November 14, 2018
Whether you’re a newcomer to the crypto community or a veteran, we all have one thing in common: the critical need for secure storage of our digital assets.
At ShapeShift, one of our focuses is on building scalable technologies that people will want to use. But providing an inclusive learning environment where crypto enthusiasts are empowered to transact safely in our world of digital assets is equally important.
After all, so many of the resources in today’s cryptosphere make deciding how to store your digital assets complex and confusing. They scare readers with technical jargon and focus on advanced features.
We promise you, this guide isn’t like that.
There’s no question that the crypto ecosystem presents a myriad of opportunities — and threats — when deciding how you’d like to store your digital assets.
But how exactly do you become educated on various options and make the safest, and best choice for you?
Keep on reading to understand crypto wallets, or jump ahead to the section that interests you most.
If you’re going to take part in the crypto ecosystem, you need a crypto wallet. But first, let’s start with a simple definition:
A crypto wallet is the technology, either hot or cold, used to hold digital assets.
While it might seem obvious to turn to Google for this one, this is a good question because of scammers that have created wallets that look trustworthy but end up stealing.“As bitcoin captures broader interest, this means more people may be purchasing the cryptocurrency, or looking for mobile wallets to store their coins,” the researchers noted.
Although there’s no central authority on storing digital assets, we like Bitcoin.org’s “Choose Your Wallet” because most of the ones featured are open source.
To store digital assets, you need a wallet of your own. But how do you determine which type of wallet best fits your need?
Luckily, we’re here to help!
Here’s a broad overview of the 5 wallet types.
If you’re serious about crypto, you’ll need a hardware wallet. Hardware wallets allow you to store, receive and send digital assets, making them the complete solution. We recommend KeepKey, but hey –– we’re biased.
Hardware wallets are also considerably more secure than online wallets, desktop wallets, or mobile wallets. Private keys are stored on an offline device that links to a computer via a USB port. While they are not free, hardware wallets are one of the safest options for anyone that wants to keep their digital assets both accessible and offline.
Paper Wallets are where you start with a software wallet or a web wallet and physically print out private part of your wallet and store the piece of paper in a safe place. Paper wallets are a secure method (despite some research that suggests they are not as secure as people think that they are). Your paper wallet is a physical representation of ownership that is on an actual piece of paper. Your public and private key will be written on this piece of paper.
Online wallets store your digital assets online through external service that has control of your money. They are cloud-based, meaning you can access them on any device that you can connect to the internet. While this makes them convenient, they are also less secure than other wallet options (these security risks were highlighted during a failed hack attempt on Binance.
Desktop wallets are downloaded programs that live on your PC, MAC or laptop. Because a desktop wallet is only accessible from the device that the program was installed to, this wallet type is more secure than an online wallet. Your digital assets will only be put at risk if you fall victim to a virus or personal hack.
Mobile wallets are exactly what they sound like–a wallet that is usable via a mobile application. This type of wallet is safer than an online wallet because the data is not stored via the cloud. However, it is considered less safe than using a desktop wallet due to the commonality of losing or breaking a mobile phone.
A “Cold Wallet” – often referred to as Cold Storage – are wallets that are kept strictly offline.
A “Hot Wallet” is a wallet that is connected to the internet in some way. Because of this, hot wallets are less secure, but they can be fairly convenient if you need to:
- Send, receive, or exchange assets several times a day. It may be difficult to hook up a USB, transcribe a key, or scan a QR code if you plan on making a number of transactions throughout the day. Digital assets that you plan on using can be stored on your hot wallet so you can use them at your convenience.
Think of this as the amount of cash you hold in your day-to-day wallet. Don’t store so much that in the case that your wallet is stolen, you lose your life savings, but keep enough for a night on the town.
- Utilize your assets on-the-go. In today’s world, we are all on-the-go, and you may need to use your funds when you are away from your computer. In cases such as this, a mobile wallet may be best for you.
There are 3 Types of Hot Wallets:
- Online wallets.
- Desktop wallets.
- Mobile wallets.
Cold Storage is best if you want to:
- Keep your digital assets secure. If you are concerned about your digital assets’ security, you can keep them in cold storage.
- Separate your digital assets. If you would like to separate the assets you plan to use immediately and those you would like to store, you can choose to store some digital assets in a cold wallet and your ready-to-use assets in a hot wallet.
The two types of cold storage are:
- Hardware wallets.
- Paper wallets.
Over to You
Now that you understand the basics, you’re ready to choose the crypto wallet that works best for you!
Before making your selection, you should, however, consider how you intend to use it.
- Do you need a wallet for everyday purchases or just buying and holding digital currency for an investment?
- Do you plan to use several currencies or one single currency?
- Do you require access to your digital wallet from anywhere or only from home?
Take some time to assess your requirements before choosing the most suitable wallet for you.