If you’ve considered buying Bitcoin or Ethereum as an investment, chances are you’ve heard of crypto wallets. These handy software platforms and devices provide security in a market that is still not regulated. In an environment where hacks occur regularly, holding a wallet—and a good one—becomes a must-have.
So, what is a crypto wallet?
A crypto wallet is a tool used to store your crypto holdings. But this tool goes further than just holding your BTC. Good wallets have robust technology and security that protects your crypto and gives you complete control over your assets and what you do with them.
Today’s selection of wallets in the market has many points of differentiation. Yours can be in the form of a device or an online platform. They can be either custodial or non-custodial.
This guide will dissect what a wallet is, its relevant features, the types of wallets you can buy today, and the best wallets to buy.
What are hot wallets and cold wallets?
Hot wallets are active and connected to the internet. When using a hot wallet, you can actively trade, buy, sell your preferred cryptos, and interact with the live market. They usually are software platforms, so it is easy for someone holding crypto to stay connected to their preferred decentralized exchange.
Cold wallets are used if you want minimal interaction with your crypto and don’t want to actively trade. These wallets often come in hardware form. USB sticks used to store crypto are one type of cold wallet.
What about public and private keys?
Public and private keys are what’s used to access your crypto wallet. A public key is an address that you can use to receive crypto. Public keys are usually information that is disclosed for transaction purposes.
A private key is a phrase that can exist in many forms—commonly in 64-digit hexadecimal form—and is the key to unlocking your crypto. A private key is crucial information that you should not share with anyone, as it can easily give someone ownership over your crypto.
What is the difference between custodial, non-custodial, and hardware wallets?
It helps to know the many types of wallets available in the market today. You may find different names to describe the same kind of wallet—custodial wallets are also called hosted wallets, for example—but there are broadly three categories: custodial, non-custodial, and hardware wallets.
The main difference between these three categories of wallet is that they allow you to choose the amount of access and control you have over your crypto.
Custodial
Custodial wallets are suitable for crypto hodlers who want to own crypto just as an investment. The private keys for these wallets are in the hands of a third party. You can hold BTC, ETH, and other key cryptocurrencies without having full control over your digital assets. The steps to opening a custodial wallet are simple.
- Choose a platform that you trust: Coinbase, Trust Wallet, MetaMask
- Create an account
- Buy and hold crypto of your choice
Non-custodial
These are also known as self-custody wallets. Instead of a third-party holding your information, these wallets allow you to hold your own public and private keys. There is no third-party holding your information, which means the responsibility of keeping your private key safe falls entirely on you. Non-custodial wallet owners can access better features such as staking and yield farming, enabling them to earn returns on their crypto. Here are the steps to getting a non-custodial wallet.
- Download a wallet-based app of your choice that is non-custodial
- Create an account
- Store your public and private key information safely
- Take advantage of features like staking, yield farming, and lending.
Hardware wallets
Custodial and non-custodial wallets store your information online. For users looking to keep their information offline, a hardware wallet is the safest bet. Hardware wallets are physical and typically are in USB or touchpad form. Here’s how you get your hardware wallet set up.
- Buy the hardware wallet of your choice
- Download a compatible software on your computer
- Plug your wallet into your computer
- Start adding crypto of your choice.
You’ve chosen what kind of wallet you want to buy. Now what?
Now that you’ve decided on the kind of wallet you want to buy, it’s important to familiarize yourself with the best brands in the market. We’ve listed a few below.
Ledger
Ledger is one of the most well-known brands among crypto wallets. Its price ranges from $79 to $249, and it has a mobile app and a desktop app for easy access. Ledger is a hardware wallet, which means it is not active unless you plug it in. It can be integrated with software wallets such as Crypto.com and Guarda. Additional features include a browser extension, two-factor authentication, and an educational content library called the Ledger Academy.
Coinbase Wallet
Coinbase Wallet has been pegged as the best crypto wallet for beginning crypto holders by Investopedia. Users can access an easy-to-navigate site and download the Coinbase wallet to start their crypto investing journey. It is a low-cost option with minimal network fees. The wallet supports over 5,500 cryptocurrencies. The wallet is free to download. While this is a great option for crypto newbies, it is not compatible with hardware wallets.
Crypto.com
Crypto.com’s wallet offers users access to its centralized trading app platform. This makes it easy for crypto investors to interact with the DeFi market and its associated products. The platform has a desktop app that is integrable with Ledger’s hardware wallet. Users can manage several tokens across multiple blockchains.
MetaMask
This wallet is commonly used for Ethereum-based tokens as it was specifically designed for the Ethereum blockchain and other Ethereum-based tokens. The wallet is completely free and can be paired with hardware wallets. The MetaMask portfolio offers users staking and DeFi apps for users who want to do more with their crypto. MetaMask does not support Bitcoin.
Trust Wallet
The official partner wallet of Binance, Trust Wallet, offers its holders wide access to cryptocurrencies on over 100 blockchains. The platform offers staking and DeFi support and can be converted to Ledger through a browser extension. The Trust Wallet is available for use through browsers and a mobile app.
