If you’ve read any news online in recent months then you’ve likely heard the buzz about cryptocurrency. And if you’ve decided to participate in purchasing this 21st Century form of digital money, then you need a crypto wallet to do so. But what exactly is a crypto wallet? And do you really need one as you venture into the world of cryptocurrency? Don’t worry, we’ve got you covered.
A crypto wallet is an online portal that stores your public and private keys. You must have these private keys to access your cryptocurrencies. This digital wallet is what enables you to send and receive cryptocurrencies, such as Bitcoin or Ethereum.
Crypto wallets are essential to storing your money, and sending and receiving the wallets do store your passwords — also referred to as keys — so you can access your digital currency.
But to know what the best crypto wallet is, you should first understand the numerous forms a wallet can take on.
It is essential to understand crypto wallets are available in different forms. Depending on your preference for accessing your currency and what is most convenient for you, knowing this would help determine what form of crypto wallet to choose.
As the name implies, you can choose a paper wallet where your passwords are stored on paper or some other physical medium. You would then store this in a safe place. While this would make it much harder for someone to steal your password to access your crypto, it could also make it much harder for you trying to access it regularly.
This type of wallet uses a physical device to store your password keys, usually a thumb drive. It’s designed to be simpler to keep up with, versus a paper wallet, but convenient enough to travel with you and use as you need it. Hard wallets can cost less than $50 or more than $150 and include brands like Trezor and Ledger.
These wallets are stored on clouds or similar types of servers to keep your keys safe, as long as you have your password and often a two-factor authentication setup. Also called hosted wallets, soft wallets can be hosted by crypto wallet companies like Coinbase or Gemini, both of which are free.
Now here is where it can be confusing: Also referred to as cold storage, cold wallets do not rely on the internet for storing passwords. Instead, all storage takes place offline, such as a paper or hard wallet, so those wallets can be referred to as cold wallets.
These wallets, also referred to as online wallets, are (yup!) online or app-based and store all of your password information so you can send, receive, and use your cryptocurrency. These wallets rely on the internet to function. This means you have access no matter where you are, as long as you’re using your mobile devices or computer, and as such, soft wallets fall under the hot wallets category.
Hot wallets are used to keep the record of transactions stored on the decentralized blockchain ledger. When you use a hot wallet that relies on downloaded software on your mobile device or desktop, then it is also called a software wallet. Software wallets use encryption to protect your crypto assets.
Since Bitcoin is the leading cryptocurrency and has been around since 2008, you might hear a reference to Bitcoin in a generic sense. However, it is simply a form of cryptocurrency. A Bitcoin wallet stores, sends, and specifically receives Bitcoins.
There are crypto exchanges that provide online wallets for storing the crypto you have purchased through the exchange. Coinbase, the largest crypto exchange, has a wallet feature, as does BlockFi, a crypto banking exchange.
Pros and cons of the various wallet types
Soft wallets pros and cons
Convenient and you don't risk losing your crypto keys as often as you may lose your keys.
Online makes it easier to exchange crypto.
As convenient as online wallets may be, the wallet is only as secure as the provider makes it, which means you are taking a risk with hackers.
Less anonymous and your crypto can be tracked.
Hard wallets pros and cons
Some prefer this method as a way to maintain full control over the passwords and lessen the likelihood of a security breach.
You hold and control your crypto.
Can be a more anonymous way of owning crypto.
Paper and hardware wallets are easy to lose and risk being destroyed or stolen.
Can be costly.
Don’t forget — your cryptocurrency wallet, no matter what type of wallet you store your keys in — is not FDIC insured like a traditional bank account. This means security features should be at the forefront of whatever wallet you choose.
The best crypto wallets
Coinbase (not to be confused with the Coinbase crypto exchange) brands itself as a one-stop shop for all activity related to cryptocurrency, including a crypto wallet. The Coinbase mobile app, available on both IOS and Android, allows you to manage all your tokens, such as Bitcoin, Bitcoin Cash, Ethereum, and Litecoin to name a few.
Coinbase is one of the larger players in the cryptocurrency market, with over 56 million verified users, and relies on open-source software for its wallets and other products. The Coinbase wallet gives you access to several features, including:
Buy and store tokens
Participate in ICOs (Initial Coin Offerings)
Collect rare digital art and other collectibles
Browse decentralized apps (DApps)
Shop with stores that accept cryptocurrency
Send crypto to anyone around the world if you know their username
Another bonus is you do not need a Coinbase account to use all of the features of the Coinbase wallet. It is important to note that if you do have a Coinbase account, moving assets from your wallet to your trading account is not instantaneous.
Electrum is one of the “oldest” Bitcoin wallets, having started in 2011. It also runs on open-source software that is considered a hot wallet. However, fans of Electrum like the fact it is compatible with cold storage wallets too, such as KeepKey, Trezor, and Ledger Nano X, and gives you the option to use it as either.
Electrum verifies your transactions are in the blockchain, and it does so quickly because it relies on Simple Payment Verification (SPV). This means it only queries the servers on the Bitcoin network, instead of downloading all of the blockchains.
Electrum uses two-factor authentication that is safe from malware. It also works from your desktop or mobile device.
But one of the fan-favorite features is the ability to set up multi-signature transactions. Another popular feature is the ability to send multiple transactions to multiple addresses at once. This cuts down on transaction fees for you.
Exodus is a software wallet and is considered a good option for beginners since the features are more simplistic and wouldn’t appeal to advanced users as much. The focus of Exodus is having a very intuitive and user-friendly interface to make navigating the wallet a little easier.
It supports over 130 cryptocurrencies, including Bitcoin, Ethereum, Dash, Dogecoin, and numerous others.
