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Cryptocurrency for Beginners

7 Cryptocurrency Wallets Types Explained

3 min read
The best cryptocurrency wallet for you is the one which is most practical for you to use and the easiest it is for you to use.

What are the different types of cryptocurrency wallets?

cryptocurrency wallet is an encrypted digital wallet used to store cryptocurrency and blockchain tokens.

Most cryptocurrency wallets will allow you to:

  1. Safely Store multiple- cryptocurrencies and blockchain tokens.
  2. Send your cryptocoins to another person.
  3. Receive payments if you are merchant.
  4. Make everyday transactions.

Choosing the best wallet depends on:

  1. The safety of your private keys.
  2. How you intend to use it.

 

What are the different types of cryptocurrency wallets?

Every Cryptocurrency has its own blockchain and every blockchain is its own currency, bank and payment network. Each Cryptocurrency runs on a different blockchain algorithm.

However, it is not practical to store 50 different private keys, that’s why multi-cryptocurrency wallets were invented.

There are cryptocurrency wallets which store only one currency and those which store several types of cryptocurrencies and tokens.

The cryptocurrency wallets which store only one cryptocurrency are called onchain wallets and link directly to the blockchain.

 

Let’s discuss the types of cryptocurrency wallets from Hot to Cold (scroll lower below for explanation:

 

1. Online wallets

Online cryptocurrency wallets are online digital wallets which can be accessed online through your internet browser.
Some wallets like My Ether Wallet, or MEW for short, offer a browser extension which makes the wallet easily accessible.

 

a)Web Browser

Most cryptocurrency exchanges like Binance will offer you a free online web browser crypto wallet on their platforms.

 

b)Browser Extensions

  • Meta Mask
  • BNB Chain Wallet (Binance)
  • MEW (My Ether Wallet)

 

Who are online crypto wallets for?

Online crypto wallets are best for Beginners and are the preferred wallets of cryptocurrency day traders.

 

Pros

  • Easy to set up
  • Easy to access
  • Free

 

Cons

  • Fake websites are constantly try to phish your private key
  • The platforms hosting the wallets are often subject to hacker attacks.
  • You can not disconnect from the network in case of attacks
  • Cryptocurrency exchanges are the favorite targets of hackers to be sure to protect your private key with Metamask.

 

2. Desktop Wallets

A desktop cryptocurrency wallet is a software which you download to your deskstop and can access offline.
Desktop wallets are considered safer than cryptocurrency wallets because if ever your computer gets a malware attack, you can easily disconnect your pc from the internet and stop the attack.

 

Who are desktop wallets for?

Desktop wallets are great for beginners and mid-term investors who like to be able to easily access the cryptocurrency even if they are not using it everyday.

 

Pros

  • Easy to set up.
  • Easy to access.
  • Less subject to attacks than online wallets.
  • Safer for online purchases.
  • Great for mid-term storage.

 

Cons

  • Regular updates.
  • If your computer crashes you can lose your wallet if you did not save the private key.
  • Not practical to carry around (E.g digital nomads).
  • Not a long-term solution.
  • Might carry additional fees for its services.

 

3. Mobile App Wallet

A Cryptocurrency Mobile Wallet is a digital wallet installed on your smartphone.
The mobile wallet is very practical to use for everyday transactions.

 

Who are mobile wallets for?

Shoppers, merchants, beginners, physical purchases.

 

Pros

  • Very easy to install.
  • Very easy to set up.
  • Pratical to carry around.
  • Practical to make physical purchases.

 

Cons

  • Private keys get lost very easily.
  • You can accidentally delete the app.
  • Many mobile wallets are unreliable because the teams have not been updating them.
  • Some terms and designs may be confusing for non-techs.

 

4. Hardware wallet

A cryptocurrency hardware wallet is a pendrive  usb-like wallet which stores your private and public key.

 

Who are hardware wallets for?

  • Miners,
  • experienced investors.
  • people who lose paper wallets.
  • those who have accidentally deleted their mobile wallets.
  • Those who don’t trust Windows

 

Pros

  • Your private keys are completely disconnected
  • Less difficult to use
  • Multipurpose
  •  

Cons

  • More expensive
  • Not all models are user friendly for beginners

 

5. Paper Wallets

A cryptocurrency paper wallet is the private key and public key written or printed on paper.
The paper wallet guarantees full control over your private and public keys.

 

Who are paper wallets for?

This is the wallet of the paranoid and those with large sums of crypto.

 

Pros

  • A great back up system from your wallets.

 

Cons

  • Basically all the reasons people moved to computers.
  • Paper gets damaged over time.
  • In some cases ink might not be visible after a few years.
  • It is very easy to lose a piece of paper.

 

 

OnChain Wallets

Onchain wallets are wallets which are synced directly to the blockchain and can only support one cryptocurrency at a time. They are used mostly by crypto miners and early adopters.

Most new blockchain projects use onchain wallets because they have not been listed on the more popular companies.

 

Self-Custodial Crypto Wallets

Self-custodial crypto wallets are another form of decentralized onchain wallets.

It basically means that you will have control of your private keys.

Most cryptocurrency exchanges do not provide private keys, however, this also makes centralized cryptocurrency exchanges vulnerable to hacking.

 

Vesting Wallets

A vesting wallet is a type of blockchain wallet provided to seed and angel investors of blockchain start-ups.

The blockchain tockens are locked for a period of time, which could be anywhere from 6 months to 5 years.

But what makes this wallet interesting is that they owner retains full ownership of his wallet even if he can not use the tokens.

 

Staking Wallets

Staking Wallets work like savings account where users earn tokens for not using their tokens.

Fun-Fact: Staking originates from the proof-of-stake algorithm because Bitcoin mining algorithm (proof-of-work )was criticized as too energy intensive.

 

NFT Wallets (Non-Fungible Token)

NFT wallets are the 3rd Generation of Blockchain wallets (web3.0)

So unlike blockchain tokens and cryptocurrencies, media such as pictures can be attached to them.

NFTs prove ownership of limited edition media, which is useful in video games with rare weapons.

 

Blockchain Token vs regular Crypto Wallets

Blockchain tokens require users to pay a separate gas fee to transfer the tokens from one wallet to another 

The best cryptocurrency wallet for you is the one which is most practical for you to use and the easiest it is for you to use.

because if lose your private key, you will not be able to retrieve the crypto.

 

Hot vs Cold Wallets

Crypto currency wallets vary from most practical to least practical.

The most practical and popular crypto wallet is usually the least secure.

The least secure wallets are hot wallets and most secure are cold wallets.

The “hotter” the wallet, the more connected they are to the internet.

 

The Best Crypto Wallet

The Best Crypto Wallet is the one you’re most qualified to to store safely.

Self-custodial multi-cryptocurrency wallets work best for seasoned crypto investors.

However, web based cryptocurrency wallets on crypto exchanges are better suited for cryptocurrency traders.

 

What next? 

If you enjoyed this article, then you might be interested in : I Have Bitcoin, Now What?

 

 

 

 

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