How to Choose a Crypto Wallet for Your Bitcoin
We have now entered a time where mass adoption is finally starting to happen for Bitcoin and other cryptocurrencies. This means that more and more people are buying Bitcoin and altcoins at a rate higher than we’ve ever had in Bitcoin history. So naturally, the next question that comes up is, what do we do with the Bitcoin that we just bought? How do we store them?
Given that many investors are beginners in the cryptoworld and may not know how to keep their Bitcoins secure, hackers are coming up with ingenious ways of stealing funds. The crypto horror stories are as shocking as can be. Hackers can reroute coins bound for one wallet to another. And sadly, the victims watch as their coins are stolen away from them, with nothing they can do about it. Sometimes, if it ain’t the hackers, it’s the investors themselves, making human errors and locking themselves out of their wallets, losing access to their Bitcoin forever. Yikes!
But in light of these events, our crypto saviors have innovated ways to keep our assets secure. Today, we have several options to store and access our crypto that are much more elegant than the regular banking security we’re used to. They are called: Crypto Wallets. In this article, i’ll be talking about hot wallets, cold wallets, and my suggested platforms for safe storage and secure access.
What you need to know before choosing a crypto wallet
As a Bitcoin holder, it’s important that you don’t get pulled into an over-optimistic sense of security. Sure, Bitcoin is decentralized and immutable, but just as technology advances, so do the creative ways bad people steal. They gotta do what they gotta do. So as the owner of your coins, you need to take full responsibility to secure and protect your assets.
To secure your crypto effectively, you’ll need a cryptocurrency wallet. There are different types, and the right one for you depends on what your goal is and how often you’ll want to access your crypto.
Technically, there are 3 main places your cryptocurrencies can be kept: hot wallets, cold wallets, and exchange wallets.
How Crypto Wallets work
Crypto wallets function in a somewhat similar way to physical wallets which hold cash. They can be thought of as a storage device for cryptocurrency coins or tokens. However, in most cases wallets are not physical items, and neither are the bitcoin they hold. Rather, they are digital storage tools which have both a public key and a private key. These keys are strings of cryptographic characters which you enter in order to complete transfers of bitcoin to, or from the wallet in question.
I do better with analogies. So let’s compare crypto wallets to your bank app, which a lot of people have grown used to. Just like how you can hold, access, and transfer your fiat money to and from your bank app, you can do the same on your crypto wallet.
So your crypto wallet public key is what you might consider your bank account number, and this is what you’ll use or give people if you want to receive crypto in your wallet. This is also called your Wallet Address.
On the other hand, your private keys will act as your username or password of sorts, which is what you’ll need if you want to securely access your funds!
HOT WALLETS
Online wallets, also known as “hot” wallets are wallets that use the internet and are accessible on computers, phones, or tablets. Because of this, they prove to be very convenient especially if you need on-the-go access to your coins.
There are many options for hot wallets, but I’d like to give you my top picks and I have 2.
Exodus
I recommend this wallet to any of my friends who are new to crypto. Exodus is a FREE multi currency crypto wallet and has both a desktop and mobile version. Multi-currency means that it can hold many types of cryptocurrency, not just Bitcoin. To date, Exodus can hold 100 cryptocurrency assets.
My first favorite thing about Exodus is that it looks sooo good. It’s beautiful! What can I say, I love a good aesthetic! But Exodus is not all looks. It boasts live chat support and a built-in exchange too, which also means that you can buy Bitcoin from within the wallet, without long confirmation times!
I like this because some wallets don’t have exchange capabilities within them. If you wanted to exchange some of your Bitcoin to Ethereum, you’re gonna have to take out your Bitcoin from your hot wallet, into an exchange, do the swap, AND THEN put it back to your wallet. Along the way, you also wait about an hour for your funds to show up on your exchange platform. Major headache!
But Exodus allows you to do all of that within one platform.
