So, what important considerations should you make before choosing the right crypto wallet for you? Let’s find out below.
1. Software vs. Hardware Wallets
There are two main types of crypto wallets: software and hardware wallets. Software wallets are entirely virtual, while hardware wallets are physical devices. To use a software wallet, you need to be connected to the internet, as this is where your private keys are stored. However, hardware wallets store your private keys offline in what is known as “cold storage.” So, which is better?
When it comes to security, hardware wallets almost always take the cake. This is because storing your private keys offline means that cybercriminals cannot access your wallet via the internet and therefore can’t access it remotely at all. This kind of wallet is also impervious to system malfunctions, server crashes, and other related technological errors that could result in you losing your private keys.
So, it’s important to note that software wallets cannot store your private keys as securely as this. But many software wallets still use multiple levels of security and backup methods to keep your crypto safe. On top of this, software wallets are much cheaper to use than hardware wallets.
The upfront cost of buying a hardware wallet often exceeds a hundred dollars, and some newer models will cost you even more. So, if you want to keep your crypto safe on a budget, you can find many reputable software wallets out there.
2. Security Features
If a crypto wallet’s primary focus isn’t security, consider that a red flag. The entire point of a crypto wallet is to store your private keys securely and keep your crypto funds safe, so it’s crucial to make sure your chosen wallet has ample security features. But what features should you be looking for?
If you’re interested in using a software wallet, a password is the basic level of security that everyone should look for. But a password alone isn’t good enough when it comes to your crypto funds. So, look out for additional security features, like two-factor authentication and multi-signature. These may complicate your experience a little but ensure that no one can access your account or make any transactions with your password alone.
It’s also crucial that your chosen software wallet has a backup feature. This often comes in the form of a seed phrase, which you can use to recover your funds if you forget your login info or experience a technical error.
If you’re looking for a hardware wallet, try to find one that has a CC EAL5+ certified Secure Element chip. This is where your private keys are stored and is the same chip used in passports and credit cards. A recovery seed phrase is also essential, as this will give you access to your private keys and your funds if you lose or break your wallet.
3. Open vs. Closed Source Crypto Wallets
A lot of popular and reputable hardware and software wallets are open source. This means that anyone can view their software or firmware. Because of this, users and developers alike can find flaws and report or remedy them, making the wallet itself more secure overall. After all, it’s better to have a wallet that’s consistently improved upon rather than one that stays the same for long periods.
While many closed source crypto wallets out there work well for most people, it’s worth noting this factor before deciding which one is best for you.
4. Crypto Wallet’s Fees
Unlike the wallet you use to store your cash and credit cards, crypto wallets aren’t usually free to use. You can incur fees for depositing and withdrawing funds, and buying or staking crypto often comes with a charge, too. These fees differ depending on the wallet you’re using, but they can be a little costly.
So, before signing up for and using any wallet, make sure you’re aware of the fees first. Most wallets have a fee schedule on their main website, so check them out to understand what kind of fees you’ll be incurring.
5. Supported Coins
This is another crucial factor you should consider before selecting a crypto wallet. Unfortunately, not all wallets support all coins, and some are designed to hold only one token. Take Mycelium, for example. This trusty software wallet has some great features but only supports Bitcoin.
Sometimes, this is a good thing. Wallets that focus on just one coin sometimes offer perks and integrations related to that specific crypto. This is why wallets like Mycelium have become quite popular. However, while you may think that using a wallet that supports one coin is fine if you own that specific coin, this may not always be the case for you.
As you progress through your journey and experience with crypto, you may end up owning multiple different tokens. And while you can have multiple crypto wallets holding the private keys for your various tokens, this isn’t always a good idea. Having passwords, seed phrases, and other sensitive info for each wallet can become overwhelming and inconvenient. So, it might be worth opting for a wallet that supports a variety of different coins to avoid this scenario.
6. User-Friendliness
Given the complexity of the crypto industry, it’s fair to say that it’s made up of beginners, intermediates, and pros. And because of this, different crypto services work well with these different skill levels. This is where user-friendliness comes into play. Some wallets are perfect for beginners, like Exodus, with a simple user interface and easy navigation. The same goes for Trust Wallet, a mobile wallet that keeps things straightforward.
On the other hand, some wallets work well for more advanced users who wish to do more with their crypto. This is the case with the Electrum software wallet for Bitcoin owners. So, do a little research around your prospective crypto wallet before getting started to avoid overwhelming yourself.
7. DApp and DEX Integration
Many crypto wallets offer a super useful feature known as exchange integration. This involves linking your crypto wallet with a decentralized exchange. The same goes for linking other DApps, like Aave or UMA, to your wallet. Being able to connect your crypto wallet to such platforms lets you seamlessly transfer funds, as well as buy, sell, or stake crypto.
Before choosing your crypto wallet, do a little research around whether it offers DApp and DEX integration, and whether you can link the other platforms you regularly use to the wallet you’re interested in. This could end up being a make or break factor in which wallet you end up going for.
Know Which Crypto Wallet Suits You Best
Before jumping into using any wallet you’ve seen raved about online, make sure you’re choosing the one that works perfectly for you. The factors above play a significant role in your overall experience with your crypto wallet. So, make sure your prospective choice ticks all the right boxes to avoid inconvenience or frustration in the future.
