What are the different types of crypto wallets?

Gemma says…

There are six primary types of crypto wallets: hot, cold, online, desktop, hardware, and paper wallets. They mainly differ based on whether or not the wallet is on the internet at all times.

If you are considering buying a cryptocurrency or have already purchased one on an exchange, a critical next step is researching and deciding on what type of wallet you would like to use to store your coins. There are many different types of wallets, each with their own tradeoffs. While one may provide greater convenience, this can be sacrificed at the expense of better security. Another wallet may promise security while sacrificing convenience or anonymity. At the end of the day, the best tactic is to rank your preferences and decide for yourself the best option.

Hot Wallets

A hot wallet is any wallet that is connected to the Internet. Oftentimes, these are the most vulnerable and insecure of wallets. They provide easy convenience if you would like immediate access to your funds, but can also be “hot targets” of hackers. If you wish to store funds for the long-term, then it is recommended that you use a cold storage wallet.

 

Online Wallets

An online wallet is run on the cloud and accessible from any location. This is a type of “hot wallet.” Its ease of access is very useful, but also means that your private keys are online and controlled by a third party.

Cold Wallets

A cold wallet is any wallet that is not connected to the Internet. For example, a hardware wallet that is unplugged and in a secure location would be considered a cold wallet.

 

Desktop Wallets

Desktop wallets are downloaded and installed on an individual computer. Short of getting hacked or infected with a virus, they are considered one of the highest levels of security if kept completely offline. However, this security is dependent on the security of the laptop itself. If the physical laptop is lost or stolen, then your funds are also gone.

Paper Wallets

Paper wallets are exactly what you would assume them to be: paper. They are a physical copy or printout of your public and private keys. With these, you can do what any wallet does, freely send or receive cryptocurrencies. By using a paper wallet, you are empowered to completely avoid storing your data digitally online. This option provides a high level of security, convenience, and anonymity so long as you are able to safely store and protect the paper. Always remember that if your keys are stolen or lost, then your cryptocurrency holdings are compromised.

Hardware Wallets

Hardware wallets are any hardware device, such as a USB, that stores cryptocurrencies offline and performs transactions online when necessary. So long as they remain offline and not connected to the Internet, they are considered a type of cold wallet. This is a more secure option, while also still relatively convenient. Users simply plug their device into any computer or device, enter a PIN, and transmit their cryptocurrency holdings.