A digital currency wallet safeguards transaction keys for users to interact with a cryptocurrency network. Wallets come in different formats, from hardware to software, and offer varying degrees of security and convenience.
The best wallets support a wide range of assets and are designed to be safe. They also offer features like self-custody, eliminating the need to trust a third party. Read more.
Security
Crypto wallets are designed to protect digital assets, but they can also pose security risks. Wallets that are connected to the Internet or that use weak passwords can be susceptible to hacking and other forms of theft. Adding robust security features like 2-factor authentication can help limit hackers’ access to your wallets and make it more difficult for them to compromise your accounts.
Wallets that are custodial, or managed by an exchange, have an extra layer of vulnerability as hackers may gain access to the company’s servers that store your private keys. Non-custodial wallets, on the other hand, give you control of your private keys and assets.
Cold wallets, which are more secure than hot wallets, require you to keep a backup of your private keys in another location. The simplest way to do this is with paper, such as a sheet of notebook paper or a written code, or hardware, such as a USB-style device that looks like it could be used to sign a transaction.
Convenience
Digital wallets make it possible to pay for things with cryptocurrency without carrying around cards or revealing your personal information to merchants. They also provide a measure of security by encrypting your card numbers so they can’t be stolen when you use them to buy something.
Some digital wallets offer added protection by tokenizing your debit and credit card information. This makes the card numbers useless to hackers in case a retailer’s system gets hacked.
A digital wallet can support a variety of cryptocurrencies, including Bitcoin and Ethereum. Some offer additional features, such as the ability to stake cryptocurrencies and earn passive income on your stored coins. Others, like Trust Wallet, are non-custodial wallets that put security first, supporting over 100 different blockchains and allowing users to control their own funds. They also feature a PIN, backup passphrase and biometric authentication to protect against unauthorised access. They also enable people in underserved areas to gain access to financial services.
Apps
A digital wallet is a piece of software that allows users to monitor their cryptocurrency and make transactions from a mobile device. These apps can be downloaded as standalone programs or included in a larger service like a crypto exchange. Most digital wallets also feature a card that can be used at point-of-sale. This option allows people in financially underserved areas to access financial services.
Most digital wallets have different security features, but they all include password protection and biometric authentication. Some have the ability to sync across multiple devices, and some have built-in support for a variety of currencies.
Coinbase is one of the most well-known cryptocurrency wallets, and it offers a mobile app and browser extension. This non-custodial wallet app provides a variety of wallet services, including an inbuilt asset-swapping feature. Another popular wallet is MetaMask, which features a full Web3 experience and allows users to connect with dApps and DeFi protocols. Both of these wallets make millions in revenue per month.
Hardware
Crypto wallets come in hardware and software forms. For those who are more security-minded or have large amounts of cryptocurrency to protect, a hardware wallet might be the way to go. These devices, which resemble USB drives and typically cost more than a desktop computer, are designed to securely hold private keys. They are also not connected to the internet, a key feature that reduces the risk of cyber-attacks.
They are a type of cold wallet, and they require users to manually sign transactions by entering a PIN on the device or using its touchscreen. This helps prevent hackers from gaining access to private keys by recording your keyboard or screen.
Hardware wallets can support hundreds and even thousands of different cryptocurrencies, and some connect directly to exchanges. They are a popular option for those who prefer to handle their own custody, though they can be less convenient than mobile or web wallets. Users should back up their wallets regularly and store them in a safe place to avoid losing their digital assets.