One concern about hot wallets is that because they are internet-operated, this presents a vulnerability as your private keys may be accessed by hackers. Exodus eliminates this issue by integrating its services with Trezor, a hardware wallet, which I’ll be talking more about in a bit.
Trezor upgrades security for your Exodus wallet by keeping your private keys offline and letting you validate transactions through an external device instead of over the internet. That makes Exodus one the most hacker-proof free wallets out there. You can sign up for Exodus HERE.
Coinomi
I recommend Coinomi to my friends that hold a diverse portfolio of cryptocurrencies.
Coinomi is a free, multi-chain hot wallet that has both a mobile and desktop version as well. It has the broadest range of crypto, supporting more than 1,700 cryptocurrency assets! I know, it’s mindblowing. Just like Exodus, Coinomi also has a built-in exchange where you can trade coins.
What’s noteworthy about Coinomi is its track record of versatility and trust. Ever since it launched in 2014, no Coinomi wallet has ever been hacked or otherwise compromised to date.
How do they do it? Their servers anonymize your requests by hiding your IP address from prying eyes! They also have strong wallet encryption and cryptography that guarantee that your funds will remain safe and under your ultimate control. So even though Coinomi doesn’t have a hardware wallet integration like Exodus does, they still prove to be the most robust and secure free wallets out there. You can sign up for Coinomi HERE.
I want to share some crypto wisdom in using hot wallets. When it comes to access and convenience in transferring my coins, I use hot wallets. But personally, if I were hodling a relatively large crypto portfolio that I intend on building my generational wealth on, I would keep most of it somewhere offline, such as a cold wallet, to completely eliminate the possibility of hacking.
(And by the way, if you’re new and wondering what HODL means, it’s to hold. The term was born out of a fortuitous typo back in 2013, and it caught on! That’s the internet for ya.)
COLD WALLETS
Cold wallets are, in my opinion, the safest option for storage. The simplest description of a cold wallet is a wallet that is not connected to the internet and therefore stands a far lesser risk of being compromised. These wallets can also be referred to as cold storage, offline wallets, or hardware wallets.
An obvious downside to cold wallets is that you have to pay for them, while most hot wallets are free. But personally, I don’t mind paying for the extra security. Cold wallets store a user’s address and private key on something that is not connected to the internet and typically come with software that allows you to view your portfolio without putting your private key at risk.
Ledger
This is the Ledger Nano, and as you can see, it’s a physical device which looks a bit like a USB drive. I believe it to be the most secure, and sleekest-looking crypto wallet money can buy.
I do wanna take a moment to praise their design. This wallet comes with a stainless-steel body, which gives it a more stylish look, not to mention more durable and portable.
Ledger wallets support over 1000 different cryptos and you can easily manage your portfolio using the Ledger Live app. And as if that wasn’t enough, they also introduced staking within Ledger Live, where you can earn an interest by holding your crypto inside the wallet! This is similar to earning interest from your savings in a traditional bank, only this time, you get about 5–6% instead of the measly .05%.
So just like hot wallets, Ledger also features a built-in exchange on their Live app. The main difference is that there is full isolation between your private keys and your computer, making you virtually, unhackable.
There are 2 different units of Ledger wallets, the Ledger Nano S, priced at $59, and the Ledger Nano X, priced at $119. Their main differences lie in the amount of apps you can install on the device and Bluetooth compatibility with your phone. You can find out more and purchase HERE.
Trezor
Trezor shares many of the security benefits as Ledger, as well as supports more than 1000 cryptocurrencies. But by the looks of it, might be a bit more beginner friendly than Ledger to set up.
The difference in design is obvious, with Trezor having a touchscreen display, which is way bigger than Ledger’s. Personally, it was almost scary to operate the Ledger because of its tiny buttons and text. So if you have vision problems, I suggest you go for Trezor.
There’s the Trezor One, priced at $59 just like the Ledger Nano S, and then there’s the Trezor Model T, priced at $181, which you can buy right HERE.
What happens if I lose or damage my cold wallet?
