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Which cryptocurrency wallet should I use?By Swati Keswani | July 31, 2018, 9:46 a.m. GMT
A cryptocurrency wallet is any means used to store private and public keys of an address on Blockchain. This enables one to not just store but send and receive cryptocurrency. If you want to use a cryptocurrency, you need to have a wallet. A cryptocurrency wallet can be a digital wallet or even a piece of paper with your address and private key stored on it.
Think of a cryptocurrency wallet like your internet banking account whether you access it via an app or over a web browser. It is where you see the balance in your bank account and authorize transfer-outs of your cryptocurrency balance to other recipients.
Thus, this is how you access your public Blockchain (Bitcoin or any other) address and indicate that you, in fact, want the said cryptocurrency transactions to take place from your account. Also, cryptocurrency wallets also tell you your balance at any point in time.
There are four types of cryptocurrency wallets:
- Software Wallets
- Online Wallets
- Paper wallets
- Hardware wallets
Software wallets require you to download and install an application either on your desktop or mobile.
- Desktop software clients may or may not require you to download the entire data on the Blockchain to be able to manage your address. Clients like Bitcoin Core expect you to become a full node and download the entire data on the Blockchain which could be more than 100 GB in size. This could be a challenge if you have limited storage or internet access of poor bandwidth. However, clients like Armory allow you to create a cryptocurrency wallet on your desktop without becoming a full node. Installing these cryptocurrency wallets may sometimes ask for some technical knowledge.
- Software clients are typically lot friendlier to you when you use them on mobile devices. Just download a cryptocurrency wallet app from Apple Appstore or Google Playstore and you are ready to fly. MyCelium, Copay, Blockchain, Zebpay, Unocoin etc. are such cryptocurrency wallets. Do not treat anything in this article as a recommendation of or nod to any specific cryptocurrency wallet- everything is susceptible to security issues.
Also, any cryptocurrency wallet is only as secure as the device it is stored on. If your phone or computer can get infected by malware, you can lose your cryptocurrency.
Online Wallets or Web Wallets are services offered by different service providers where you can access your cryptocurrency on the web browser using a username-password. It is easy to sign-up for such services on providers like Blockchain or others, but like most decisions in life, there is a trade-off here too. Your Bitcoins or cryptocurrency, say, is not truly stored on the Blockchain network and you are not really controlling your private key. It is all stored on the server of the service provider. Your cryptocurrency is as safe as your provider’s server is.
In 2014, hackers stole Bitcoins worth $460 million from Mt. Gox, a popular online wallet, and exchange.
Use online wallets for small amounts only that you want to use to make payments or trade-in. Store the rest of cryptocurrency in paper wallets or hardware wallets- up next.
A Paper Wallet is a just a confusing name for a piece of paper where your public and private keys are written or printed out on a piece of paper. Paper Wallets are way more secure than software or online cryptocurrency wallets as you are not storing your private key on an internet-connected device or on a server- therefore out-of-reach of hackers. As you might have guessed, it is a Cold Storage method, as it is offline.
You can create a paper wallet yourself using BitAddress.com and printing the output- address and private key. To use the cryptocurrency wallet at a later date, you just have to add the public-private key combination into any existing software or online wallet.
Remember just because it is difficult to hack into a paper wallet, it is not completely secure in all manners. It can get lost, torn, burnt, water-damaged, stolen, photographed, copied or the printing may simply fade away with time. Make multiple copies, laminate them and store in more than one safe places eg lockers.
Lazy people will lose their cryptocurrency. Not may- they will.
Hardware Wallets are stand-alone hardware devices that help you manage your cryptocurrency by creating keys during transactions. Often, they are USB shaped devices, which can be plugged into the USB port of your laptop or desktop to make a cryptocurrency transaction.
Hardware wallets are better protected against malware than online or software cryptocurrency wallets as they generate private keys offline, on the device itself not relying or storing it on any server. They are fairly simple to use even for those without a technical bent of mind. Even if they get stolen, the thief will not be able to access your cryptocurrency as they are password-protected. Trezor happens to be the most widely used hardware wallet.
Software or online wallets are known as ‘Hot Storage’ as it is easy to use your cryptocurrency stored on them. Paper and hardware wallets are what are called ‘Cold Storage’ as you ideally first have to move cryptocurrency to a hot wallet from them before being able to use them on the fly.