What are Crypto Wallets?

Cold wallets and Hot wallets

All wallets are classified as either hot or cold. One that is connected to the internet or is online is said to be ‘hot’. On the other hand, ‘cold’ implies it is offline or disconnected from the internet.

‘Cold’ is considered the most secure, thus, recommended for storing large amounts of Crypto Coins. ‘Hot’ is suitable for frequently accessed funds. Therefore, the best strategy is to use cold storage for long term holdings and a hot wallet for regular use.

The ‘Colder’ a wallet is, the harder it is to learn and use (Especially for moving coins around and portability). However, they offer the best security. The ‘Hotter’ a wallet is, the easier it is to learn and use (Portability is amazing, making it usable anywhere and everywhere). However, they offer very poor security. Most wallets that are compromised are ‘Hot’ wallets.

 

 

1. Online web wallets

These are provided on the cloud by third party wallet service companies. The wallets on these platforms are only accessible through an internet connection. Coinbase, Blockchain, Bitgo, and many more are perfect examples. With each providing different services such as Multi-Sig, 2FA, Buying and Selling of Crypto Coins directly and easily, Multiple different Crypto Wallets, and the ability to hold all types of coins. Each come with their pros and cons.

Advantages:

  • Fastest way to complete transactions
  • Suitable for small amounts of Crypto
  • Some are able to manage multiple Crypto currencies, transfer amounts between them, or be directly integrated into an exchange
  • Can send money from any computer
  • Can increase anonymity by using VPN/TOR

Disadvantages:

  • Vulnerable to web-based attacks (see NiceHash & Mt. Gox)
  • Vulnerable to phishing, cracking, and brute forcing
  • Your money is in someone Else’s hands, if they bail, you lose.
  • Your computer is open to malware, keyloggers, and viruses

 

2. Desktop wallets

Desktop wallets are designed to be downloaded and used on any computer– Windows, Mac OS and Ubuntu. They are very easily accessed and can be used offline, online other types of wallets.

Advantages:

  • Easy to setup and use
  • Can be used offline
  • Better security
  • You control your coins, You don’t have to worry about your web-based wallet getting hacked
  • Private keys are not stored anywhere else
  • Can increase anonymity by using VPN/TOR

Disadvantages:

  • There is no recovery! Lose your hard drive, Lose your money!
  • Computer Access, Friends or Family? Computer Repair? Anyone can take your money
  • Your computer is open to malware, keyloggers, and viruses
  • You can’t use your wallet unless you have your computer, Almost 0 to no portability

 

3. Mobile wallets

Crypto wallets tailored for your Smartphone is very convenient. Extreme portability!

Advantages:

  • Easy to use, send money anywhere at any time
  • Additional features such as QR scanning make sending money instant without fear of making mistakes (Such as wrong wallet or amount)
  • Can increase anonymity by using VPN/TOR

Disadvantages:

  • Phones (especially androids) are very lacking on the security part. If you download a shady app or visit a shady site, your phone is now rooted. Consider your money gone.
  • Your phone is open to malware, keyloggers, and viruses
  • Battery Died? Good luck if you don’t have a charger.

 

4. Physical wallets

If you thought bitcoins were digital only, then think again. Paper wallets can securely hold your Crypto Coins. Print your Crypto on a piece of paper. Literally.

Advantages:

  • One of the most hacker-proof Crypto wallet choices
  • Not stored on a computer (We are unsure if this is really an advantage)
  • You control your coins, You don’t have to worry about your web-based wallet getting hacked or people snooping on your computer.

Disadvantages:

  • More effort required to move Crypto Currencies around
  • More technical understand required
  • Moving Crypto around is a headache
  • Very impractical for frequent traders

 

5. Hardware Wallets

Hardware wallets are slightly less user-friendly Crypto Currency wallets than the other types of Crypto Wallets, but they’re easier to work with than paper wallets and more secure than hot wallets. They are great for storing large amounts of Crypto Currency you don’t need to move around often, and they offer more control.

Advantages:

  • If it has a screen, it’s the most secure way to store Crypto long-term
  • Stronger security than all other wallets
  • You control your coins, You don’t have to worry about your web-based wallet getting hacked or people snooping on your computer.

Disadvantages:

  • Cumbersome for some beginners to use
  • More effort required to move Crypto Currencies around
  • More technical understand required
  • Moving Crypto around is a headache
  • Very impractical for frequent traders