Excellent guide on types of Crypto wallets and features to look for

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Excellent guide on types of crypto wallets and features to look for

For answers to questions like what is cryptocurrency wallet, types of Crypto wallets features to look for before making decisions, etc., read this comprehensive guide carefully.

Cryptocurrencies are completely virtual. So if you want to do anything with your digital Coins you do need a crypto purse.

What is a crypto wallet? Crypto wallet is software, that allows you to hold, transfer and receive bitcoin, ethereum, Litecoin and other cryptocurrencies, much like a real wallet.

In this post, you’ll learn what crypto wallets are and how to decide which wallet to use in holding your cryptocurrencies.

This post is divided into 3 parts.

  • Part 1 – Types of crypto wallets with pros and cons: Here we describe which types of Crypto Wallets exist and what their advantages and disadvantages are.
  • Part 2 – What features to look for in a crypto wallet: The second important factor in deciding which crypto purse to pick are Wallet features. In this part, we describe the most important features you should look for in a cryptocurrency wallet and why they are useful.
  • Part 3 – our crypto wallet recommendations: Finally, we build on previous information and recommend some wallets, that we believe will give you the best results.

So let’s begin.

Types of crypto wallets with pros and cons

So the first thing you need to know about the crypto wallet is that not all wallets work the same way. There are actually different types.

There are 5 types of crypto wallets, they are:

  1. Local Wallets
  2. Hardware Wallets
  3. Paper Wallets
  4. Online Wallets
  5. Multi-Coin Wallets.

In this post, I’ll explain all of them in detail and address their advantages and disadvantages.

1. Local Wallets

The oldest types of Crypto wallets is the Local wallet. These are installed on your local machine (PC, Android, iOS) and hold the coins on your device. This comes with a set of advantages and disadvantages.

Advantages of using local wallets

  • You hold your coins, so they are very secure
  • You can always access your funds even without internet connection
  • You can download the blockchain and support the network.

Disvantages of local wallets

  • If your hard drive breaks your coins are gone (unless you made a backup)
  • If your device gets hacked and your Password is compromised your coins can be stolen
  • You can only access coins on the device. To get coins from a Pc to your phone you need to make a transfer

2. Hardware Wallet

These are physical wallets (imagine a special USB stick). Hardware wallets hold the crypto coins and are disconnected from the internet. You access the coins from any device which is connected to the hardware wallet by using a pin code. You can store these crypto wallets in a safe or under your pillow. 🙂

Advantages of hardware wallets

  • Hardware wallet is the safest way to hold your crypto coins
  • You hold the coins and have full control over them

Disadvantages of hardware wallets

  • They are not free
  • Compared to software wallets accessing coins is less convenient
  • Physical destruction means a loss of the coins

3. Paper Wallet

This is yet another types of Crypto wallets. Paper wallet allows you to print your private keys. These keys are all that is needed to spend the coins. Many other crypto wallets do also offer this printout as a feature.

Advantages:

  • Not hackable
  • You control your coins

Disadvantages:

  • It’s on paper
  • Anyone who sees the keys can steal them
  • To use the coins you have to enter the (pretty long) keys into another wallet

4. Online Wallet

Online wallets works as a service. You transfer coins to these cloud-based services. And then use their website or apps to access the wallet functionality.

Advantages of online wallets:

  • You can use one account from multiple devices
  • They are often easy to use and have lots of extra features
  • Transaction fees are often very low

Disadvantages of online wallets:

  • You do not hold your coins. They are with the hosting company, which is acting as a “bank”.
  • A server outage or DDoS attack can make your funds inaccessible.
  • You have to trust a private company with your money. But these platform providers are not regulated like regular banks and can use your coins as they please.
  • Cryptocoin Exchanges and Trading sites do often double as online wallets

5. MultiCoin Wallets

MultiCoin Wallets are types of Crypto wallets that can hold multiple cryptocurrencies simultaneously. These are available as online or local wallets

Advantages of multicoin wallets

  • You can manage multiple coins in one place
  • You get a good overview of your holdings
  • Ideally, you only need to install and update one wallet

Disadvantages of multicoin wallets

  • Get hacked once. Lose all of your coins
  • There are not that many MultiCoin wallets to choose from
  • The available features are generalized. So you often cannot use features which are specific to a certain coin

So these are the types of cryptocurrency wallets. Next up are features to look for in crypto wallets.

What features to look for in a cryptocurrency wallet?

