A Beginner’s Guide to Crypto Wallets

Beginner Nov 8, 2022

Owning cryptocurrencies requires you to store them in crypto wallets—just like how fiat currencies are kept in your wallets or bank accounts. 

A crypto wallet (cryptocurrency wallet) allows users to receive, send, and store their crypto assets securely. Additionally, crypto wallets validate transactions in the blockchain and help in managing digital assets easily.

There are several types of wallets present in the crypto space. While they all share the same functions and purpose, several crypto wallets are designed differently from the others.

With that said, understanding the difference between different types of crypto wallets will also help in choosing which wallet suits your needs—which among them is the best cryptocurrency wallet. Let’s find out how do crypto wallets work.

Crypto Wallets: Categories

Before diving into the different types of crypto wallets, first, it’s important to understand that crypto wallets are categorized into two: hot and cold wallets.

A hot wallet is simply any crypto wallet that is connected to the internet. Hot wallets have this ‘always on’ nature, that makes them convenient to use. On the other hand, a cold wallet is any type of wallet that is offline or not connected to the internet. This type of wallet may require more technical know-how; hence, they are suited for experienced traders or those with huge amounts of crypto assets.

Crypto Wallets: Custodial Vs. Non-custodial

Another key distinction between crypto wallets is having a custodial or non-custodial mechanism.

A custodial wallet uses a third party like a crypto exchange to hold users’ private keys and use them to ‘sign’ and initiate transactions on behalf of the owner. In other words, aside from the users, even the parties have access to their private keys.

In contrast, non-custodial, decentralized crypto wallet wallets have full control over their private keys and funds. The holder has the sole responsibility of keeping their cryptocurrencies and private keys safe and secure. 

Crypto Wallets: Types

Desktop Wallet

A desktop wallet is a type of hot wallet that uses encryption to keep users’ holdings and private keys securely stored on their computer hard drives. These are programs that run on users’ desktop or laptop computers.

Examples: Electrum, Exodus, Brave Wallet

Mobile Wallet

A mobile wallet is a type of hot wallet that allows users to quickly send or receive transactions on the go, using their mobile phones and active internet connection. It is also a type of hot wallet.

Examples: Hippo Wallet, Trust Wallet, MetaMask

Paper Wallets

A paper wallet is a type of cold wallet, wherein private keys are written down or printed on a paper. This paper is securely stored by the user as well.

Example: WalletGenerator.Net and BitcoinPaperWallet.com

Hardware Wallets

Hardware wallets offer a high-tech solution for securing private keys in a number of formats. Additionally, these wallets are physical devices resembling a USB hard drive, which is plugged into a computer or mobile device. 

Example: Ledger Nano S, Trezor Model One, Ledger Nano X

Conclusion

When choosing the best crypto wallet for you, it is important to have a deep understanding of the types of wallets. With this, you will know which wallet suits your needs best; hence, know which one will be convenient for you to use.

Subscribe to be the first to read our articles!

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.