Best Cryptocurrency Wallets For 2022
When it comes to Bitcoin, Ethereum, and all other ALT coins in general, crypto wallets are an essential tool for buying, trading, selling, and holding cryptocurrencies. No matter if your wallet is hardware or software based, custom crypto wallets offer crypto holders a dedicated and secure solution compared to holding your cryptocurrency on crypto exchanges.
What Is A Cryptocurrency Wallet and Why Do You Need One?
A cryptocurrency wallet is either a software program or a physical device or both, that allows you to store your crypto and allows you to send and receive crypto transactions. Crypto wallet consists of two key pairs: the private keys and the public keys. A public key is derived from the private key and serves as the address used to receive crypto to the wallet. The public keys is the address you would share with someone who is sending you crypto.
Crypto wallets keep your cryptocurrencies safe and accessible. The private keys are the passwords that gives you access to your cryptocurrencies allowing you to send and receive cryptocurrencies like Bitcoin and Ethereum. Wallets come in many forms, from hardware wallets like Ledger (which looks like a USB drive) to mobile apps like Metamask, which makes it easy to access your cryptos where ever you go.
The most important part of a crypto wallet and the part where most new users often find themselves in trouble, is the private key. The private key is, kind of like the password to a safe deposit box. Anyone who has access to the private key of a wallet can take control of the crypto balance held in the wallet. But unlike a safe deposit box at the bank, crypto users actually hold their own private keys and make transactions to other wallets or crypto exchanges, essentially acting as their own bank. But unlike your normal pocket wallet, which can hold actual cold hard cash, crypto wallets technically don’t store your cryptocurrency, but rather gives you access to your cryptocurrency.
Your crypto holdings actually live on the blockchain, but can only be accessed using the private key for that wallet. Your private keys prove your ownership of your digital currency and allows you to make transactions using your wallet. If you lose your private keys, you lose access to all your crypto in that wallet. That is why it’s important to keep your private keys very safe and secure.
What Are Cryptocurrency Wallet Private Keys?
A crypto wallet private key is a secret algorithmic number that is used in cryptography, similar to a password. In cryptocurrency, private keys are also used to sign wallet transactions and prove ownership of a blockchain address.
The most important thing to remember is to never share your private key with anyone. A private key gives a person the ability to prove ownership of a wallet or spend the funds associated with your public wallet address. A private key can take many forms including:
- Mnemonic phrase (Seed Phrase)
- 256 character long binary code
- 64 digit hexadecimal code
A private key is an astronomically large number, and it’s large for a good reason. While you can generate a public key from a private key, its practically impossible to generate a private key from a public key, because of the one-way “trapdoor” function. You can also have any number of public keys connected to a private key.
A crypto wallet works by a number being generated and used with a length that depends on the algorithm size of the cryptocurrency’s tech requirements. The number is then converted to a private key using the specific requirements of the cryptocurrency cryptography algorithm.
The private key is then utilised by the wallet owner to access and send cryptocurrency and is private to the owner and kept secret, whereas the public key is to be shared to any third party to receive cryptocurrency to that address.
The private key and public key pair are also not known by the blockchain or anyone else. And the blockchain will only record the transaction of the public address when some cryptocurrency is sent to it, thus recording the transaction of the public address in the blockchain ledger.
What Is A Crypto Seed Phrase?
One of the most common terms you might have come across when it comes to crypto wallets is “seed phrase”. A seed phrase, seed recovery phrase or backup seed phrase is a set of random words generated by your crypto wallet when you first set up your wallet up, and it is of the utmost importance to keep a record of these words and secure it in a safe place. The seed phrase stores all the information needed to recover crypto funds on-chain. A seed phrase are the only group of words that will allow you access to a cryptocurrency wallet, besides the actual private keys. It’s important to note, private keys and seed phrases are not the same, although both would allow an intruder to spend your coins within that wallet.
All crypto wallet software will typically generate a seed phrase when the wallet is activated, and instruct the user to write it down on paper to be kept safely. If the holder’s computer/smart phone breaks or their hard drive becomes corrupted, they can download the same wallet software again and use the paper backup to get their cryptos back.
