Ever wonder how you can access cryptocurrencies? After all, being digital assets, you can’t hold them in your hand or tuck them away into a leather wallet. Instead, your digital assets can be monitored with cryptocurrency wallets: a software program or app which stores the public and/or private keys that can be used to interact with one’s crypto addresses. A digital wallet can be used to track ownership of, receive and spend cryptocurrencies.

To control one’s wallet, the most important item is the private key. The private key one uses has to match the public address where his or her cryptocurrency transactions are being directed to. A private key is an integral aspect of bitcoin and altcoins, and its security make-up helps protect a user from theft and unauthorized access to funds.

Five Main Types of Wallets:

Desktops wallets- are installed onto a PC or laptop can only be accessed from the device onto which they are downloaded. Though highly secure, if the device gets hacked by an attacker, you could lose all your funds.

Online wallets- can be accessed from any device because they run on the cloud. However, because your private keys are controlled by a third party, they are prone to hacking and thefts.

Mobile wallets- run on an app on your phone. They are typically smaller and simpler than desktop wallets.

Hardware wallets- store one’s private key on a hardware device such as a USB. Transactions happen online but the currency is stored offline and therefore safe from online threats and attacks. To make transactions online, one simply needs to plug their hardware device into an internet-connected computer and enter a pin.

Paper wallets- are a physical printout of your public and private keys. Transferring cryptocurrency to your paper wallet simply requires transferring funds from your software wallet to the public address shown on your paper wallet.

The security of wallets varies from provider to provider and depends on many factors. Diligent security precautions should be taken to ensure the security of your wallet such as backing up your wallet, updating the software, adding extra layers of security, and making sure you do not download fake applications.

Custodial vs. Non-Custodial Wallets:

Another major difference between cryptocurrency wallets is whether a wallet is custodial or non-custodial. A non-custodial wallet is decentralized because it does not have a “custodian” or a third-party controlling your funds. The user him or herself owns the wallet’s private keys meaning they have full control of the funds. The user gets a file with private keys and a mnemonic phrase that can be used to access and restore funds. On the other hand, a custodial wallet involves a third party keeping the user’s private keys and backing up his or her funds.

So, which wallet is better?

A disadvantage for a non-custodial wallet is that you are responsible for keeping your private key and mnemonic seed safe. If lose your private key or mnemonic seed, there is no backup for your money. When using a non-custodial wallet, it is important to keep your mnemonic seed safe. Even if your computer or device breaks, with your seed phrase, you can recover your account. However, with a non-custodial wallet, you have full control of your funds.

Well-Known Non-Custodial Wallets:

TrustlessBank’s Wallet App

TrustlessBank — a multi-asset wallet that provides a decentralized way to exchange between any currency (stable coins or crypto) to any other. Being an application and a protocol only, users have complete control over their funds and operations.

MyEtherWallet — a free, open-source, client-side interface for generating Ethereum wallets

Guarda — a secure lightweight crypto wallet for major cryptocurrencies and their tokens

Electrum — one of the most popular Bitcoin wallets that is fast, secure and easy to use

On the other hand, because a custodial wallet backs up your digital assets, losing your private key does not mean losing your digital currency. Your access to your wallet can easily be restored even if the device your wallet is on breaks or you forget the password to your wallet. In addition, some custodial wallets allow for free transactions allowing cryptocurrency users to save money. However, because a custodian controls your assets, the custodian themselves or anyone who hacks into the provider can steal your money.

Well-Known Custodial Wallets:

Freewallet — a mobile wallet that works with multiple cryptocurrencies including Bitcoin, Ethereum, DASH, Zcash, Steem, Ardor, DigitalNote, Bancor, Tether.

BTC.com — a mobile client that connects to the Bitcoin network directly, decreasing the chance of third-party thefts.

Blockchain.info — a ​partially​ centralized wallet. *It has undergone major thefts with hackers stealing 700 BTC back in February 2018.

All in all, the surge of blockchain and cryptocurrencies is providing the world with safer ways to exchange, spend, and make money. However, even the digital world guarded by cryptography is not without weaknesses. Cryptocurrency wallets though highly secure still have some chance of being hacked, and the wallet provider themselves may be behind the attack. So, when making a decision on what crypto-wallet to use, make sure to consider: who do you trust with your money?