Naturally, people have fears about possibly damaging or losing their device. So, in case you lose your cold wallet inside a cab, or you keep it in your back pocket and a friend pushes you into a swimming pool, you won’t have to worry about losing your coins forever.
This is because both Ledger and Trezor allows you to backup your wallets with a pin code and 12 to 24-word key or seed phrase which keeps access private.
This seed phrase is a list of randomly generated words in a particular order, which only you, or someone you trust should know and keep safe. If you lose your device, get a new one, log-in with your key phrase, and voila, you have access to your coins again.
EXCHANGE WALLETS
Exchange Wallets are wallets built-in to the cryptocurrency exchange platforms.
I’d like to warn you that of all the options, this is the least secure, as they are custodial, meaning they have access to your private keys and the platform itself is tasked with keeping your Bitcoin safe.
There are a number of issues around this. The first being these exchanges are web-based and therefore prone to hacking and phishing. If an event were to occur where the exchange is hacked or your account becomes compromised, your funds would be lost.
Second, exchanges reserve the right to hold withdrawals on your accounts if there is “unusual activity”, and on some platforms, you may not be able to withdraw your assets for a number of days. There was one platform that didn’t allow me to withdraw my assets for 90 days! (I’m looking at you, Etoro).
Now having said that, in certain situations, exchange wallets have proven themselves useful. For example, if you’re looking to quickly swap your coins to another type of cryptocurrency that isn’t supported by your existing hot or cold wallet, or if you’re anticipating doing that within a short time frame, then an exchange wallet is the best place to do that.
I personally keep some amount of my crypto on an exchange such as OKEx, which has their own wallet, because I’d like some coins readily available for trading. This way, I’d like to think my crypto is relatively safe, because I’m not keeping my entire portfolio in once place.
I’d like to share my best practices in using hot wallets, cold wallets, and exchange wallets.
Crypto Wallet Tips
#1
If exchange wallets are custodial, by contrast, hot wallets and cold wallets are NON-custodial, which means no one else has custody of your private keys, but you. You are responsible for keeping your keys or seed phrases safe. As they say in the cryptoworld, “not your keys, not your coins”, which means that once you lose access to your wallet keys or forget what they are, you can bid those coins adieu. Non-custodial means that none of these wallet providers have access to your PIN and seed phrases, so make sure you make records of them and keep them in a secure place as people may be able to access your wallet with your seed phrase alone, even without knowing your PIN code.
#2
Always confirm and double check your wallet addresses. Wallet addresses, or public keys, are unique to the kind of cryptocurrency you’re dealing with.
Think of it like this. Let’s say you are a customer with one bank. In that bank, you may have separate accounts for dollars, pesos, and euros. Each currency has its own account number, and you can only accept the same currency in each account. You cannot mismatch your currencies, like deposit euros into your dollar account. This is the same with your Crypto Wallets. Your wallets are like your bank apps, and your wallet addresse are your bank accounts. If you’re transferring Bitcoin, make sure that the wallet address you’re depositing to is also a Bitcoin address, not an Ethereum address.
I make it a practice to double check the first and last few characters if I’m copy-pasting my wallet address, just to be sure I got all of it. Remembering this is important because if you mistakenly send your crypto to the wrong address, it’s lost in the blockchain forever. There’s no customer service you can call, no reversal paperwork, no appeals. This is straight up accountability, you guys. You have power over your finances now, and with great power comes great responsibility.
(Yes I know what I did LOL)
Conclusion
Hot wallets and cold wallets have their strengths, depending on how much accessibility and security you’ll need. Hot wallets are the best for easy access, while cold wallets offer the most robust security as they are offline.
Let me know your thoughts, which kind of storage are you looking into? And what platforms are piquing your interest? Want me to do a review on a particular kind of wallet? Let me know in the comments below!
This article is written by Sixteen Ramos.
Disclaimer: Sixteen is not a financial advisor. This article is for educational purposes only. Please do your own research outside of reading this article.
