A cryptocurrency wallet is a kind of bank account where you can store your digital currency. We distinguish 4 different types: online wallets, desktop and mobile wallets, hardware wallets & paper wallets. Each type differs in terms of ease of use, possibilities and safety.
Online wallet #
With online wallets we mean software that you do not have to install, but that you can use immediately via an online website. Most online cryptocurrency wallets are integrated into an exchange platform. This is an online exchange where you can trade between different cryptocurrencies, binance for example. The advantage of this is that this is a multi-currency wallet. This means that you can store multiple digital crypto currencies on 1 platform. Another advantage is that you can continue trading directly from here.
There are also drawbacks. One of these is that you depend on the provider for the safety of your coins. Several of these websites have been hacked in the past. Millions of dollars in bitcoin and other coins were then stolen. But in principle, this threat is getting smaller and smaller. These types of websites are increasingly able to protect themselves against external threats/hacks. Another disadvantage is that you do not own your own private keys.
Desktop and mobile wallet #
A cryptocurrency wallet for your desktop involves downloading a piece of software and storing it on your PC/desktop. This means that your account is entirely under your own responsibility. You’ll have to set up your password to enter this wallet. Be cautious if you are downloading the correct software, because installing the wrong one could mean that you’ll lose your investment. Always make sure to only install from official websites. The same applies to mobile. These wallets are available for iOS and Android. An alternative, to shake off some vulnerability from having a mobile wallet(which often means different WiFi-networks) is to download a portfolio app in which you can enter your portfolio and view your progress without having to log in to your crypto wallet.
Because you are quite vulnerable from your mobile (you constantly commute between different WiFi networks), we personally do not recommend this. A better alternative is to download a portfolio app in which you can enter how many and which coins you have. This way you can view your progress and return without having to log in to your crypto wallet.
Example: https://www.exodus.com/
Hardware cryptocurrency wallet #
Hardware wallets are being called the safest ways to store your currency. This is because they are not constantly connected to the internet; you store your coins offline. A hardware crypto wallet is a kind of small computer that you can connect to your computer through a USB connection. Access to your hardware wallet is also done by entering your password(s). Make sure you don’t keep these with your hardware storage itself, because if someone finds these together, they could enter your wallet. Without the codes, it is not possible to enter the wallet.
Examples for hardware wallets are Trezor (https://trezor.io/) and Nano ledgers (https://www.ledger.com/).
Paper wallet #
A crypto wallet stored on paper is called a paper wallet. Just like a hardware version, the wallet is stored offline. For a paper wallet, you’ll need to create an address. For example for bitcoin you can do that via this link (https://www.bitaddress.org/bitaddress.org-v3.3.0-SHA256-dec17c07685e1870960903d8f58090475b25af946fe95a734f88408cef4aa194.html. Make sure you use the website when your internet is off and therefore completely offline. Print the data and keep it in a safe place. Although you currently have no threats online, you also need to protect them from offline threats (for example, burglars, or fire). If you want to access your investment at a later time, you can download a desktop cryptocurrency wallet and log in with the data you printed.
Web 3 wallet #
The Web3 introduces a layer of governance that runs on top of today’s Internet, allowing two people who don’t know or trust each other to make agreements over the Web, record values and assets, and settle mutual transactions. Web 3 wallets are mainly used to connect with smart contract compatible blockchains (and their layer 2 solutions) such as Ethereum, Fantom and the Binance Smart Chain.
By using web 3 wallets, investors can connect their wallets with decentralized apps (DApps) in order to start investing in decentralized finance (DeFi). Popular web 3 wallets are MetaMask and Trustwallet.
