Let’s talk about the different types of wallets where you can store your cryptocurrencies.
Like most things crypto, there’s a bit of slang to work through but with a little research it starts to make sense. The best Bitcoin wallet for you will depend on your own situation, level of investment and technical skills.
The good news is that all crypto wallets can be categorised as either hot or cold. Hot wallets are connected to the internet, while cold wallets are not.
Convenience, accessibility and security are what differentiates cold wallets and hot wallets.
A cold wallet is like the cash you’d keep in a safe. It is kept offline (such as a piece of paper) and therefore is more secure than most hot wallets.
As the name suggests, a paper wallet is simply a piece of paper with your private and public keys either hand-written or printed on it. This is a simple but effective method of hiding your keys from hackers. The extra security of a cold wallet means that it’s wise to keep the majority of your crypto here and only move it to a hot wallet when you need to transfer or spend them. You will need to take extra care when you manually type in the lengthy string of characters that are your private and public keys. Get this wrong and sending your crypto to the wrong place would be a very expensive mistake. There’s no undo button or call centre to contact for help.
A hot wallet can be compared to the cash you might keep in your pocket. You keep this online and easily accessible buy stuff or transfer to others. This accessibility and convenience can make some of them more vulnerable, so as a general rule it is wise not to keep too much crypto in a hot wallet.
Some wallets are designed for specific coins only, such as a Bitcoin wallet or Ethereum wallet. Others will handle a variety of different cryptocurrencies. If you plan on holding a number of different cryptos it obviously makes sense to use a multi-coin wallet.
So now that you understand the difference between hot and cold wallets, let’s look at the four main types – desktop, mobile, web and hardware.
This is simply an app that you download to your computer to store and manage your crypto. For many people a desktop wallet offers a good balance between security and ease of use.
As you’d expect, a mobile wallet is used on your mobile device such as a smartphone or tablet. They are convenient, but relatively insecure so it’s not advisable to keep much crypto on them.
A web wallet allows you to store your crypto in the cloud with a third-party provider. What you gain in the convenience of being able to access it from anywhere, you lose in security as you are heavily reliant on a third party to store your digital assets.
A hardware wallet offers better security than desktop, mobile or web wallets. It is a physical device that you plug into a computer when you want to make a transfer (in which case you’ll have to press a button on the device), but are kept offline the rest of the time to keep your crypto as secure as possible. Hardware wallets look quite similar to a USB flash drive, but there’s plenty going on ‘under the hood’.
The additional security of a hardware wallet comes at a price, but if you are dealing with more than a few dollars in crypto investments it is money well spent. The two dominant players in the hardware wallet market are Trezor and Ledger. They have both earned a reputation for strong security at a fair price.
To buy from an Australian wallet provider you should check out Coinstop. They’re a well respected local company and an authorised reseller of three reputable hardware wallet manufacturers in Trezor, Ledger and KeepKey.
Coinstop’s online store also sells a stainless steel private key storage solution, as well as a range of merchandise like Bitcoin collectibles and T-Shirts.
Like much of the crypto industry, wallets might seem a little overwhelming the first time you research them. But it won’t take long before you understand the various Bitcoin wallet options and what will work best for you.
As you get more seriously into crypto you will likely have a number of different wallets to cover all bases, since you will need both ease of access and also strong security. Your choice of Bitcoin wallets will depend on your level of experience, investment and security requirements.
Above all else, just make sure you take your purchase out of the Bitcoin exchange and transfer it over to your own wallet as soon as possible. Because until you have the private keys in your possession, then you really don’t own that Bitcoin. Unless you plan to day-trade, there’s really no reason whatsoever to keep your crypto on any exchange.
Legendary Bitcoin educator Andreas Antonopolous can explain this in just 10 words:
“Your keys, your coins.”
“Not your keys, not your coins.”