Crypto assets grew to meteoric prominence in 2021, with about a quarter of Americans owning some form of crypto. Bitcoin’s prior spike in 2017 was still held back by lack of technical and enterprise support. But by 2020, local governments around the world were relatively savvy to crypto, and the industry flourished alongside non-fungible tokens (NFT).
Diversifying crypto assets across blockchain projects is a necessary step toward truly decentralizing your finances. Most other investable assets are diversified, but many ignore this primary rule when it comes to crypto. And then there’s the storage of crypto. Do you trust a single wallet or should you select multiple?
If you hold cryptocurrencies, you should securely store them. Exchange wallets aren’t necessarily a great idea, as they enable easy liquidation without some unique benefits offered by other wallets. Here’s what you need to know about crypto wallets.
What Is a Crypto Wallet and Are They Safe?
Unlike fiat currency and traditional assets, you don’t technically own any physical bitcoin, ether, or other cryptocurrency. They’re stored on the public blockchain and distributed across all nodes on the network. What you hold is your private and public crypto keys.
Crypto wallets store these keys just like a password manager does with your passwords. The difference is crypto wallets interact with a variety of blockchains to cover a wide range of cryptocurrencies, NFT smart contracts, and more.
There are multiple types of crypto wallets, but they boil down to two categories: hardware and software wallets.
1. Hardware Wallets
Hard wallets store your private crypto keys on a physical device. Hardware wallets are a form of cold storage, which means they are disconnected from the internet. They also include paper wallets, in which people simply print their private keys on a sheet of paper so it’s not stored digitally and exposed to hackers.
USB wallets look like thumb drives and can be easily plugged into a computer or mobile phone to access the balance. Some are specifically designed to store exactly one BTC, ETH, or other cryptocurrencies so that you can spend them just like a physical currency.
Choosing the right hardware wallet for the right situation is up to you. Everyone has a different balance between security and simplicity, and some prefer software solutions instead.
2. Software Wallets
Software wallets are apps that reside on your computer or mobile device’s hard drive. Crypto miners are typically running that blockchain’s native crypto mining software (i.e. Bitcoin core), and require a lot of system resources to continuously update.
Instead, you can use a variety of third-party software wallets that increasingly act like traditional banking and investment apps.
These wallets are typically more susceptible to intrusion than a hardware wallet. However, they’re much more convenient and can be used on mobile, web, or desktop. This makes them preferable for those seeking to store a wide variety of obscure altcoins or spend crypto as currency.
Why You Need a Crypto Wallet
The most important reason to have a crypto wallet is to maintain control over your crypto assets. In the early days of crypto, it wasn’t uncommon for a crypto exchange to be shut down by a government that would freeze all assets like Mt Gox in the 2010s.
While that’s not as common anymore, the threat of cyberattacks is very real.
Among the prominent crypto hacks of the 2020s include the $80 million EasyFi hack, a $300 million money laundering scheme using Helix Bitcoin mixing, $200 million worth of CryptoCore exchange thefts, and the $150 million KuCoin theft.
If you don’t want your crypto assets stolen from you, crypto wallets are the best way to maintain security. But which is the best cryptocurrency wallet to use?
What’s the Best Crypto Wallet?
Every crypto wallet has its pros and cons, and there are a variety of wallet use cases. This list of crypto wallets is not exhaustive. Be sure to perform your own due diligence to determine which solution is right to store your NFTs, cryptocurrencies, tokens, and smart contracts.
Coinbase
Coinbase Global Inc (NASDAQ:COIN) is a $50 billion company and one of the most popular crypto exchange markets on the planet.
This Wilmington, Delaware company lacks a physical headquarters like all crypto companies, but its leadership is based in the United States, where the company is publicly listed on the Nasdaq exchange.
This makes it one of the most secure places to store your crypto, and the company has both an exchange wallet and separate software wallet. As it grows, it continues offering incentives for users, like free airdropped tokens for completing quizzes, interest-bearing accounts, loans, and more.
This makes it a versatile platform worth keeping an eye on, as more tokens are added to its always-expanding crypto listings.
BlockFi Wallet
Like Coinbase (COIN), BlockFi is focused on leveraging crypto assets to build wealth. The platform offers interest accounts with up to 7.5 percent APY and allows customers to borrow fiat currency on their crypto assets to provide liquidity without needing to sell your holdings.
This bridges an important gap for your crypto assets and ensures you can afford to “hodl” your favorite projects to fully support them.
And don’t limit yourself to just one – many crypto investors use multiple wallets so they always have the right tool for the right job. Do what’s right for your financial situation.
Ledger Nano X
The Nano X from Ledger is the smallest and most versatile hardware wallet around. It connects to your device via Bluetooth and supports up to 100 separate apps across over 1800 cryptocurrencies and token standards.
It has a digital screen to quickly check your balance and buy/sell/trade directly from the wallet once connected to an online-enabled device. Its high-speed USB-C connection ensures the fastest possible exchange or transfers.
Electrum Wallet
Electrum is one of the most secure software wallets available for bitcoin. It adds a variety of security features to the standard Bitcoin Core wallet to provide a much more secure and reliable experience without the need for mining BTC.
It also resolves one of the biggest pain points in crypto, which is losing your private keys. This could cause you to forever lose your BTC balance to the bitcoin void that already claimed about 20 percent of the total bitcoin supply, worth well over $100 billion.
Trezor Model T
Trezor is regarded as being among the most secure cryptocurrency hard wallets with the Model T. This advanced master key stores and encrypts your information with the highest level of security and authentication. It uses 12-word recover seeds and is the first hardware wallet to support Shamir Backup (SLIP39) too.
Model T from Trezor supports over 1200 of the most popular coins and tokens, like Zcash, Nem, Bitcoin Gold, Tether, Ripple, Stellar, Dogecoin, and more.
It also works as a universal 2nd-factor (U2F) hardware token which provides another layer of security. This means it can act as your password manager and more to become an all-in-one digital security device.
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