Cryptocurrency Wallets Explained: How to Keep Your Coins Safe and Secure

Cryptocurrency Wallets Explained: How to Keep Your Coins Safe and Secure

Cryptocurrency wallets hold the keys to your digital fortune. Here's how to choose them wisely.

With a plethora of options at your fingertips, the quest for an ideal crypto wallet begins with finding the perfect fit for your needs. This straightforward primer will shine a light on what really matters when it comes to the best crypto wallets.

Crypto wallets come in many forms, built for different kinds of crypto explorers. Some are designed to hold a single type of coin, like bitcoin or ether, while others can contain entire digital treasure chests of different currencies. Some wallets stay connected to the internet, ready to make quick transactions, while more secure offline wallets keep your crypto protected from online threats.

With so many options, finding the right wallet may seem complicated. But don't worry — we're here to help. In this article, we'll explain what crypto wallets do, outline the main types available, and provide tips for keeping your digital assets secure. We'll even highlight some of the top contenders so you can find your perfect match.

How Do Cryptocurrency Wallets Work

A traditional physical wallet holds the money, cards, and other items you need to access your funds. A cryptocurrency wallet works differently. It doesn't actually contain your crypto coins or tokens. Instead, it holds the special codes that give you access to your cryptocurrency on the blockchain.

With a bank, you have an account number that identifies your funds. On a crypto blockchain, your public key serves a similar purpose. But just having a public key isn't enough to conduct transactions or access your crypto. You also need a private key, and only you should have access to it.

Keys are part of cryptography used by blockchains. Public and private keys come in pairs, and both are required to send, receive, or check your crypto balance. Your private key acts like the personal PIN for your bank account. With it, you can unlock your crypto on the blockchain.

Crypto wallets securely store your private keys and other info. Your public keys remain on the blockchain. By combining a public and private key, your wallet allows you to safely access your crypto to view balances, conduct transactions, and more.

So in short, a crypto wallet doesn't actually hold your digital assets. It holds the keys that unlock them for your use. This system helps ensure that only you control access to your own cryptocurrency. As long as you keep your private keys secure in a wallet, you maintain full ownership over your crypto funds on the blockchain.

What Are the Different Types of Cryptocurrency Wallets

Cryptocurrency wallets come in many flavors. You get to choose not just which wallet service or product you want to use but also the type of wallet that suits your needs.

Hot Wallet vs Cold Wallet

The two main categories of crypto wallets are hot wallets and cold wallets. While hot wallets stay connected to the internet, cold wallets are offline most of the time and only connect when needed.

Cold wallets include:

  • Hardware wallets: Your private keys are stored on a physical device like a USB drive. Hardware wallets provide isolation from online threats when disconnected.
👉 Hardware wallets that are offline most of the time are one of the most secure options for storing cryptocurrency. For those with substantial crypto holdings, hardware is often the preferred wallet choice. Hardware wallets provide a backup seed phrase, so you can restore your wallet on a new device if anything happens to the original. The main downsides are slightly less convenience and higher costs when compared to software options. However, for most crypto investors, this is a small price to pay for the enhanced security that cold storage provides. For more information on hardware wallets, refer to this piece: Top 5 Best Hardware Wallets Crypto.
  • Paper wallets: Your public and private keys are simply written down on paper. This low-tech approach keeps keys entirely offline.
👉 While paper wallets are free to use and simple to understand, they are easier to lose and damage. So don’t use, unless temporarily.

Hot wallets include:

  • Online wallets: Hosted by a crypto exchange or service. They hold your public and private keys, and you access your wallet by logging in.
👉 Online crypto wallets, accessed through a website, can be convenient. But they also tend to be the least secure wallet option. It's easy for hackers to steal login info through phishing emails, malware, or by exploiting internet browser weaknesses. So if you do use an online wallet, make sure it at least requires two-factor authentication (2FA).
  • Desktop wallets: Your keys are stored in an application on your own computer.
👉 While desktop wallets from trusted companies are typically quite secure, if you hold a significant amount of cryptocurrency, cold storage options like a hardware wallet may still be the safest choice. Desktop software is connected to the internet and more susceptible to hacking or theft than an air-gapped hardware device.
  • Mobile wallets: An app on your phone stores your keys.
👉 Mobile crypto wallets offer a convenient way to send, receive, and check on your digital assets on the go. When using a reputable wallet from an established provider, mobile apps can also be quite secure. However, be aware that not every crypto wallet app is legitimate. Only download wallets from well-known companies to avoid possibly downloading a scam "copycat" app designed to steal your funds.

