In today’s post, we are going to discuss a very important topic – crypto wallets. A crypto wallet is the magical math based addresses that you use to store your crypto gains. There are a number of these out there, of all different types, and it can be a little hard to see which ones are good for what purpose, so I’m hoping to spread a little bit of knowledge on the subject and hopefully everyone can keep their crypto as locked up as gold at Fort Knox.
In my last post Getting Some Free Starter Crypto, I showed some nice and easy ways to get your hands on some free crypto to start things off, and now it’s time to show you where to stick it. In a polite way of course.
For the usual disclosure, I am not a financial advisor, I don’t even work in finance at all. My day job is as a telecommunications software engineer. Treat everything you read here as some educational resources and not financial advise. Some of the links you find on here will also be affiliate links, so using them will benefit the both of us.
What Is A Crypto Wallet
A crypto wallet is something that holds the secrets to your crypto fortune. They store and protect the private keys of your crypto address. They also keep track of the transactions your address make on the blockchain and tabulate your balance.
Some crypto wallets are specific to a type of crypto, while others can store a lot of different coins for you. There a lot of different options, especially when it comes to software and hardware wallets. You’ll need to consider what you’re looking for in a wallet, and find on that best suits your needs. I hope this article will help educate you and help you pick well.
Crypto Wallet Types
There are three main types of crypto wallets – exchange, software and hardware. They all provide different levels of functionality and security, and it’s important to understand the pros and cons of each so you can make good decisions on where you should store what crypto. Some of it you’ll want easier access to so you can day trade it on the exchange, while other’s you’ll be HODL’ing away safe and sound away from the action on the market.
We’ll run through the list in order of least secure to most secure.
Exchange Wallets
The first type of crypto wallet we are going to cover is going to be the wallets you are handed when you sign up at an exchange such as Binance, Coinbase, Newton, etc, When you sign up for an exchange (or sometimes when you use a crypto there for the first time), a new wallet is generated for you. You’ll generally have a bunch of them, one for each of the cryptos the given exchange supports.
Bitfinex wallet list
This is a screenshot from the Bitfinex exchange where I have no crypto parked. What, did you think I’d share my actual balances? Hell no! Even if it’s not enough to be worth stealing, never tell people how much crypto you may or may not be sitting on.
As you can see, you are able to hold balances of a lot of different fiat and crypto currencies, all ripe for the trading. Which is exactly the one and only benefit of leaving crypto sitting on an exchange. Easy access for conducting trades and not having to pay network fees to move it from a colder wallet onto the exchange when it’s time.
I know it will be tempting to leave your crypto there. It’s so easy right? And you don’t have to worry about moving money around and paying all those fees! But hold up. Who controls those wallets? Is it really you? Nope, it sure isn’t. Basically, all an exchange wallet is, is a promise to pay from the company that actually owns the wallets.
Now, do you have to worry about a big major exchange having liquidity problems and not being able to pay you? Or hackers taking down an exchange and stealing all the crypto? Or the big exchange actually being a shady organization that runs off with your riches?
Probably not, but it is definitely not unheard of. You may wake up and find out the whole exchange was a Ponzi scheme and the owner “mysteriously died”. Ask the folks that used Quadriga.
Software Wallets
The next level of crypto wallet security would be the software wallet. These are any kind of software application, be it browser plugin, or desktop/smartphone application. This is where there is the greatest variety of things to consider.
If you’re only going to be sitting on a bunch of Bitcoin (BTC), you can probably get away with just getting a wallet like Electrum. If you’re like most people, you’ll be sitting on a number of different coins and tokens. There are quite a few popular ones like MetaMask and Exodus, the latter being the one I use.
Some things to think about when picking a software wallet is going to be if it supports the coins you want to HODL. Does it come from a reputable development company with a good track record? Has there been any large software breaches reported against the software? If everything looks good there, you are probably good to go.
Exodus wallet output
This is a screenshot I stole off the Exodus website, and clearly not my personal balances.
The benefit of a software wallet over leaving it on the exchange is of course, you own the keys to the castle. The private keys for your address pair are stored locally on the device, and you don’t have to worry about the exchange getting attacked, or not having liquidity. You do, however, have to worry about if you get hacked, or if all the exchanges just suddenly stop supporting your coin of choice out of nowhere.
If you’re using a software wallet, make sure you are being smart as far as avoid viruses and other ways the dark side of the digital world can get you. And for the love of the crypto gods, when it gives you the seed words and tells you to write them down and lock them in a safe. Fucking do it. Don’t be the guy that has 12 million dollars in a wallet he can’t access.
I plan to do a more in-depth review of the Exodus wallet in an upcoming blog, as it’s my software wallet of choice, so make sure you come back if you’re interested in learning more about it.
Hardware Wallets
The last type of crypto wallet is the most secure, but also the hardest to access fund from when you need them. Hardest is probably not the right word. The one that has the most steps between you and your crypto. But also, the most steps between someone else and your crypto.
I don’t personally use one, as I don’t have near enough into the crypto game to justify the cost just yet, but as soon as I have a balance I think is worth protecting, you bet your ass it’ll be the first investment I make. There are quite a lot of them on the market, but I am going to defer to the judgement of Guy over at Coin Bureau and direct you to this video of his if you want to get a good idea of the specific devices he covers and recommends.
In a nutshell, a hardware wallet is like a software wallet, except the private keys are not just sitting there on your computer for a hacker to get their grubby hands on. They are sitting on an actual hardware key that you disconnect from your computer when you are not trying to access the funds on it. This means that most of the time, the device is air gapped and nobody can access it.
There is one drawback to this, and one real vulnerability. The drawback is that if you want to sell your crypto, you need to have the device in hand. If you have it sitting in a safe or something, it might take you longer to get access to it, if you are trying to sell in a hurry. So these are not for anything you are trying to hold for a short time, and should only be used for HODL’ing.
As for the vulnerability, well, if I know you have a hardware wallet that holds a few million dollars in crypto, that makes it real easy to bash you over the head with whatever object is nearby and lift it off you. That’s why you never talk about how much crypto you have or where you store it. You never know who may be sitting at a nearby table and suddenly seeing dollar signs.
Conclusion
As you can see, there are quite a few things to consider when setting up your crypto storage needs. And there is no “one size fits all” wallet, as every investor is going to be different. And likely, you’re going to use a combination of them all. Some sitting on exchanges for your fast trades, some hiding away in your colder wallets, waiting for the day you think the market is topping out and decide it time to cash in those sweet, sweet, gains.
If you enjoyed this content, come back every Monday through Thursday for fresh Crypto content. If you have any comments or questions, feel free to email me a [email protected], use the Contact form, or hit me up on Twitter or Facebook.
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