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Cryptocurrency wallets, such as a Bitcoin wallet, function quite differently from traditional cash wallets. For instance, crypto wallets have to account for the fact that all transactions are irreversible and stored entirely in the blockchain. To encrypt your transactions on the blockchain and keep them secure, you need a public and a private cryptography key. Wallets use both keys to access your digital currency.
This also begs the question: Is a crypto wallet more secure?
In this guide, we’ll cover different types of crypto wallets, how to set up a secure crypto wallet, and top crypto wallets to choose from. However, depending on your security and liquidity needs, some wallets may suit you better than others. We’ll pull out the top wallets from each category to point you in the right direction.
A crypto wallet stores both private and public cryptography keys used to interact with the blockchain network.
In simple terms, a crypto wallet is how you secure, store, and move your crypto from one place to another. The term is can be misleading since your currency is not actually kept in the wallet itself. However, your stored private key signs transactions, while your public key is used to receive funds and identify your account.
Crypto wallets have a user interface so you can check available funds, monitor past transactions, and identify security options.
For example, you can choose to deposit or withdrawl different digital assets including BTC, ETH, XRP and more on Bybit’s crypto wallet.
The type of crypto wallet you choose determines the safety, security, and liquidity of your funds. Depending on how you use your crypto — as an investment tool, for day trading, or as currency — some wallets will serve you better than others. Additionally, certain wallets are designed for specific digital currencies, while others can host hundreds of options.
Hardware wallets are physical devices, similar to USB drives, that let you interact with the blockchain. Since data is stored offline, hardware wallets are considered “cold wallets” with the most secure form of storage.
Excellent for: Long-term investors; those interested in security; high-net-worth crypto users
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The Ledger Nano X is a type of hardware wallet that’s become a bit of a “gold standard” in secured crypto transactions. It supports over 1,300 crypto assets, works on all major desktop and mobile systems, and comes with top-tier security. However, it’s not cheap — a single Ledger Nano X wallet can run up to $160–$200 each.
How to set up a hardware wallet:
Hosted wallets, sometimes called hot wallets or cloud wallets, are the easiest beginner wallets to use because they require little to no additional effort. When you buy digital currency from a crypto exchange, the system automatically creates a wallet for you. This is the easiest version of a hosted wallet to use.
You can also transfer your crypto into an online wallet from a non-exchange service, like MyEtherWallet or Exodus. These tend to be more secure than an exchange-hosted wallet and are also available anywhere you can access the internet. However, the one drawback is you can’t access everything crypto has to offer.
Best for: Traders who are actively trading coins, users who deposit and withdraw frequently.
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How to set up a hosted wallet:
Buy or transfer crypto. Most crypto platforms and exchanges allow you to buy crypto using a bank account or credit card. For example, you can buy crypto via XanPool or MoonPay on Bybit and it’ll be deposited in the hosted wallet.
Desktop wallets, like hosted wallets, are a type of software wallet. They’re accessible through custom software tied to a specific coin (often developed by the same team).
Compared to other software wallets, desktop wallets offer the most security, though they’re not infallible.
Best for: Those who want both accessibility and security
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Exodus is a highly rated desktop software wallet suitable for beginners, although Exodus has mobile and hardware crypto wallets as well. The Exodus desktop wallet supports over 135 crypto assets and a built-in exchange to trade crypto 24/7.
Mobile wallets, like Mycelium for Bitcoin, are crypto wallets for mobile devices. These run on an app installed on your phone that allows you to send and receive crypto anytime, anywhere.
While mobile wallets do take security measures, they also store your private key in the app. This makes for ease of use — and a quick way to lose your crypto if your phone is hacked or stolen.
Best for: Heavy mobile users; those who want to buy and sell crypto on the go
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Paper wallets are “cold wallets” created when you store your private key in a secure, offline environment. This literally involves printing your private key onto a piece of paper. Ideally, you’d then store this piece of paper in a locked deposit box or safe.
Paper wallets are the least liquid but most secure (from hackers, anyway) form of crypto wallets. However, if you lose your paper wallet, it’s gone for good — so make two copies, just in case.
Best for: Those who need the utmost security from hackers
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If you’re interested in adding a paper wallet for extra security, you can download WalletGenerator.net from GitHub to randomly generate your unique private and public keys. Just be sure that once you have your printed wallet (two copies just in case!), store each version in a safe, secure and in separate places.
How to set up a paper wallet:
Always make double copies of the address and store it separately if you lost one and still have another.
The difference between custodial and non-custodial wallets comes down to one simple question: Who is the custodian of your cryptocurrency, the person who holds your private keys — yourself or a third party?
For example, the hosted wallets offered by exchanges count as custodial wallets, because a third party maintains some level of access to your crypto. Hardware wallets, on the other hand, count as non-custodial wallets, since you’re the only one who can access your private keys.
Custodial wallet pros:
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Non-custodial wallet pros:
Non-custodial wallet cons:
The security of a cryptocurrency wallet depends on the type of wallet, the service provider, and (in the case of paper wallets and backups) your general forgetfulness. To keep your wallet(s) secure, set up fail-safes such as:
Learning how to set up a crypto wallet is an essential part of owning cryptocurrency. After all, the entire ethos behind crypto is that you control your money, and no one else. That means that if your wallet is the most secure, it’s hard for anyone to skim your funds or seize your account.
Typically, the trade-off when choosing a wallet is between security and ease of use for beginners. Once you become comfortable, you’ll be able to choose the highest form of security.
Congratulations — you’ve just become your own bank, entirely responsible for your cryptocurrency holdings.