Custodial Crypto Wallet vs Non Custodial Crypto Wallet

Wallets also come in custodial or noncustodial formats:

  • A third party, typically an exchange, oversees custodial wallets. They make it easy to buy, sell, and hold crypto, but they also control your wallet.
  • Noncustodial wallets put you in charge of your keys and funds. Options include paper wallets and desktop/mobile software wallets under your control.

So when choosing a crypto wallet, decide if you want a hot or cold wallet, custodial or noncustodial. Custodial hot wallets are most convenient but offer less control or security.

Noncustodial cold wallets put you in full command of your crypto, but also full responsibility.

For many, a combination of wallet types works well. Use a custodial hot wallet to actively trade, but move long-term holdings to a noncustodial cold wallet under your own control. That way, you get convenience and security — the best of both worlds in managing your digital assets.

👉 A note on self-custody: As a new crypto investor, it's tempting to just leave your digital assets on the exchange where you bought them. It seems so convenient. But in reality, that convenience comes at a cost. When your crypto is on an exchange, you don't fully own or control it. The exchange does. They're essentially holding your crypto for you and promising to let you access its value when you want to sell or move it. But if something were to happen to the exchange, your crypto could be at risk. You've probably heard the saying, "not your keys, not your crypto." This highlights the difference between leaving crypto on a centralized exchange like Coinbase or Binance versus storing it in a wallet you control.

Choosing a Crypto Wallet: How to Choose the Best Cryptocurrency Wallet?

When choosing a crypto wallet, it’s important to understand what exactly you’re trying to achieve with it and what assets you’re planning to hold.

At the very least, you should consider how much convenience you’re willing to trade for better security. After all, security ultimately comes down to personal responsibility. You can have the most advanced wallet options available, but if you leave keys accessible or reuse passwords, your funds can still be stolen.  

Nevertheless, different wallets offer different degrees of security and convenience. So, let’s review crypto wallet types again and see how they balance the two things.  

  • Exchanges

The least secure but most convenient method is leaving your crypto on an exchange. But remember, storing your crypto on an exchange is like keeping your money in a bank account — you don't physically control the funds. Since exchanges are popular hacking targets, your funds could be lost forever. Exchanges, though, offer an excellent way to buy, sell, and trade crypto. So, bottom line is — only keep money on an exchange that you plan to actively trade or sell soon.

  • Hardware wallet vs software wallet

A software wallet, like one on your phone or computer, is convenient and more secure than an exchange. You control your own private keys, which is good. However, since these devices are connected to the internet, they are vulnerable to hacking, viruses, and malware. So, bottom line is — software wallets are good for small, frequent transactions.

Hardware wallets, or cold wallets, offer the best protection for your crypto assets. Though highly secure, they are less convenient than mobile wallets for everyday use. So, use hardware wallets for long-term storage of large amounts.

  • Paper wallets

Paper wallets provide the highest security because they are impossible to hack digitally. However, they are extremely inconvenient for accessing or transacting crypto. So if you don’t really plan to touch your crypto for a long time or are only looking for a temporary solution, then paper wallets are your best bet.

👉 To balance security and convenience, consider your habits and needs. If you're a long-term holder, a hardware wallet may be the best solution. Many users opt for a combination of hardware and software wallets, storing the majority of their funds securely in hardware wallets and keeping a smaller amount in software wallets for daily transactions or short-term access. The general rule of thumb, however, is to only keep your funds on an exchange when you're ready to sell or are actively trading.

