What is a Crypto wallet?
ACrypto wallet is primarily a device or software that stores your passwords (private keys) for the transaction of cryptocurrencies. A cryptocurrency wallet comes in multiple forms that include hardware, software, etc to make digital transactions easy & secure. Apart from handling transactions, this wallet also serves purposes like encrypting information and executing smart contracts.
How do Crypto Wallets work?
Unlike normal wallets, crypto wallets hold private keys that are used to access your fund on the blockchain. When a wallet is created, an automatic public key is generated which you can give to anyone to get money. However, private keys are similar to passwords that are only used by the account holder of the crypto wallet when the person wishes to send out cryptocurrency to some other party. Private keys are crucial to keeping your money intact and if you somehow lose it, you lose your money too. Since it is easy to compromise with the account if the other person gets this key, it is always advisable to use a trusted blockchain development company as your wallet provider.
What should you look for in crypto wallet apps?
One of the best cryptocurrency wallet apps have these enhanced features which must be included if you too want a crypto wallet application to work with its full efficiency.
1. Multiple cryptocurrency support
Many cryptocurrencies have been adding up on a daily basis and their values also keep changing from time to time. In order to meet the user’s demands and provide a one-stop solution to store all their cryptocurrencies, the app therefore must support popular and trending cryptocurrencies.
2. QR code scanner
Facilitate wallet address scanning and public keys automatically using a QR code scanner. Instead of typing the characters of public keys, QR codes can be simply scanned to speed up cryptocurrency trading and transactions. This feature eliminates the possibility of missing any character while typing the long address.
3. User authorization
Wallet applications are prone to security attacks which is why it is essential to improve user authentication of crypto wallet apps. This can be easily done using two-factor or multi-factor authentication which many non-crypto applications do not provide.
4. Push notifications
Push notifications are the medium through which customers can become aware of the prices of their digital currency. It keeps the users updated about the success and failure of any crypto transactions.
5. Block-chain-based Transactions
Blockchain technology allows users to trade digital currencies using crypto applications in a tamper-proof way. Customers can see their entire transaction history because these completed transactions pass through the blockchain network.
6. Optional session Logout
This feature enhances the security of your application by automatically logging out the user after a fixed time period. This prevents unauthorized access to your application when not in use.
7. Paper wallet import
Paper wallets are used for offline Bitcoin storage. The Crypto wallet app that you create must allow scanning of QR codes for crypto transactions.
8. Managing familiar addresses
This feature makes the transaction process convenient and smoother by simplifying the management of frequently used addresses.
These are some of the essential features one must incorporate when creating a crypto wallet. Now that you know what your crypto wallet app should have, you must also have knowledge of the types of crypto wallets.
What are some essential types of Crypto wallet?
A crypto wallet is created out of public and private keys and can be categorized based on the location of storage and method.
Hot Wallet
Cryptocurrency wallet that is used to send and receive cryptocurrency and allows to view the number of tokens that are available for use is a hot wallet. Hot wallets store the private keys that are used to access the currency. These wallets are primarily applications that are linked to the net and the cryptocurrency infrastructure. That is why they are also known as ‘Software wallets’ too.
Some of the best examples of hot wallets are:
Coinbase wallet
MetaMask
Edge wallet
Pros of Hot Wallet:
Hot wallet gives ease of use as the trading can be done at any point in time due to the online availability of the wallet.
Faster transfer
Cheaper compared to cold wallets
Gets upgraded easily
Cons of Hot Wallet:
It is recommended to not overstore in a hot wallet due to security concerns.
Prone to thefts
Funds are not insured if the wallet exchange shuts down
Cold Wallet
Cold wallets are offline digital wallets (cold wallets) that store private keys on a hardware i.e. USB drive. These offline wallets carry out transactions offline which are later disclosed on the internet. As these wallets don’t trade online, they are known to provide higher security than hot wallets.
Pros of Cold Wallet:
Offer better security due to offline trading
Stores a substantial amount of funds compared to hot wallet
Cons of Cold Wallet:
It takes more time to access a cold wallet
Cold wallets cost about $100 on an average
Have limited cryptocurrency that is accepted by this wallet
Learn more about the differences between Cold Wallets and Hot Wallets in Crypto?
