Different Types of Crypto Wallets: Pros & Cons
There are different types of crypto wallets available in the crypto ecosystem. These wallets enable crypto investors to safely store their digital assets. While various wallets serve a similar purpose of storage, they come with different features and safety standards.
Unlike fiat currencies that can easily be accessed online and in physical locations, cryptocurrencies can only be accessed online. This is why an effective online wallet is critical in securing your crypto holdings.
Here are some of the key wallets that you can use to secure your crypto holdings!
Cold wallet vs. Hot wallet
The major difference between these wallets is that one is connected to the internet and the other can operate offline through software.
Cold Wallet
A cold wallet is used for storing cryptocurrencies in cold storage. This means that your crypto tokens are stored offline. In that case they are more secure than other wallets and acts like a vault where you can perform your daily cryptocurrency transactions.
Hot Wallets
Hot wallets on the other hand require an internet connection to function and thus are less secure than cold wallets. These wallets are more abundant than cold wallets because of the ease of access through the internet but are still vulnerable to attacks from fraudsters.
Other types of cryptocurrency wallets
There are about five different cryptocurrency wallets out there. Each of them offers different features and security levels to protect your private keys. They include hardware (cold wallet), desktop, paper, online and mobile wallets.
Let’s run through the pros and cons of each.
Hardware wallet (cold wallets)
Hardware wallets are typically cold storage wallets. You can keep your cryptocurrency assets offline away from cybercriminals.
Pros
- Highly secured
- Store, send and receive crypto
- You have control over your private keys
Cons
- If you lose your hardware wallet your cryptocurrencies are gone forever
- Some hardware wallets can be pricey
Paper Wallet
A paper wallet is merely a piece of paper with your private keys written on them. You can place this paper containing your private keys in a vault or any safe place. At one point they were considered the best way to store your private keys.
Pros
- You keep your private keys
- Store, send and receive crypto
Cons
- Once the wallet gets lost there is no way to access your bitcoins
Mobile wallets
Mobile wallets can be used on your smartphone and can be used to send and receive cryptocurrencies. They are IOS and Android compatible.
Pros
- Stores your private keys
- Store, send and receive crypto
- Can access your crypto wallet on the go
Cons
- You can lose your cryptocurrencies if your phone gets lost
- A person can get access to your phone and steal your tokens
Online wallets
Online wallets are the most popular kind of wallet. They are also called custodian wallets where a third party keeps your private keys safe for you.
Pros
- The most popular form of cryptocurrency wallet
- Store, send, and receive crypto
- Access to most of the cryptocurrencies
- Good user interface
Cons
- The online wallet can be hacked
- You don’t have access to your private keys
Desktop wallets
Desktop wallets are installed on your desktop and give you full control over your wallet. It acts as an address for storing your crypto. Moreover, you can also use it to send receive cryptocurrencies.
Pros
- Store, send, and receive crypto
- You keep your private keys
Cons
- Cyberattacks are possible
- If your desktop crashes you lose your crypto if you don’t back it up
Conclusion
There are a variety of crypto wallets that you can choose from. Depending on the choice of your wallet, you can either opt for a wallet that comes with a better user interface or one that offers better safety features. Either way, you can choose any that suits your needs. Alternatively, you can choose to use both as long as they serve the intended purpose effectively.
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