Once you have determined the appropriate balance between security and convenience for your needs, check out other features:

  • Reputation

Check reviews of the wallet to ensure it has no known security flaws and is reputable.

  • Access to private keys

You should have full control of your cryptoassets, meaning the wallet gives you access to your private keys. The private keys are 12/24 word passphrases that give you control of the crypto in the associated address. If your wallet denies access to private keys, you merely have a claim on your cryptoassets, with someone else having custody and control. If your custodian goes bankrupt, you may lose your crypto forever. Not holding private keys also means you need permission from the custodian to use your crypto, which might result in delays and extra fees. Possessing private keys allows for direct interaction with the public blockchain, eliminating middlemen.

  • Supported crypto

If you intend to own multiple cryptocurrencies, choosing a digital wallet with multicurrency support is essential. However, if you only intend to own one cryptocurrency, find out if the creators of that coin provide an official dedicated wallet. In any case, check out the coin’s website and see what wallets devs recommend.

One of the biggest advantages of a good hardware wallet is that it supports numerous cryptocurrencies. For instance, two of the most popular hardware wallets (Ledger and Trezor) claim to support around 1,000 coins and tokens.

  • Backup features

Managing many private keys can be difficult, so choose a wallet with backup features to help. These may include cloud backup to store encrypted keys, single sign-on to access keys, and options to restore access if you lose your device. These features reduce the burden of manually recording and entering many private key passphrases.

  • Fee customization

Look for a wallet that lets you customize the transaction fees you pay to ensure fast or affordable sends. Options may include presets for fast, medium, and slow sends as well as the ability to set a precise fee rate. Lower fees may mean slower transaction confirmation.

  • Additional features

High-quality crypto wallets are user-friendly and feature-rich. Some allow you to use different authentication/authorization methods like biometrics, add personal notes to transactions, and create unlimited wallets.

Crypto Wallet Security: How Do You Protect Your Cryptocurrency Wallet?

The following recommendations will strengthen the security of your crypto wallets. These suggestions cover aspects such as passwords, banking, identity, and cryptocurrency safety. So by following them, you won’t only protect your crypto wallet but also improve your overall online security.

  • Safeguard your 12/24-word secret recovery/seed phrase. This phrase is essentially the master key to your wallet, and anyone who possesses it can access your funds. It's also the only way to recover your funds if you lose or damage a hardware wallet or the device on which a software wallet is installed. You should be the only one with access to this phrase, meaning no one, not even the wallet manufacturer, can help you recover a wallet.
  • Write this phrase down on paper or engrave it on metal plates and store in separate, secure locations. If using paper, make two copies and laminate them for protection. Record this phrase exactly as displayed when setting up your wallet. Be meticulous and diligent. Keep it in a private location known only to you or your most trusted family members or friends. You don't want these phrases falling into the wrong hands.
  • Never enter your seed phrase online or share it with anyone, including customer support. No legitimate company will ask for this information.
  • Do not copy or share your private keys. Private keys provide access to your cryptocurrency like a recovery phrase. If compromised, you risk losing access to funds. Private keys remain encrypted within your password-protected wallet. You typically do not need to access them directly.
  • Password-protect your cryptocurrency wallets and devices. Use a strong, unique password. Biometric protection is also recommended. Anyone who accesses your device could steal your cryptocurrency if it is unprotected.
  • Keep your operating systems and cryptocurrency wallet apps up to date. Operating system and wallet updates often address security vulnerabilities. Using outdated software puts you at risk.
  • Avoid downloading software or visiting suspicious websites. This is how most malware, viruses and other threats infect devices.
  • Consider using one device solely for cryptocurrency to limit exposure. Keep other devices for general use.
  • Use antivirus software and firewalls. These help prevent unauthorized access and block malicious software. Practice safe online habits as well.
  • Use two-factor authentication (2FA) when available. 2FA requires both your password and a code sent to your phone or an authentication app. This helps prevent account access even if your password is stolen. Use an authentication app instead of SMS text messages for 2FA.
  • Use a password manager to generate and remember complex, unique passwords for all accounts. This significantly improves your security.