The following are features you should look for in any crypto wallet before making your decision.

Cold Storage

This means that the wallet offers the possibility to store coins offline e.g. as a printout. This feature is a must-have if you hold large amounts of Cryptocurrency. For the casual user, cold storage is usually overkill.

Two-factor authentification

This means you need a second input in addition to your password to transfer your cryptocoins. E.g. an SMS code or a Mail activation. You probably know this from your online banking account.

This does dramatically increase security, while not adding much hassle.

Key Phrase / Recovery Phrase

This means that you set a Recovery Phrase when you first start up your cryptocurrency wallet. This phrase is used in the generation of your private keys. This means you can restore your coins e.g. after a harddrive breakdown, only by using this phrase. But this does not enable you to retrieve stolen coins.

Lightweight Wallets

Traditionally, wallets needed to download the whole Blockchain before you could use them. But, the Blockchain does grow over time. And by the time of this writing, many blockchains have reached significant sizes.

Bitcoin Blockchain > 343GB

Etherum Blockchain > 836GB

Litecoin Blockchain > 51 GB

If you don’t have that much vacant disk space, you can go for a lightweight Wallets. These can operate without downloading the chain. But please consider the download. More copies of the Blockchain strengthen the network.

Open Source

Crypto Wallets do exist as open-source projects and as closed source products. Trust is a difficult topic on the internet. If you pick an open-source wallet you can be confident, that no malicious code is hidden inside the wallet. On the flipside, if there is a security weakness in the wallets code it can be found and abused by someone screening in the code.

So those are the important features to look for in crypto wallets.

Crypto wallets Recommendations

To pick the perfect wallet all you have to do is decide which features you need and which type of crypto wallet you want to use. In the following, we give you our recommendations.

For me, the most important features are Open Source, Control over the private Keys and ease of use. Therefore I do generally prefer Local Wallets over any variant where you cannot access your keys.

Bitcoin:

I recommend Electrum as an easy to use, beginner-friendly crypto wallet. It does also feature recovery phrases and is Open Source

For more advanced users, I recommend Armory. This wallet has the best security options and is thus great for holding larger sums. It also integrates nicely with hardware wallets.

Bitcoin.org does provide a list with promoted wallets and a lot of additional information. The wallets on that list have gone through an extensive screening process and if a wallet is not on that list, I recommend that you do not use it.

Ethereum

For holding Ethereum, I recommend the Coinbase wallet. It is an easy to use Online crypto Wallet. I recommend an Online wallet for Ethereum because I do not like the lightweight options for Ethereum.

For android devices:

For Android my Pick is Mycelium wallet. it is Open Source and ok to use. It also offers a recovery phrase which I find especially important on mobile devices.

Hardware Wallets

I believe that the Ledger Nano S is currently the best one on the market. It is pretty small has a display for added security and you enter your pin on the wallet. But I would not pay more than 200$ for the device. There is sometimes price fluctuation as everything related to Bitcoins is currently sold out.

Online crypto Wallets

If you decide to go for an online crypto wallet it is more important to look at the company, than to look at the features of the wallet.

I recommend Blockchain.com. They are based in Luxemburg. A first world country in Europe, whose economy is built around finance. They allow backups and retrieval of your private keys on demand. They also have gathered a large amount of venture capital.

If you prefer a US-Based Company I recommend coinbase. They are also very well funded. They are also running an exchange which is convenient and supports a lot of different coins.

Coinbase also hold a substantial amount of their coins in cold storage. However, your coins are completely controlled by coinbase. this means you cannot access your keys unless you withdraw them to another wallet.

MultiCoin Wallet

I do generally not recommend going MultiCoin for the above-mentioned reasons. But if you go down that road you might as well go all the way. Thus I recommend Coinomi. It supports 68 different coins and is Open Source. You also keep control over your private keys. Coinomi also allows easy exchange between the different coins.

This is it. I hope you found this, ‘excellent guide to types of Crypto wallets and features to look for’ useful in your decision and I hope you have found the perfect crypto wallet for your digital currency endeavour.

Thanks for reading and do click on the red button afloat below this page to subscribe. That way you will always receive a notification whenever I make a new post.

Read this:

What are Cryptocurrencies? Where and how to buy them in 2021

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About the Author: Femi Olawole

Femi Olawole is a web designer, blogger and SEO expert. He is the owner of XYZ News Nigeria, a local news and entertainment blog

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