With Crypto going mainstream in 2021, so begins the debate of choosing the right wallet to store your Cryptocurrency. In my opinion, they should be renamed “personal banks” instead of wallets. If you lose your wallet, your password or have your account hacked into, then tough luck. There is no one out there who can help you recover it. There is an estimated 1 million Bitcoins lost by users to date; that’s approximately U$ 33 trillion! If these figures shock you enough to ponder over the safety of your crypto investments, then do refer to the links listed at the end of this post which will help you further understand the importance of taking care of your assets.
Once you have understood the importance of safeguarding your hardware and passwords, you are ready to take the next step; safely storing your Cryptocurrency. Crypto wallets come in many forms, including web, mobile, desktop, paper, and hardware wallets. No matter the type of wallet you choose, they all serve the same function. However, depending on what you plan to use your cryptocurrency for, some wallets work better than others. My focus below are on the ones that are relevant in the present day.
Hardware, software and web wallets
Hardware wallets (cold wallets) often come in the form of an USB drive. The Ledger Nano X and Trezor are popular names in hardware wallets. These wallets are considered the most secure and the best choice if you invest and don’t plan to trade regularly. Each time you transfer crypto from your wallet to an exchange, or vice-versa you will spend a small amount of transaction fees, which is a way of rewarding the network.
Software wallets (warm wallets) are applications you download on to your computer or mobile device. Hot wallets use encryption to protect your crypto assets, therefore, it is vital to ensure that your passwords are stored safely when using these wallets.
Web wallets (Hot wallets) are offered mostly by exchanges. When deciding which exchange to use, I would recommend checking the list on Coingecko. Binance at present is the largest exchange and you can use my referral code WBJZ3YL3 when registering the account, which will entitle you to a 5% reward on your transaction fees. Exchanges offer a variety of tokens and allows payments, buying, selling and even trading through their platforms. To overcome the lack of accessibility of wallets, DEX (Decentralised exchanges) now offer the option of connecting your wallets directly to the trading platform to swap coins. This is a secure way of accessing your funds because the private keys never leave your device. Check out Uniswap to further understand this service. Do remember though that it is unwise to keep all your coins in an centralised exchange in the long term, as these exchanges have been and remain vulnerable to hackers as they are not developed using blockchain technology.
Leading wallets for 2021 as rated by Investopedia
- Hardware: Ledger Nano
- Hardware: Trezor One
- Hardware: KeepKey
- Software: Exodus
- Software: Electrum
- Software: Mycelium
I personally use MyEtherWallet, which is fairly straightforward to set up and use. However, it is only for ETH and allows you to swap ETH to BTC. Exodus is another great option. There are a few government approved and regulated exchanges which are also bringing crypto into mainstream. Luno is a software wallet and an exchange which is approved by many governments including Bank Negara Malaysia. Companies such as Luno go the extra step, by verifying your identity in an attempt to prevent fraud. PayPal and Square’s CashApp are other mainstream payment systems which will certainly take crypto to a larger audience globally. Gemini, the exchange founded by the Winklevoss twins of Facebook fame offers a custodian service and wallet, as well as an exchange. Gemini also boasts of being the first New York based trust company regulated by the New York State Department of Financial Services (NYSDFS).
I hope this article has shed light on the basics of crypto wallets, and the differences between them. The decision of which wallet to choose has no correct answer, as it is dependent on your personal requirement and purpose. Different wallets should be utilized for different applications, and by accurately doing so, you ensure that your coins are stored safely in the long term. The key takeaway here is that using one wallet to achieve multiple purposes could only increase the risk of losing your coins. Remember, you are your own bank!