Secure Crypto Trading — Bitsgap

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We're constantly innovating and updating our security features to stay ahead of bad actors. Here's a sneak peek at what we do to keep you safe:

  • Encrypted API: We don't have access to your funds or personal data;
  • API Lock, countertrade protection, and fingerprinting: Extra security measures to keep scammers away;
  • OAuth: Fast and secure connect between Bitsgap and exchange;
  • 2048-bit RSA encryption: Stronger security than your online bank;
  • IP whitelisting: Restricted trading to only authorized IPs;
  • Two-factor authentication: Additional level of safety at your fingertips.

Interested in learning more? You’re welcome → Your Security with Bitsgap

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Cryptocurrency Wallets List: Best Crypto Wallets

Coinbase: Best Hot Wallet

You may have heard of Coinbase, a major U.S. cryptocurrency exchange. However, Coinbase Wallet is a separate product that enables users to store cryptocurrency themselves instead of keeping it with Coinbase. Since Coinbase developed Coinbase Wallet, it easily integrates with their exchange and may be a good introduction for users new to non-custodial wallets.

The free Coinbase Wallet has some advantages, such as connecting to decentralized apps via mobile and web browsers. However, it lacks some features of competitors, like a desktop app, although its browser extension connects with the Ledger hardware wallet.

👉 It is surprising that centralized exchange Coinbase offers a wallet that provides easy access to decentralized exchanges (DEXs) and DeFi apps. But it shows that centralized and decentralized platforms can coexist.

Coinbase Wallet supports Ethereum layer two scaling solutions, including the Polygon network and Optimism. This helps users access decentralized finance (DeFi) platforms like Aave, Compound Finance, and Uniswap or mint non-fungible tokens (NFTs) on OpenSea by avoiding high Ethereum gas fees and long confirmation times.

Coinbase Wallet is one of the best wallets for participating in airdrops, initial coin offerings (ICOs), storing digital art, gaming NFTs, and other collectibles. It covers all DeFi bases. It enables local crypto payments and supports hundreds of thousands of tokens, including all ERC-20 tokens and tokens on Ethereum Virtual Machine (EVM)-compatible chains like Avalanche and Polygon. This includes stablecoins like USDC and DAI on all Coinbase Wallet's supported networks.

Private keys are encrypted and stored locally on users' devices. The app can be secured using biometrics and a passcode.

Your other good options: Exodus, MetaMask, DeFi Wallet, Coinomi, Guarda, Atomic, and Trust Wallet.

Trezor: Best Cold Wallet

The top spot for the best hardware crypto wallet goes to the Trezor Model T, Satoshi Labs' flagship product.

This high-end, secure hardware wallet supports over 1,000 crypto assets and can be used with the Trezor web wallet on desktop or mobile or the Trezor Suite desktop app. It integrates with web 3.0 wallets like MetaMask and Exodus, combining Exodus's features and interface with Trezor's security. Trezor works with Windows, Mac, Linux, and Android. It does not support iOS, Windows mobile, Chrome OS, or OpenWrt.

The Model T's advantages over the Trezor One include supporting more coins and entering sensitive data like PINs and recovery phrases on its touchscreen rather than a computer. Moreover, the Model T's user-friendly color touchscreen is more efficient than the Trezor One's buttons and the Ledger's.

Setting up the Model T is quick and easy. Install the bridge, update the firmware, and you're set.

Your other good options: Ledger Nano X, NGRAVE ZERO, KeepKey, ELLIPAL Titan, BitBox02, SecuX STONE

Learn more about best hardware wallets here: Top 5 Crypto Hardware Wallets.


What Are the 5 Types of Cryptocurrency Wallets?

There are five primary types of crypto wallets, including hardware, desktop, mobile, web, and paper wallets.

Hardware wallets are physical devices that store private keys offline, making them highly secure and less vulnerable to online threats such as hacking. Examples of these wallets include Ledger, Trezor, and KeepKey.

