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Cryptocurrency wallet guide — everything you need to know
To put it simply, a cryptocurrency wallet is similar to a bank account. It lets you monitor your balance, make and receive payments, and see all your transactions in one place. You need one to use Bitcoin, Ripple, Dash, or any other coin.
A cryptocurrency wallet stores your private and public keys and interacts with a blockchain. A private key is a randomly generated string (numbers and letters) that allows you to send cryptocurrency to someone else. Think of it as a password or signature you need to approve a transaction. This means you have to keep it safe at all times, as losing your private key basically means you’ve lost all your coins. And in case a shady character gets a hold of it, he can send all the coins from your wallet to his — and you can’t do anything about it.
Read next: What is cryptocurrency?
Unlike the private key, the public key can be seen by others. It’s derived from the private key and hashed to create an address for the wallet. This address is then used by others to send you cryptocurrency.
Imagine a mailbox. The public key or wallet address represents the location of your mailbox, an address your grandma needs to send you a card with some money for your birthday. A private key, on the other hand, is the key you need to unlock the mailbox and get your hands on the money grandma sent you. As already mentioned, you need to keep that key safe. If you lose it, you won’t be able to access the gift from grandma. If someone else gets it, he or she can unlock your mailbox and get his or her hands on your birthday present.
Types of cryptocurrency wallets
There are many cryptocurrency wallets available, which can be broken down into three categories: software, hardware, and paper.
Desktop wallet (software): This is a wallet you download and install on your computer. It’s stored on a hard drive, so you can only access it from a computer. It’s a relatively safe method of storage but far from bulletproof. If your hard drive gets hacked or damaged, you could lose all your funds.
Mobile wallet (software): This wallet runs locally on your smartphone. It’s more convenient than a desktop wallet, as it allows you to quickly make transactions on the go. However, it suffers from the same security issues — getting hacked or damaging your phone could lead to losing your funds. Not all mobile wallets store info locally on your smartphone. Some let you access online storage servers, same as online wallets described below.
Online wallet (software): An online wallet lives in the cloud, which means you can access it from any computer with an internet connection. You also save yourself the hassle when switching to a new PC or phone, and don’t have to worry about your device getting damaged. It’s not as safe as a desktop or mobile wallet. Your online wallet is controlled by a third party and is constantly online, making it more vulnerable to hacking attacks and theft. They are mainly offered by online exchanges, which let you buy and sell cryptocurrencies.
Hardware wallet (hardware): This is one of the safest options available. A hardware wallet looks like a USB flash drive and stores your private and public keys offline, making it impossible for someone to hack. However, losing or damaging the device could lead to a loss of the cryptocurrencies you own. Also, these things can be expensive.
Paper wallet (paper): A paper wallet is a form of offline storage. It’s basically your private and public keys printed on a piece of paper, usually as QR codes. It’s a safe way to store your info, although you could still get yourself in trouble by losing your paper wallet or if it gets damaged. But keep in mind that you can’t send someone cryptocurrency from your paper wallet — you must first sweep or import the funds into a software wallet.
Best cryptocurrency wallets
Let’s take a look at the best option available for each kind of cryptocurrency wallets.
Exodus (desktop cryptocurrency wallet)
Exodus is a desktop wallet, which means it stores all the data locally on your device. It works on Windows, Mac, and Linux, and supports tons of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Dash, with many more coming soon.
This cryptocurrency wallet lets you quickly exchange one cryptocurrency for another, thanks to its integration with ShapeShift. It also has a gorgeous design that’s easy to use. You can see a chart showing all the cryptocurrencies you own as well as their total value, which gives you a great overview on a single page. Additionally, there are a few skins available for personalizing the experience to your liking.
Exodus also comes with a nifty security feature. It creates a 12-word passphrase, which you can use to restore your wallet if you can’t access the original anymore. The software is only partially open source and can be downloaded via the button below.
Coinomi (mobile cryptocurrency wallet)
Coinomi is a cryptocurrency wallet for both Android and iOS. It supports hundreds of coins including major ones like Bitcoin, Ethereum, and Dash. Just like Exodus, it lets you exchange one cryptocurrency for another through integrations with ShapeShift and Changelly.
Read next: 10 best cryptocurrency apps for Android
The mobile wallet offers loads of security features. Coinomi makes sure your private keys never leave your device and that your identity is secure, which is achieved by anonymizing IP addresses through their servers. It also creates a seed phrase, which allows you to restore access to your account if your phone gets lost, stolen, or damaged.
Coinomi is an open-source software and supports cross-chain payments, which means you can send an altcoin to a Bitcoin address without any extra steps. It’s available in a few different languages including English, Chinese, and Russian.
Blockchain Wallet (online cryptocurrency wallet)
This is an online wallet, so you don’t have to download any software to use it. All you have to do is visit the website of the service (button below), sign up, and you’re good to go.
Blockchain Wallet has around 24 million users.
Blockchain Wallet is one of the most popular online cryptocurrency wallets, with around 24 million users. It supports Bitcoin, Bitcoin Cash, and Ethereum. It has a few security features, like two-step verification, and it also creates a passphrase to restore your account in case you lose your password.
The wallet lets you see your balance in your local currency, offers Android and iOS apps, and lets you buy and sell cryptocurrencies. It’s not the safest option available, as storing your wallet online makes it vulnerable to hacking attacks.
Ledger Nano S (hardware cryptocurrency wallet)
The Ledger Nano S is a hardware wallet that supports a number of cryptocurrencies including Bitcoin, Ethereum, and Litecoin. It connects to a computer via USB and sports an OLED display along with two physical buttons that let you check and confirm transactions.
The device offers fantastic security, making sure your confidential info is never exposed. It’s a form of cold storage, meaning the data is kept offline and can’t be hacked. It also has a built-in four-digit PIN security lock and creates a 24-word phrase that lets you access your data in case the Ledger Nano S gets lost, damaged or stolen.
Unlike the other cryptocurrency wallets on this list, the Ledger Nano S costs money. It will set you back $100 on Amazon, which means it’s best suited for those who own a lot of coins.
WalletGenerator (paper cryptocurrency wallet)
This free tool lets you create a paper wallet for 197 cryptocurrencies including Bitcoin, Dash, and Litecoin. A paper wallet can store funds offline, where they can’t be hacked.
The first thing you have to do is visit WalletGenerator’s website, download it from Github, and open the index.html file directly from your computer. You might also want to disconnect from the internet for extra security. Then just choose your currency, click the “Generate new address” button, and print it.
The generated paper wallet contains a public key that you can share with others to receive payments and a private key, which you have to keep safe at all times. When you want to spend the coins you have, you’ll have to import them to a software wallet first. You can’t send them to someone directly from a paper wallet, as it’s just a piece of paper with your public and private keys on it.
These are the best cryptocurrency wallets in our opinion. There are plenty of other great options available. Which ones would you add to this list? Let us know in the comments!