Exodus has both a desktop wallet and app that allows you to control your digital assets while you're on the move. The app is available through iOS and Android. But one of the best features of Exodus is the 24/7 customer support available to you when you have questions. This is another example of how beginners could benefit from this particular wallet.
Mycelium is a mobile-only option and like others mentioned, operates with open-source software. Mycelium is both a hot wallet and offers a cold storage option. You can use Mycelium on your mobile device, but then use hardware like Trezor, Ledger, and KeepKey to store your password keys offline.
When you buy and sell cryptocurrencies, there are transaction fees involved. With Mycelium, you can choose how long you want to wait to purchase your crypto, which means you could pay less in transaction fees. This is a rather unique feature where you have more control over transaction fees.
One key feature of Mycelium is it has a built-in crypto exchange, which is what you need to convert fiat currency into crypto. It also only supports a handful of cryptocurrencies, including Bitcoin, Ethereum, and ERC-20 tokens, but if these are the ones you’re most interested in, then this is all you need.
KeepKey is a super-simple, yet secure, option for those who want a secure way to store passwords with a hardware wallet. Because it’s a hardware wallet, you can take it with you wherever you go or store it for safekeeping. It’s also convenient to purchase right off of Amazon.
If you’re worried about losing your KeepKey, it has a backup and recovery feature to address this. When you first receive it, you are given a 12-word recovery sentence. This way if you ever lose your wallet or it’s stolen, you can simply recite the recovery sentence and you’re good to go.
It doesn’t support as many cryptocurrencies as others on this list – only 7 – but it does support Bitcoin, Ethereum, Litecoin, Namecoin, Dogecoin, Dash, and Testnet.
KeepKey is a USB device and is compatible with a PC, Mac, Linux, and Android. Proponents of hardware like this highlight security as a main feature, since it’s much more difficult to hack or be the victim of a malware attack on a USB device. This is a great option if you are looking for a budget-friendly hardware wallet for offline storage.
This is another option for offline storage but is a bit more expensive than the KeepKey version. The Model T is the second generation version of this hardware, and it costs $181.
The biggest difference between the Trezor and other hardware wallets is it allows you to access other crypto exchanges, which may be convenient if you plan on converting the currency often or sending it to others. Another added convenience feature is the USB type-c cable it comes with, so you can easily connect to your desktop or smartphone.
Extra security is another feature to pique many user’s interests. Not only is it more secure by nature of it being a USB device, versus relying on the internet, but Trezor includes a MicroSD card slot for a MicroSD card. You can set up a pin to further restrict access and add another layer of security.
But of all the crypto wallets on our list, none support as many cryptocurrencies as Trezor. Currently, it supports over 1,600 coins and tokens, by far the most of the ones reviewed.
Ledger Nano X
Last on our list is the Ledger Nano X. This is another hardware option, but is less expensive than Trezor, with a current price of around $119.
Ledger has a few unique features too, including Bluetooth connectivity, although some users may be hesitant to use it for fear of compromising the security. Fortunately, this feature is optional and you can disable the Bluetooth connectivity if you want.
If you do want to use Bluetooth, the advantage is you can connect the wallet to an iOS or Android device without needing a computer. Ledger also supports the Chrome OS for those of you who use a Chromebook as your computer.
Like Trezor, Ledger supports many currencies, including 27 different coins and 1,500 different tokens. You can see what’s going on with your wallet at all times with Ledger Live, which also lets you manage everything related to your crypto wallet.
Summary table for best crypto wallets
Type of wallet
Cost to purchase
8 coins and all ERC20 tokens
Hot wallet with cold storage option
70 coins and 33 tokens
Hot wallet with cold storage option
Bitcoin, Ethereum, ERC-20 tokens
7 coins, 32 tokens
Over 1,600 coins and tokens
Ledger Nano X
27 coins and 1,500 tokens
What should I look for with a crypto wallet?
Choose a wallet based on how you plan to use your crypto. If you plan on purchasing it and holding onto it for a long time, then a hardware wallet may be a better fit. Security is a major concern, so look for wallets offering safety features like 2-factor authentication or even multi-signature support, where more than one person has to provide keys to make transactions. Other considerations are if you need the convenience of mobile wallets, where all your transactions take place on your mobile device. You should also consider if you need multi-currency or if single-currency will work for your needs. There are wallets available to support multiple currencies so you do not need several different wallets.
Can I have more than one wallet?
Definitely. And someone might even argue you may be better off from a security standpoint by having both online and offline wallets. One scenario could be for you to store the bulk of your crypto offline and only use online storage when you need to make a transaction. This could potentially help limit some of the risks associated with the transactions.
Are crypto wallets the same as crypto exchanges?
No, there is a difference between the two and it’s good to understand what each does when you come across these phrases.
As mentioned, a crypto wallet is a way to secure your cryptos, store them for the long term, and access them when you need them. A cryptocurrency exchange, however, is when you want to buy or sell your crypto, convert fiat currency into cryptocurrency, and send your crypto to a wallet. There is also a control aspect to each of these. A wallet gives you full control over your passwords and private keys. Whereas a crypto exchange account means you give over some control to the platform since you need it to facilitate a transaction
Are crypto wallets or cryptocurrency FDIC insured?
No. Unlike your credit card or debit card you use to withdraw from your bank account, your crypto transactions or cryptocurrency are not FDIC insured. This is one of the risks associated with using this type of currency, so it’s up to you to weigh the risk versus benefits of investing in digital currencies.
The bottom line
The world of cryptocurrencies is a little daunting at first, especially when you are learning an entirely new language around digital currencies. Crypto wallets are another part of this language but it exists so you can buy, sell, sell and store your crypto. Choosing one depends on your comfort level with crypto, as well as how secure and accessible you need it to be.
Don’t let this language intimidate you. Researching the numerous options available allows you to figure out what wallet is best for you and your comfort level.
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