Through some tedious research of different types of cryptocurrency wallets, I can now present a synopsis to the reader. The website https://www.cryptocompare.com offers a link to 212 different wallets available to the consumer. The overwhelming amount to select from can be daunting and difficult to navigate. A cryptocurrency wallet is a method of securing one’s digital assets. It will be best to describe the types available for the investor for there are several. I will start with the types available and the function they serve for the investor. I will also look into the security of each type and how to acquire them. Are you ready? Here we go.
Essentially there are two broad categories with subcategories beneath each one. The investor must choose between an online wallet and an offline wallet. Online wallets include mobile, desktop and web. Offline wallets include hardware and paper wallets. An online wallet is also called a “Hot” wallet and an offline wallet is called a “Cold” wallet. The choice of wallet will depend on the goal of the investor. If the investor wishes to hold the digital asset for an extended period of time, then an offline or “cold” wallet will be the most secure. If the investor wants to engage in active trading or day trading, then a “hot” wallet will be preferred. Let’s start with the “cold” wallets.
Cold or offline wallets are like vaults which store private keys offline. The only way someone can steal the investment is to steal the storage device itself or the access to the vault. The thief would also need your private key. There are two kinds of cold storage wallets available for the consumer. There is a hardware version which is a device held in hand and a paper version with a QR code.
Two keys are issued to the buyer. The first is a private key. The private key is the most important of the two keys. The private key is like the combination to the vault. Never share the private key with anyone. The private key is the only way the assets can be accessed. It is like the PIN number for a bank account.
The top five hardware wallet companies are Ledger, Trezor, CoolWallet, Sugi Wallet and KeepKey. NEVER BUY A HARDWARE WALLET USED OR FROM AN UNAUTHORIZED DEALER.
The Ledger looks like a USB thumb drive with an OLED screen. The Ledger Nano X (the latest version) stores and interacts with over 1100 cryptocurrencies and looks like a little switchblade without a point. Setup can be completed with either a USB cable or via Bluetooth. The cost is just shy of 1,696,155 IDR or $119.00 from Amazon. A good review is found here:
The Trezor One is a popular model. Trezor was one of the first hardware wallets on the scene as cryptocurrencies gained popularity. The track record of Trezor has been proven over the years and is a secure and reliable option. The Trezor One is 527,376 IDR or $37.00 from Amazon and the new Trezor Model T is 2,138,010 IDR or $150.00 from Amazon. A good review is found here:
A nice feature of the CoolWallet S is its wireless capability. This device connects via Bluetooth or NFC (near field communication) and is thin enough to fit into a wallet. The security is strong, yet simple to set up. There are strong security features in place and it is designed for use with Android or iOS mobile apps. Two limitations of this hardware wallet are the total digital assets supported and the age of the company. Amazon sells the CoolWallet S for 1,412,161 IDR or $99.00. A good review is found here:
Fourth on the cold storage wallet list is Sugi. This device looks like a debit card. It is designed to work alongside the Sugi mobile app. The app is compatible with Windows, Linux, Android and iOS. The website showcases three offerings: Newbie, Pro and Expert. The Newbie is just the standard card with a cost of 965,241 IDR. The Pro is the customizable version allowing text up to 30 characters long including spaces. The cost of this version is 1,126,383 IDR. The third is labeled Expert. Expert provides two customizable cards. The notion behind this is one will be for everyday use and the other is for long term storage. The cost of the Expert option is 1,932,093 IDR. A comparison chart of how the Sugi stacks up against other cold storage is found here:
The comparison is by Sugi, keep an open mind. A good review is found here:
The final offering of hardware wallets today is the KeepKey wallet. This device must be purchased from the website or the company. DO NOT purchase the KeepKey wallet from any other vendor the security of the device cannot be guaranteed. The KeepKey offers top-notch security and an OLED screen. It claims theft of private keys is nearly impossible. It is bulkier than other hardware wallets and may be viewed as a drawback in portability. KeepKey is a Hierarchical Deterministic (HD) Wallet. According to Investopedia, this system allows for increased security while minimizing user involvement. Nice read here on HD wallets:
A good review is found here:
The next category of cryptocurrency wallets is hot wallets. The term “hot” in this context refers to being connected to the internet. There are three major branches in this category: desktop, mobile and web. The caveat of the hot wallet is its connection to the internet. There is no guarantee of security. It is ill-advised to keep large amounts of cryptocurrency assets in a hot wallet. Keep what is necessary for day trading or daily use in the online wallet and stow the rest in cold storage.
The desktop hot wallet stores the private keys of the investor on the hard drive of the computer or laptop. Knowing this fact, one can see the possibility of losing private keys by hacking or system failure. Be it from either software or hardware failure: private keys can be lost. That being said, private keys are stored offline when using this method. There are many desktop wallets to choose from, so the investor must do diligent research to ensure a good fit. A few popular examples of desktop wallets are:
For the mobile hot wallet, the private keys are stored on the phone. If the phone is lost or damaged, it may be difficult to recover the private keys. Although the mobile wallet is not as secure as the desktop wallet, it offers the convenience of being readily available and instantaneous. They operate much like a GoPay, OVO or Dana. Basically, if the phone is lost, the private keys could be lost as well. A few popular examples of a mobile wallet are:
The last category is the web. Reference to the web wallet is either a third-party application or an exchange. This type of wallet is also called a custodial wallet. When using this type of wallet, the investor doesn’t own the private keys, the exchange does. This an acceptable location to store cryptocurrencies short-term if an investor is actively engaged in trading or day trading. Coinbase is the only exchange who will guarantee cryptocurrencies held at their exchange. I’m not sure if an article about exchange wallets can be read without a mention of the Mt. Gox incident.
In a few short years, the Japanese exchange Mt. Gox, began to handle upwards of 70% of the Bitcoin transactions of the world. The exchange suddenly closed and admitted to being robbed of 850,000 Bitcoin. The consensus is they were stolen. The missing value amounted to $450 million. Anyone calling Bitcoin a “flash in the pan” or sees it as a fad is quick to mention Mt. Gox. Since then, more regulations have been placed to ensure investments. Coinbase guarantees investments, much like the American banking system. A few popular web wallets are:
In conclusion, it is always good practice to do research. The crypto market is volatile and not for the weak of heart. I have presented this information as an overview of cryptocurrency storage, and I hope it has been enlightening. I have given many links to follow for more information. I cannot endorse one method over another, but I like security and privacy.