Hosted Wallets
Hosted web wallets store private keys online via a third party known as exchanges. These exchange platforms link the users’ accounts to a set of keys for various coins that the platform hosts.
Some of the best examples of hot wallets are:
Mt Gox
Bitflyer
Coinbase
Pros of Hosted Wallets:
- Hosted wallets are user-friendly
Cons of Hosted Wallets:
Third-party controls your keys which makes your hosted wallet more vulnerable to attacks.
In case of contingencies, you may not be able to withdraw money immediately.
Decentralized Wallets
A decentralized wallet is the one where the holder of the keys is given access to their crypto wallet. The holder of the crypto wallet can receive or send the cryptocurrency worldwide.
Pros of Decentralized Wallet:
High security
Improved data reconciliation
Optimized resource distribution
Better privacy
Cons of Decentralized Wallet:
Difficulty in scalability
Can inherit instability from the host blockchain
Liquidity is a critical factor in decentralized projects
Hardware Wallets
Hardware wallets are assets that store the private keys of users offline in a hardware device. These wallets store private keys in a microcontroller which encrypts the keys and makes them non-transferrable. Most of the time the software is open-source which means it allows users to validate the complete operations of the hardware.
Examples of hardware wallets include:
Ledger Nano
Trezor
Keep key
Opendime
Coldcard
Pros of Hardware Wallets:
Immune to cyber attacks and viruses even when connected to infected hardware
Can be used interactively
Private keys are not exposed
Hold multiple cryptocurrencies in the same wallet
Cons of Hardware Wallets:
Buying the wallet from an unreliable resource can risk security
Difficult for beginners
Much more expensive than digital wallets
Software Wallets
Software wallets can be called hot wallets because they stay connected to the internet in either way, which means such wallets are accessible 24*7. Some of the popular software wallets that are available for usage are:
Mobile wallets
Mobile wallets are smartphone applications that can be used for cryptocurrency transactions using normal trade or through QR codes. Interestingly, mobile wallets are highly efficient wallets that have proved beneficial for Bitcoin and BNB trading. Trust wallet is one of the well-known mobile wallets in the market today.
However, make sure mobile wallets are secured with strong passwords and that you have a backup of your private keys and seed phrase.
Web wallets
Web wallets are browser wallet providers and exchange wallets that can be used for holding and managing private keys. The newest web wallets now also offer the facility to manage your own keys or use shared control which leverages multi-signature authentication. Binance is a good example of a web wallet.
Desktop wallets
Desktop wallets are software packages that store or manage private keys on your PC and hard drive. Desktop wallets are hot wallets as they are supposed to be connected to the desktop to operate. These wallets are secured using several protections like firewalls, malware removal tools, antivirus software, etc. Electrum, Exodus, and Jaxx.io are some of the best examples of desktop wallets known in the market.
Top 10 Picks for Best Crypto Wallet of 2022
Here are the top 10 crypto wallets that can be used in 2022:
1. Coinbase Wallet:
Coinbase wallet is a self-custody wallet that provides full control over your cryptocurrency and safely stores NFTs in the wallet. This non-custodial cryptocurrency wallet enables customers to buy a wide range of assets and access decentralized applications. This wallet supports about 44,000+ crypto assets and helps users to access web 3 through browser extension or mobile. It also allows users to earn interest on their digital investments and has lower fees compared to others.
Pros of Coinbase Wallet:
Supports multiple cryptocurrencies
Decentralized applications across multiple blockchains
Easy to use wallets
Only charges network fees
Cons of Coinbase Wallet:
Doesn’t have open-source code
Apparently bad customer service
Coinbase wallet supports Bitcoin, Dogecoin, Stellar, Binance smart chains as well as Ethereum layer-2 solutions like Optimism and Arbitrum. Moreover, these wallets help users to earn interest in their crypto assets. Another interesting feature of this wallet is it allows Ethereum-based NFTs.
