The best cryptocurrency wallets: pros and cons

Confused about which cryptocurrency wallet to use? In this guide, we'll break down the pros and cons of the best types of wallet to help you decide

If you’ve recently acquired, or are looking to acquire, cryptocurrency, you need to know how best to store your funds. The answer to this is simple: get a cryptocurrency wallet.

It is incredibly important that you store your crypto safely in a wallet, because in a world centred on technology, malicious hacks are frequent. A wallet functions by providing users with a private key. Lose this, and you lose access to your crypto. Don’t lose it, and you are the only one who can access the wallet. While it sounds simple, don’t understate the significance of losing your private key. A private key isn’t a physical, material key – it is more like a password. You wouldn’t give anybody your password to your social media accounts, so don’t give anyone your private key.

Once you have set your wallet up, it will generate a public and private key for you to use. The public key is used to send, receive, or verify transactions, while a private key is how you access your account balances and funds.

Hardware wallets

Hardware wallets are arguably the safest method of keeping your private stash safe. This is because they generate your keys offline, meaning they shouldn’t ever come into contact with the internet, which ultimately prevents hackers from compromising them. This shouldn’t be taken as sovereign, though – hardware wallets do have their flaws.

Pros

  • One of the most secure methods for keeping your crypto safe in the long run.
  • Much more ideal for those who have large stashes of crypto with no immediate plans to spend the full amount.
  • Easily available in shops.
  • Plug-and-play can be easy once you are acquainted with them.

Cons

  • If you are not acquainted with them, they can be cumbersome.
  • A lot of them require batteries.
  • During the manufacturing process, an error could be made. If the device is not perfectly made, it leaves room for them to be compromised. This is called imperfect implementation. Using one means you are trusting the manufacturer.
  • Hardware wallets use Random Number Generators (RNGs) to generate keys. Some doubt the validity of the ‘random’ generation of keys. If it turned out that they were not actually random and there was a sequence that generated them, in theory, a hacker could crack this sequence. It is difficult to verify the validity of RNG though, making it hard to know whether this is an issue or not.

Web wallets

Web wallets are notorious in the crypto space. On the one hand, they are incredibly easy to use, set up, and get going. But on the other hand, they are very susceptible to malware and hackers. If you have a large amount of crypto, don’t bother storing it in a web wallet. Instead, place a large portion of your funds in a safer wallet, leaving only the crypto you intend to spend in a web wallet, if you use one at all.

Pros

  • They offer the fastest way to process transactions without any server lag.
  • Ideal for working with small amounts of crypto.
  • Privacy can be improved with external applications such as TOR.

Cons

  • Incredibly susceptible to malware and hacks.
  • You are trusting your private keys and information to a third party.
  • Not many web wallets allow users to manage multiple cryptocurrencies.

Mobile wallets

Mobile wallets aren’t a great deal different from the likes of web, electronic, and software wallets. As mobile wallets are hosted, you are trusting a third party to keep your crypto safe, and again this makes them susceptible to malware and hacks. Though this is dependent on which mobile wallet you choose and which company developed it.

Pros

  • Quick and simple to set up and use. As with all applications on mobile phones, the ease of use and simplicity is a great attraction to many.
  • Additional features that other types of wallets don’t offer, such as QR scanning.
  • Support from the TOR network for enhanced privacy.

Cons

  • As they are hosted and not entirely operated by the user, there is an element of trust in play.
  • Phones can be compromised by viruses, key loggers, and malware, like any other device.

Desktop wallets

Desktop wallets are quite a popular choice because you can download them directly onto your computer. In doing so, you have the additional security of retaining control over the wallet since it is not hosted. However, you need to make periodic backups in case your computer malfunctions or becomes infected with a virus.

Pros

  • Suitable for beginners.
  • Considered one of the better options for ‘cold storage.’ Cold storage refers to the storage of funds offline that are typically moved offline because the user has no intention of using them for a duration of time. Usually, these users would have another wallet that has their spending funds.
  • You are not trusting your private keys to a third party.
  • Once again, TOR can be used to boost privacy.

Cons

  • If you are connected to the internet, you are still at risk of being compromised by a hacker.
  • You need to make periodic backups.
  • Susceptible to viruses and malware attacks.

Paper wallets

Whilst a paper wallet sounds rather archaic and obsolete, they are amongst the very best options for storing your crypto. With paper wallets, your private key will be printed onto a piece of paper as a QR code. You can then split the paper in two and hide it in two locations. This ensures a hacker cannot get a hold of your private key. Of course, though, if you lost both or even one of the pieces of paper, you would be in an unfavourable position.

Pros

  • The most secure wallet to prevent hackers from accessing your keys.
  • Does not require computer/electronic storage.
  • The private key never touches a third-party server.

Cons

  • Difficult to move your crypto (it is a good option for cold storage, though).
  • Paper is flammable amongst a whole host of other issues.
  • If you lose the paper, you are not in a good position to recover your crypto.

 

In the end, there are pros and cons to all types of cryptocurrency wallets. Truthfully, there is not a stand-out wallet that is entirely safe and secure. An ideal method to remedy this would be to utilise a combination of wallets, but that requires more time and attention from the user. Before you choose which wallet you want to use, be sure to do your own research and find the most suitable one for your needs.

For more information and guides from Coin Rivet, click here.

 

 

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