Desktop wallets are software applications that can be installed on a computer, providing a good balance between security and convenience. They store private keys on the device while also allowing easy access to funds. Examples of desktop wallets include Electrum, Exodus, and Bitcoin Core.

Mobile wallets are smartphone apps that allow users to manage cryptocurrencies on the go, offering additional features such as QR code scanning and the ability to make transactions using near-field communication (NFC). Examples of mobile wallets include Mycelium, Coinomi, and Trust Wallet.

Web wallets are online platforms that store users' private keys on a third-party server, providing easy access to funds from any device with an internet connection. However, they generally have lower security levels and are more susceptible to hacking and phishing attacks. Examples of web wallets include, MyEtherWallet, and MetaMask.

Paper wallets are physical documents containing printed private and public keys, offering cold storage and offline protection from hackers. However, they can be vulnerable to physical damage, loss, or theft. Users can generate their keys using services like or and then print them on a piece of paper.

It's important to consider the pros and cons of each wallet type and choose the one that best suits your needs and security requirements.

What Are the Best Crypto Wallets?

The best crypto wallets are typically hardware wallets because they offer maximum security, especially when compared to “hot” options.

If you’re looking for specific names, then here’s our pick:

  • Trezor Model T
  • Ledger Nano X
  • Exodus
  • Coinbase
  • MetaMask
  • Coinomi
  • Trust Wallet
  • Electrum
  • Atomic Wallet

However, please remember that it's very important to conduct your own research and carefully consider factors such as security, ease of use, platform compatibility, and the type of cryptocurrencies supported before selecting a wallet that best suits your needs and preferences.

What Are the Most Secure Crypto Wallets?

The most secure crypto wallets are hardware wallets, such as Trezor Model T, Ledger Nano X, and NGRAVE ZERO.

What Are the Multi-Currency Wallets?

Multi-currency wallets are cryptocurrency wallets that support the storage and management of multiple digital assets. These wallets are designed to provide you with a single platform where you can store and manage your different cryptocurrencies in one place, rather than having to use multiple wallets for each crypto you own.

What Are Crypto Wallet Security Best Practices?

Cryptocurrency wallets are designed to be secure, but vigilance is key. Here are some best practices to help keep your treasures safe:

  • Choose a reputable wallet provider that puts security first. Do some research to find a provider with a proven track record of keeping customers' funds safe. Look for reviews from fellow crypto holders to guide you to a trusted choice.
  • Enable two-factor authentication on your wallet whenever you can. 2FA adds an extra layer of protection by requiring not just your password but also a unique code sent to your phone. Use 2FA on web and mobile wallets in particular to keep hackers at bay.
  • Keep your private keys offline using a hardware wallet or paper wallet. Only enter private keys into trusted wallets, and never share them with anyone.
  • Keep your wallet software and firmware up to date so you have the latest security patches and features guarding your funds.
  • Back up your wallet in case anything happens to your device. A backup ensures you can recover your funds even if your wallet is lost, stolen or damaged.
  • Steer clear of public Wi-Fi when using or accessing your wallet. Public networks are often unsecured, allowing hackers to snoop on your activity and steal data.
  • Double check transaction details before sending funds to ensure you're sending the correct amount to the intended recipient. One small mistake could mean losing your money forever!
  • Be cautious of any third-party apps. Only use reputable exchanges, wallet providers and other services. Do some digging to ensure any company you use values customer security.
  • Never share personal information like wallet addresses, private keys or seed phrases. Keep this info under lock and key to avoid unauthorized access to your funds.

Following security best practices will give you peace of mind that your crypto assets are as well-protected as possible. Stay vigilant, invest in the latest protection, and your digital wallet will be a vault no hacker can crack!

What Are Multisig (Shared Wallets)?

A multisignature or multisig wallet requires multiple parties to approve transactions. For example, a 3-of-6 multisig wallet would have six participants but require only three to sign and approve sends. Multisig wallets improve security by protecting funds if one party loses access and can also be used for shared control of organizational funds.

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