Picture this: It's 2010, and you're flipping through posts on an online forum and keep seeing a few people talking about something called a...
"Bitcoin?"
1 BTC = $0.01
You think to yourself, "I got twenty bucks, why not?"
Before you buy any, you realize you need a way to hold your 2,000 Bitcoins. You set up a special Bitcoin wallet and see a secret key that consists of a long string of random words.
You know youʻll need them if something were to happen to your computer, but you donʻt bother to write them down.
A year passes. You tossed your old computer because it was getting slow.
Another two years pass. You joke with your friends about how you could have bought the entire store's inventory if you kept your old computer.
Ten years have gone by, and you've scoured the internet looking for ways to get back your Bitcoin — but you know without your old computer or secret key, they're gone forever.
The only thing you can do now is wonder how youʻd spend $130 million if you wouldʻve taken the time to learn more about crypto wallets.
What is a Crypto Wallet?
A crypto wallet allows you to send, receive and securely store cryptocurrency. All of that is done through a set of public and private keys.
Private Keys
Your private keys act as your password and recovery device.
They are 12-24 random words in sequential order. Your wallet doesnʻt actually hold your crypto; it holds your private keys.
Your crypto is "stored" on a public ledger, known as the blockchain. Your private keys are like an electronic signature that only you can know.
If something has your private keys, you are broadcasting to the network you gave your electronic signature, and the transaction is irreversible.
Just like youʻd never give out your banking and email passwords, you should never give out your private keys.
If someone were to gain access to your private keys, they would have total control to send funds out of your account.
Public Keys
Your public keys are your receiving address. They're like your Paypal address or Venmo username. You can share it with friends, and if you need to, itʻs safe to post online.
Your public keys are different for every different kind of cryptocurrency!
Ethereum is different from Bitcoin, which is different from Dogecoin. Sending or attempting to receive the wrong kind of crypto to the incorrect wallet address may result in a complete loss of funds.
If you have purchased your crypto from an exchange like Coinbase, Binance, or Gemini, no, you technically donʻt need an external wallet. You can send and receive funds right from your exchange wallet.
If you plan a day or swing trading regularly, the time it takes to switch back and forth from an exchange to your wallet might make or break the success of a trade.
Thereʻs a saying in the crypto community: "Not your keys, not your crypto." Your private keys are stored on the exchangeʻs servers, and you access them through your account. Itʻs much faster but less secure.
Server stored keys give hackers a chance to access your wallet. Keep in mind, your crypto is not insured like a stock would on any popular brokerage.
While exchanges will proudly note your funds are FDIC insured up to $250,000, the second you exchange your fiat (government back currency), you lose that insurance.
Your exchange might have a private fund to pay back exchange wallets that were hacked. In the case of a complete hack, that fund will not be nearly enough.
Remember, with crypto, thereʻs no customer support and no government backing if something goes wrong. You are in charge of keeping everything secure.
Certain people fear a government seizure on cryptocurrency because Bitcoin is often referred to as digital gold.
During the Great Depression of the 1930ʻs, the American government seized private ownership of gold as a means to stabilize the dollar. People were forced to sell below market rate, only to have the Gold Reserve act of 1934 set a considerably higher standard rate for gold.
Private gold ownership remained illegal until the 70ʻs, and some fear this could happen again with crypto. Private keys mean private ownership. That might sound overly paranoid, but history has a habit of repeating itself.
Types of Crypto Wallets
There are three types of crypto wallets you can choose from.
All of them have their pros and cons — you canʻt have it all because ease of use always comes at a loss of security.
We’ll look at each one next.
Software / Browser Wallets
Software wallets serve as a graphic user interface to interact with your private keys. Instead of just lines of text, you can get minute-to-minute updates on your portfolioʻs value.
Most software wallets also have mobile apps for easy payments. You can also get your wallet address or someone elseʻs as a QR code to simplify transactions.
Browser-based wallet extensions for Chrome and Firefox make it extremely easy to interact with other decentralized applications and send and receive funds.
The downside to software wallets is that they are susceptible to malware attacks. Keyloggers are regularly set to hunt down things that sound like your private keys. Software wallets are only as safe as your internet habits are.
If you want ease of use and are comfortable with your internet habits, the software route might be the best crypto wallet for you.
Hardware Wallets
Hardware wallets serve as a single-purpose holder for your public and private keys. Hardware wallets usually look like a USB drive that plugs into your computer.
Hardware wallets are incapable of doing anything else except holding your keys. They can’t even connect to the internet. That way, thereʻs no possibility of malware. It is a completely sealed and self-contained "dry box." Your computer is only there to interface with the hardware.
Once a hardware wallet connects to your computer, a bridge application allows you to sign off on incoming and outgoing transactions. The bridge enables your private keys never to be directly connected to your computer.
A hardware walletʻs added security comes with the downside of added hassle. A further consideration you need to take is where you are going to store your hardware wallet. If your house gets broken into, and the thief finds your hardware wallet, you're out of luck.
If you donʻt use crypto regularly for transactions and have a secure location, a hardware wallet might be the best crypto wallet long-term.
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The Best Crypto Wallets in 2022
Next, we’ll take a look at the best crypto wallets in 2022.
Exodus
Exodus wallet is a free desktop and mobile wallet supporting over 100 cryptocurrencies with a built-in exchange.
Exodus has a clean interface and is one of the most user-friendly wallets, with customer support available if you have questions.
Learn more about it here.
The Trezor Model One
The Trezor Model One is an industry-standard hardware wallet.
The Model One is one of the best crypto wallets for "cold" storage.
At around $70, Trezor makes a relatively cheap and reliable way to store your crypto.
The Model One can also integrate with Exodus wallet, which means you can quickly go from "hot" to "cold" storage or have it serve as a backup.
Learn more about it here.
Metamask and Trust Wallet
Metamask and Trust Wallet are the two most popular free browser-based wallets. They share many of the same features that enable them to interact with decentralized applications (Dapps).
You can easily link them up to exchanges for quick swaps in coins not featured on major exchanges.
If you are into extreme micro-cap cryptos and dapps, Metamask or Trustwallet might be the best crypto wallets out there.
Learn more about Metamask here and Trust Wallet here.
Atomic Wallet
Atomic Wallet is a free software wallet featuring both desktop and mobile access.
Atomic has many of the same features as Exodus but has an added layer of anonymity.
Atomic does not need an account or any verification to set up, just keys and crypto, the way Satoshi intended.
Learn more about it here.
The more you scale your position sizes and the time you plan on holding your crypto, the more backups and fail-safes you should have.
Hardware wallets stop malware, but not thieves, floods, and fires.
Doubling up on a hardware and software wallet might seem extra safe, but you also double your potential threats.
There are looming existential threats when it comes to your wallet safety, but you should know that the most dangerous threat is yourself.
