Every investor or user who decided to dive into the crypto-world should immediately learn the main rule – he is responsible for his coins himself. If you can put your fiat savings in a bank and not worry about anything, the owner is responsible for storing cryptocurrency, and there will be no one to compensate. This is why it is so important to choose the right cryptocurrency wallet. This guide from ProstoCoin tells you more about it.
What is a cryptocurrency wallet
A cryptocurrency wallet is a place to store digital savings. Most of these stores are implemented as programs and online services, but there are also those that “exist” offline and are comparable to an ordinary wallet.
Any cryptocurrency wallet has two important components:
- public key (address) – a unique set of letters and numbers, which is comparable to a safe deposit box and serves as an address for sending coins;
- private key – a cryptographically protected hash, which also looks like an alphanumeric combination, but is comparable to the key that opens access to the very safety deposit box.
The pair of these keys are interrelated. The public key is visible to everyone and can be shared with third parties as a payment reference without fear. The private key, on the other hand, must be securely stored by the user or service that has been entrusted with such obligations, as it allows transactions to be made from the wallet.
Digital coins are not assigned to a specific user. In fact, whoever holds the wallet’s private key also owns all the coins in their account.
How cryptocurrency wallet works
Cryptocurrency wallets are used by millions of users, but not everyone understands exactly how it works. Unlike cash transactions, where one party to a transaction transfers an enriched amount of money to another during a payment, transfers with digital money are performed without a physical transfer.
Cryptocurrencies do not exist in physical form, so all transactions with them are reduced to a change of entry in the blockchain register. When a transaction is made, the ownership of coins is simply “rewritten” from one address to another through the cryptocurrency wallet.
Such a transaction is only possible if it is signed with the private key corresponding to the public address. If the public and secret keys match, the transaction is validated by the miners, after which it is added to the blockchain registry, and the balance of the sender and recipient wallets changes accordingly.
You can top up your cryptocurrency wallet with an incoming transaction in one of the following ways:
- Through exchange services. For example, the NetEx24 You can top up your wallet from your card or through a convenient payment system. After payment, the cryptocurrency will be instantly credited to the specified purse number;
- Transfer coins from cryptocurrency exchanges, to the account of which you must first put money, and then exchange it for the coins of interest.
Which cryptocurrency wallet to choose
When deciding which cryptocurrency wallet to get, you need to learn the main rule: the more convenient it is to use, the less safe the savings are. This is due to the fact that more convenient cryptocurrencies provide easy access to the private key, but the same easy access can be obtained by intruders.
Which cryptocurrency wallet is better, every coin owner decides for himself. A wallet with quick registration and easy access to the balance will be convenient for those who plan to make frequent transactions for small amounts. If it is a question of storing large savings, a more rational option would be cryptocurrency wallets of higher reliability, but less convenient to use.
Types of cryptocurrencies
In fact, any cryptocurrency wallet is just two digital codes, but the developers have taken care of the users and provided several solutions for the convenient use of codes.
Each wallet has its own level of security, which mainly depends on its type and service provider. All cryptocurrencies can be divided into two main groups:
- “hot” storage – saves private keys with an Internet connection, which provides easier access, but adds vulnerability to hackers;
- “Cold storage – private keys are stored without access to the network. Transactions require advance preparation, but you can rest assured that off the Internet hackers can’t get to the private key.
Each group, in turn, has several varieties of wallets with their own advantages and disadvantages.
Cold cryptocurrency wallet
Cold wallets have the highest degree of security. This category includes hardware wallets that store private keys without Internet access.
A hardware wallet is a separate physical device designed solely for secure storage of cryptocurrency. The private key in such a wallet is stored in the device’s memory and never leaves it.
Additionally, hardware wallets are protected by a password and a secret SEED phrase. With a set PIN, the wallet owner makes a quick connection, and the SEED phrase will be needed to regain access and additional protection in case the wallet is lost.
To perform transactions, the hardware wallet is connected to a computer using a USB cable. At this point, work with the private key is done remotely in the protective environment of the hardware device. Even if the PC is infected with a virus, it will not affect the security of the storage, because it is impossible to remove the private key from the device.
Wallets of this type are often used by exchanges and large investors to store large savings. Their only disadvantage is that they are provided on a fee basis.
By far the most popular hardware wallets are:
Cryptocurrency wallet online
Online cryptocurrency wallets are essentially an account on a special service that takes responsibility for storing users’ private keys. This is the most convenient way of storage, providing fast access, but not increased reliability.
Opening a cryptocurrency wallet on such services is as easy as registering on any website. Even registration on any cryptocurrency exchange opens up hot wallets for the user to store assets.
To use an online wallet, you only need to remember your username and password. You can use them to log in from any device and get instant access to your savings and transactions.
This is a simple and convenient way to store, but it is not recommended for large sums. First, because online services are vulnerable to hackers and DDOS attacks. Second, the user is often not the owner of the private key, and, accordingly, he or she cannot be called the sole owner of the savings stored there. That is why it is so important to choose a reliable online wallet.
Time-tested online wallets are:
- Coinomi is a reliable multi-currency wallet, proven by time and users;
- Coinbase is a secure, trusted online multi-currency wallet and exchange;
- Blockchain is a cryptocurrency wallet with a minimum fee, which the user sets himself.
Mobile cryptocurrency wallet
With the growing popularity of smartphones, mobile wallets – special applications that allow to store and make cryptocurrency transactions from mobile devices – are also in high demand.
To open such a cryptocurrency wallet on your smartphone, you need to install a special application and register in it. Using mobile versions of wallets has almost the same advantages and disadvantages as online wallets. True, some applications provide users with private keys. It is also worth noting that, in case the mobile device is lost, the owner also risks losing their savings: especially if two-step authentication has not been installed in the mobile cryptocurrency wallet.
