exclusively for those wishing to buy Ethereum assets on the Ethereum blockchain. The interface is connected directly to the Ethereum network and allows individuals to place orders and transactions between private wallet addresses. If you’re still a little confused, take a look at our recent MyEtherWallet review for a more detailed explanation.
The Jaxx wallet is relatively new to the cryptocurrency industry. This multi-currency wallet offers support for seven digital assets. Better still, it is available on the leading desktop operating systems (Windows, Apple and Linux) as well as Android and iOS mobile devices and Google Chrome and Firefox browser extensions. Read our full review of the Jaxx wallet to decide whether it’s the one for you.
Ledger Nano S
The Ledger Wallet is one of the most popular hardware wallets on the planet. Its latest Nano S device offers multicurrency protection for assets offline based on its secure chip, guaranteeing cold security thanks to the use of a PIN code that operates similarly to that of a debit or credit card. Check out our review of the Ledger Nano S to find out whether it supports the cryptocurrencies you invest in.
The Exodus wallet is a desktop-based wallet that supports a number of the world’s top cryptocurrency assets. Founded in the summer of 2016, it is jam-packed with charts and data that gives retail and day traders the ideal information at the fingertips they need to make snap decisions on the cryptocurrency exchanges. Take some time to read our Exodus wallet review to find out whether a desktop wallet befits your crypto investment needs.
The original Bitcoin hardware wallet, the Trezor wallet is one of the safest places to store your coins. The Trezor wallet offers transparent security that takes the storage of crypto assets offline and secures your digital portfolio. With the ability to sign and verify transactions with total peace of mind, it’s a good starting point for those new to hardware wallets. Read our Trezor wallet review for further information before taking the plunge.