If you’re buying, trading, and selling cryptocurrencies, a cryptocurrency wallet is a must-have digital accessory. We’re not just talking about a Bitcoin wallet either — there are a growing number of cryptocurrencies out there for you to invest in.
But what is a crypo wallet? And how does it work? And do you really need one? We understand any confusion. The digital world can be confusing and moves at a relentless, always-upgrading pace. And you’re right to be cautious: The new-fangled crypto world can be a shady, scammy place.
If you’re new to it all, don’t worry. We’ve compiled a list of great crypto wallets — options for all kinds of cryptocurrency owners — and answered the key questions.
Do you need a crypto wallet?
Technically, you don’t need a crypto wallet, but just as a regular wallet keeps your cash and cards safer, a crypto wallet makes everything easier. It keeps everything in one place, so you can see exactly what crypto assets you own. It’s also ideal for making Bitcoin and other cryptocurrency transactions. Simply put, if you want to be organised with how you track and monitor your cryptocurrency, you need a crypto wallet.
Are there different types of crypto wallet?
At their simplest, there are two types of wallet — a hot wallet and cold wallet — which are then broken down into subsections. A hot wallet is one that is actively connected to the internet, while a cold wallet is offline.
What is a hot wallet?
Let’s break down the hot wallet with a bit more detail. Being connected to the internet means it’s really easy to make transactions but hot wallets also more vulnerable to attack. The wallets typically break down to being either a mobile wallet or a desktop wallet, depending on if you’re using a smartphone app or desktop app.
Another term you may see is an online wallet or cloud wallet. These are very easy to use as you can access them from any location. However, your private keys are stored on another server, which can be risky. Generally, it’s not advised to use them for large amounts of money.
What is a cold wallet?
A cold wallet is not connected to the internet. That means there’s no risk of being hacked but you do need to physically store items. One example is a paper wallet, which involves storing your Bitcoin or another cryptocurrency as a QR code that is printed out. Another form of cold storage wallet is a hardware wallet. It lets you store your private keys in a secure physical device while cryptocurrencies stored within the wallet are kept offline, so no chance of them being hacked.
Within the cold wallet category there are are also custodial wallets. These are digital wallets where the private key or keys are held by the service provider. You access and spend money on it but you don’t have full control over it. The service provider could even potentially stop you from transferring funds.
What is the safest crypto wallet?
There isn’t really one type of truly safe crypto wallet. They all have different strengths and advantages largely depending on how you’re looking after your currency.
On the surface, hot wallets appear to be the riskiest. That’s because you’re dependent on the security of a provider. Cold storage may seem like the best solution, with crypto hardware wallets seemingly unbeatable, right? Kind of. These may not be vulnerable to hackers as they’re offline but they are susceptible to external damage, theft, or simple loss of the hardware.
There’s no perfect solution. You just need to weigh up what works best for your needs.
Will your Bitcoin grow in your crypto wallet?
For the most part, unfortunately not. Unlike a regular bank account that may have interest added to investments, a crypto wallet is solely a means of storage. Just like a regular wallet, it’s somewhere to keep your finances safe rather than to see them grow and develop. There are some exceptions. Coinbase Wallet allows you to earn interest, but there’s a certain amount of risk with rates fluctuating.
What is the best crypto wallet?
The good news is that there are plenty of crypto wallets out there, so you have options. The bad news is that selecting the right one is tricky. This is where we can help. We’ve lined up a selection of the very best crypto wallets, with something to suit everyone.
These are the best crypto wallets in 2024.