A seed phrase is a set of random 12 to 24 (or even greater) list of dictionary words which is an unencrypted form of the private key. This is because words are easier to memorise than numbers. When a wallet is activated, either on an exchange, software or hardware wallet, they generate random numbers as the private key, and the seed phrase is a mnemonic version of it that needs to be recorded by the user. So when access to the crypto wallet becomes misplaced, damaged or compromised, the seed phrase can be used to re-access the wallet and associated keys of the cryptocurrency.
Cryptocurrency Cold Wallets VS Hot wallets, What’s The Difference?
I’m sure you have heard of the terms “hot wallet” and “cold wallet”, which are used to differentiate cryptocurrency wallets. Just so you know these terms don’t have any relation to the actual temperatures of these wallets. Hot wallets are digital cryptocurrency wallets which come as software or an app , while cold wallets are actual physical devices that store crypto keys inside of them. There are other types of wallets, but hot and cold ones are the most popular ones.
What Is A Hot Wallet?
A hot wallet is also known as a software wallet. It is a form of digital storage that you can access on your computer or smart phone, and is connected to the internet. Because of the internet connection, hot wallets are not as secure from hackers as cold wallets. Some crypto exchanges will offer a separate hot wallet in addition to letting you keep your crypto on their exchange.
What is A Cold Wallet?
Cold wallets are specifically designed hardware devices that are designated physical cryptocurrency storage. This means your cryptos are offline and can only be accessed with the device or the seed phrase.
Why Cold Wallets Are Superior To Hot Wallets?
To sum it up in one word “Security”. Cold wallets are the definition of security when it comes to cryptocurrency storage.
Hot wallets are vulnerable because all of the digital wallets store your security keys and codes on their online servers, which can be extremely vulnerable to hacker attacks, phishing attempts and other ill intent-driven actions. Even though most of the popular hot wallets have major security measures put in place,all it takes is the smallest loophole for your crypto savings to be gone forever.
Cold wallets on the other hand are offline devices, and not connected to the internet. They are considered more secure than hot wallets, but there are other things to consider as well.
If are worried about keeping track of an extra physical item like a cold wallet, then you may be better off with a hot wallet on your phone. Hot wallets also offer a more user-friendly experience and are often connected to big cryptocurrency exchanges, making transferring your holding much simpler than using an offline cold wallet.
But one benefits that the cold wallets provide is that you can have your cryptos beside you at all times. These cold wallets are usually small and compact, which enables both comfort and discreteness whilst transferring or simply carrying them around.
What Are The Most Popular Crypto Hot Wallets?
MetaMask is a digital crypto wallet that allows you to manage, send, and receive cryptocurrency. Aaron Davis and Dan Finlay designed it back in 2016 intending to assist crypto traders with managing their cryptos. With MetaMask you can also add different crypto networks like the “Binance Smart Chain network” to Metamask manually and store and exchange BEP-20 tokens. The MetaMask wallet easily connects a regular browser like Google Chrome or Firefox to the blockchain by acting as a browser extension.
The Trust Wallet is a decentralised open-source mobile crypto wallet that offers over 160,000 assets and blockchains. It also enables traders to accrue interest by staking their coins. The Trust Wallet was initially designed to only support ERC20 and ERC223 tokens, but it has subsequently been modified to include other major cryptocurrencies such as Bitcoin, and Polygon. The Trust Wallet also comes with a Web3 browser that allows users to buy cryptocurrencies directly via the Kyber Network’s native decentralised exchange.
What Are The Most Popular Crypto Cold Wallets?
Ledger is one of the top cold crypto wallets in the market. Ledger’s two top products, the Ledger Nano X and Ledger Nano S are both packed into convenient form-factors, including micro-LCD. These then pair with Ledger’s own smartphone app. For such small devices, the Ledger Nanos both include hardware that’s capable of supporting their apps. They not only work with over 1,800 cryptocurrencies but also work with a large number of other wallets.
Trezor is the main cold wallet product of SatoshiLabs, a Czech-founded company that has two main products. Their streamlined approach to cold wallets has managed to keep the organization lean by simply building towards supporting more cryptocurrencies. Trezor wallets support a wide range of cryptocurrencies, including Bitcoin, Ethereum, Solana, Polkadot, Cardano, and many more. Setting up the wallets is also easy; all you need is a PIN code and a recovery seed.