Popular mobile apps:
- Jaxx is a mobile version of the popular local wallet;
- Coinomi is a mobile cryptocurrency wallet that supports over 100 types of cryptocurrencies;
- Blockchain is one of the most popular online wallets with a good reputation.
Offline Crypto Wallet
Offline cryptocurrency wallets are software programs that can work without Internet access once installed on a local device. Such programs are also called desktop wallets, and they are virtually free analogs of hardware wallets.
Such programs can be divided into two groups:
- full-value – some of the first wallets that download the entire blockchain history to the user’s computer;
- thin – desktop programs that can work without loading the blockchain, drawing information on it from verified sites.
When creating such a crypto-purse, a configuration file with a private key will be uploaded to the computer, which will be used by the program to confirm access and transactions. The main disadvantage of such storage is the probability of PC infection by viruses that can transmit information from it to hackers. If you decide to use such storage software, you should make sure to update your anti-virus system.
Popular cryptocurrency wallets for PC:
- Exodus – multicurrency wallet for cold storage keys on the PC, has a bright and user-friendly interface, but significant commissions;
- Electrum – a local cryptocurrency wallet, which will be useful for those who need enhanced security, because it works without problems through the TOR network, and is also suitable for storing anonymous currency Verge;
- MyEtherWallet is an official wallet that allows you to store only Ether;
- Hideez Wallet is the first Ukrainian cryptocurrency wallet, developed in desktop and mobile versions;
- Bitcoin Core is the oldest Bitcoin wallet, which is close to official status and supports the Russian interface;
- NEO GUI is one of the official wallets for Neo cryptocurrency.
Paper cryptocurrency wallet
As stated earlier, cryptocurrency wallets are a set of digital keys linked together. Everything else is just a convenient shell for users. The easiest way to create a cryptocurrency wallet is to generate public and private keys, and then write them down on paper. To do this, just visit one of the special services, which will generate a pair of keys and prepare them for printing, and then delete their data. For convenience, the services also offer the design of addresses into QR codes.
From a computer security point of view, this is a secure way to store your savings, because a private key can definitely not be taken advantage of by hackers. You should not expect a threat from the virtual world, but there are new difficulties in storage. Paper is an unstable material that can tear, get wet, or burn. Also, an intruder who gets hold of such a piece of paper will be able to gain unproblematic access to the wallet, and the owner will have no way to restore the data.
To use such a wallet keys should be integrated into any convenient program, but it should be understood that after that they are no longer stored without access to the Internet, which means that if you want to keep savings in cold storage you will need to create a new wallet. For easy integration, a backup copy of the keys can be saved on a flash drive to create a prototype hardware wallet, but it should be understood that the flash drive has no similar protection against viruses and data theft.
It should also be noted that paper wallets cannot be multicurrency and are generated separately for each digital currency. Getting a pair of keys for a particular type of cryptocurrency is usually available on the official website.
Services for key generation:
Rating of cryptocurrency wallets
|hardware||Windows 7+, Linux, Mac.||Yes||low|
|Jaxx||local and mobile||Windows 7+, Linux, Mac, Android, IOS||Yes||Medium|
|Electrum||local and mobile||Windows 7+, Linux, Mac, Android, IOS||no||low|
|Exodus||local and mobile||Windows 7+, Linux, Mac, Android, IOS||Yes||high|
|Trezor||hardware||Windows 7+, Linux, Mac, Android, IOS||Yes||low|
|BRD (Bread) Wallet||mobile||Android, IOS||Yes||Medium|
The most reliable cryptocurrency wallet
Ledger Nano S – the best multi-currency cryptocurrency wallet, which is rightfully considered the most reliable way of storage. The body of the device is made in the form of a flash drive, equipped with a small portable display and two buttons for control.
The device allows you to store more than 1,100 types of cryptocurrencies remotely from the network, which provides increased security. The list of cryptocurrencies available for storage is constantly expanding.
- weight: 16.2 g;
- size: 98x18x9 mm;
- material: brushed stainless steel and plastic;
- connection ports: USB type Micro-B;
- Accessories: device, instructions, USB-cable, lanyard for comfortable carrying, card for recording SEED-phrases.
An important feature of Ledger Nano S is that the private key is generated during the creation of the crypto-purse and remains stored on the ST31H320 secure chip and never leaves it. The same type of chip is used for biometric passports and credit cards.
To perform operations on the wallet manufacturer has developed a special application Ledger Live, which is connected to all operating systems except mobile.
When you first start the user sets the PIN-code and SEED the phrase of 24 words, which later will help restore access to the wallet, even if you lose the device.
SEED-phrase is strongly not recommended to write on the proposed card, because the key, which can provide access to the savings, should be written without identifying marks, so as not to attract the attention of intruders.
On the official website, the cost of Ledger Nano S is 60 euros including VAT. It can definitely be positioned as the best. Last year alone, more than 1.3 million devices were sold in more than 100 countries.
There are a lot of options for storing cryptocurrency and the number of offers on the market is constantly growing. Before you finally decide on your choice, ProstoCoin advises you to determine: how exactly you plan to use your savings and how often you will need to access them.
For small amounts and the need for private transactions, it is rational to turn to special services and applications, but if your coins need reliable storage, it is recommended to pay attention to the methods of cold storage. Among offline storage, hardware wallets are considered the most convenient and reliable.
Finally, it is worth noting that whichever option is chosen, the user must also take care of the keys themselves. Measures to prevent theft and loss include regularly updating the anti-virus system, backing up keys and connecting additional layers of security.