Security is paramount in crypto. If you share the wrong information, you could quickly lose your funds, while if an exchange suffers a hack, the same fate awaits. That’s why crypto-security experts always recommend you store your cryptocurrency in a designated wallet to make sure it’s safe.
What crypto wallet should I use?
Crypto wallets fall into two distinct categories: hot wallets and cold wallets. The categories cover a wide range of solutions, but the best one to choose depends on your plans for your cryptocurrency.
Hot wallets
A hot wallet is a cryptocurrency wallet that’s connected to the internet. It could be a smartphone app or a desktop wallet. Either way, hot wallets tend to be the most user friendly. They’re a convenient way to send, receive, or trade cryptocurrencies without having to move funds between wallets — but convenience might come at the expense of security.
The fact hot wallets are online means they’re vulnerable to hacks. If someone gained access to your device, they could theoretically access your hot wallet and steal your funds. That said, the likelihood is small and hot wallets are fairly secure.
They’re perfect for holding smaller balances of funds you might need at short notice, they’re just not as secure as cold wallets.
Cold Wallets
Cold wallets aren’t connected to the internet. They’re entirely offline and only connect if and when the user wants to transfer funds between two locations. The best-known type of cold wallet is the hardware wallet.
Hardware Wallets
Hardware wallets are portable USBs or card-shaped cold storage devices that aim to provide a better user experience than many typical cold wallets, but that still achieve the same level of security. They play the role of being portable, cheaper storage devices, and are custom-built for cryptocurrency storage.
The hardware wallet industry is growing fast, bringing countless offerings to the market — but the most popular remain CoolWallet, Ledger, and Trezor.
What’s the best storage option?
There is no ‘best’ — it’s a trade-off between security and how you use your cryptocurrency.
An active trader may want a hot wallet, whereas a long-term investor would be happier with a cold storage solution. If you handle particularly large sums of cryptocurrency, you may need a multi-signature solution.
Typically, we recommend you keep inactive funds in a hardware wallet. And be sure to store an offline back-up of your keys in case you lose the device or it stops working. You may write your seed phrases on paper and store that in a safe — or you may stamp it to fireproof metal if your funds are worth a very high sum.
If you want to trade funds or use them for purchases, then store what you need in a hot wallet. Mobile wallets are often best: they’re like a current account — but you only want to keep what you can afford to lose, as you would with cash in your wallet.
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