Another important factor is security. This wallet gives access to the private keys so in case the Coinbase servers are compromised, users’ funds in Coinbase wallets will not be accessible to the attackers.
Coinbase Wallet Features:
Multi-coin support
Digital collectibles
Secure storage
Crypto currencies that are supported
Bitcoin
Ethereum
Bitcoin cash
XRP
Stellar
Litecoin
ETH Tokens
2. Electrum
Electrum is an open-source wallet that enables investors to safely store digital currency for a decade. This bitcoin wallet allows users to send and receive payments over the Bitcoin network. It also uses replace-by-fee and batches RBF transactions. Electrum also lets you set an encryption password for improved security. This wallet helps users to create multiple Bitcoin addresses and increases user privacy by discarding old wallets.
Pros of Electrum:
Secure bitcoin with 10+ years of track record
Open-source wallet
Creates lightning network payment channels
Cons of Electrum:
Restricted customer support
Electrum only supports
BitcoinUnsuitable for beginners
Features of Electrum:
Compatibility with hardware wallets for secure cold storage
Creation of multi-signature wallets
Ability to set Bitcoin transaction fees
Support Cryptocurrencies of Electrum:
- Only Bitcoin
3. Mycelium
Mycelium is a Bitcoin-focused wallet with increased emphasis on the security of user-deposited coins. The app allows users to trade or send and receive money. Mycelium’s local trader feature allows buying and selling of bitcoins to individual users. Since this wallet is feature-rich and offers high security, it is a good option for advanced crypto users.
Pros of Mycelium:
Compatibility with hardware storage like Ledger, Keeperkey, etc.
Local trader feature
Advanced security features
Cons of Mycelium:
No desktop version
Not an ideal wallet for naive users
Lack of coins
Email-only customer support
Features of Mycelium:
Compatibility with offline storage
Setup is quite simple
Single address account
Watch only account
3rd party integrations
Supported coins of Mycelium:
Bitcoins
Ethereum
USD coin
Tether USD
Huobi tokens
Binance USD
Zero X
4. Ledger Nano X
Ledger nano x is a hardware wallet used for managing crypto and NFTs. It is the best way to secure your cryptocurrencies (Bitcoins, etc) offline. This device has a secure element that protects the wallet from physical attacks. It also protects private keys against malware attacks and allows offline storage of coins. Nano X supports iOS, Android, and desktops. It also supports almost 27 coins and >1500 tokens.
Pros of Ledger Nano X:
Most secure crypto wallet
Supports 1500 tokens
Managed from a mobile device easily
Attractive and comfortable design
Battery life of about 8 hours
Cons of Ledger Nano X:
Expensive than other wallets
No desktop compatibility with Bluetooth
No assets can be purchased using ledger nano x
Features of Ledger Nano X:
It is a type of cold crypto wallet
Has Bluetooth to connect with mobile devices
Has a 100mAh battery
Nano X has 128*64 pixels
Compatible with >1800 altcoins
Supported Coins of Ledger Nano X:
ERC20
ERC721
TRC10
TRC20
BEP2
NEP5
SOL
5. Exodus
Exodus is an easy-to-use wallet that gives access to over 200+ assets. It is one of the best cryptocurrency wallets for beginners. Exodus users have the liberty to connect with the Trezor wallet. Moreover, it allows complete control over assets as Exodus is non-custodial. Exodus has been lately integrated with the Lightning Network payment system that allows transactions out of the Bitcoin network. Another remarkable feature that Exodus offers is Non-Fungible Tokens (NFTs) within the NFT marketplace. Wallet users also get the facility to stake and earn interest on their assets and holdings.
Pros of Exodus:
Supports >150 cryptocurrencies
Easy-to-use interface
Seamlessly integrates with Defi platforms
Cons of Exodus:
- Altcoins are not charged custom fees
Features of Exodus:
Two tap crypto exchanges are available
Live portfolio and charts
Can exchange Tezor and Exodus assets
Supported Coins of Exodus:
Ethereum
Bitcoin
Tether
Terra
Binance coin
Read more about Crypto Wallets