What's In A (Crypto) Wallet? Hardware Wallets vs Software Wallets vs Online Wallets

With the maturing of the cryptocurrency industry, the ecosystem and services surrounding it, have also consequently evolved. From exchanges to wallets- the supportive infrastructure has grown besides the expansion of this industry.  

While there has been significant progress, users still need to be careful while choosing the support, including wallets and exchanges, in a crypto eco-system. History has witnessed the loss of millions of dollars with the Mt Gox scandal, resulting in users literally ‘paying the price’. It, therefore, becomes vital to thoroughly research the options available while choosing the one that meets your needs. 

The cryptocurrency users today have a series of options for wallets to choose from. In this article, we take a look at the key features of different kinds of wallets available for you in the market today. 

The hardware wallets are the physical devices that are used to store private keys. The advantage of this wallet is that they are the most secure option available to tuck in your crypto funds. The disadvantage is that you will need to connect them to a computer in order to access your wallet, thus making them relatively less accessible. 

Currently considered as one of the best wallets for storing altcoins, the Ledger Nano hardware wallet comes in USB sized device. It is a multi-cryptocurrency wallet supporting more than 700 digital currencies and tokens. Further, it can also easily integrate with multiple cryptocurrency software wallets. The cryptocurrencies inside the wallet are stored offline, hence making it impossible to be hacked. 

Pros- The key features of security provided by Ledger Nano prevents your cryptocurrency funds against malware attacks and threats of hacking. The recovery process can be directly done from the device itself. 

Cons- It is a bit expensive, as most of the hardware wallets are. Absence of a password manager. 

Trezor is another hardware wallet, shaped like a USB drive and further supports multiple cryptocurrencies. The interface is simple, easy to use and supported with a sleek design. The device is supported on major operating systems including Windows, Linux, and Mac. 

Pros- The hardware wallet adds an extra layer of security using a randomly generated PIN number. Additionally, it also limits access given to third parties.

Cons- It is a bit overpriced. 

Mobile wallets are fairly convenient and easier to use as compared to other options available. 

With a mobile wallet, you can check your account transfers or make in-store payments using QR scanning instantly. However, mobile wallets also face the same concerns as a desktop wallet. Your private keys can just easily be stolen or hacked. 

Coin Bitcoin Wallet is an open-source wallet available as on Android, IOS and Windows. It supports prominent cryptocurrencies including bitcoin, Ethereum, and Litecoin. The mobile wallet provides security using  AES-256 encryption and a 4-digit PIN login. It does not store your private keys on its cloud or server. Hence, the control of your funds remains in your hands. 

Pros- The control of your crypto funds remain in your hands. It gives you complete privacy to your identity by not linking personal information like name, email id to your wallet address. 

Cons- It does not support multi-signature usage. 2 FA authentication is missing. 

The Mycelium, a mobile-only wallet, allows users to send or receive bitcoins. The wallet is currently available on Android and iPhone. It supports security features using cold storage functionality and is integrated with third-party apps like Trezor and Ledger Wallet. 

Pros- Secures wallet using a PIN. It provides some of the additional features including searching for the nearest bitcoin seller and multi-currency viewing

Cons-  Complicated; especially for new users. 

Software wallets or desktop wallets are locally stored inside your desktop or laptop’s hard drive. The disadvantage is that software wallets are more susceptible to hacker attacks as they are remotely connected with the internet. On the upside, they have significant advantages if you are trading in small amounts. 

The Electrum software is one of the oldest providers of cryptocurrency wallets. The platform is fast and easy to set up. Supporting bitcoin, the electrum wallet ensures the security of your private keys using 2 separate levels of encryption. The software can easily integrate with some of the hardware wallet providers including ledger and Trezor. 

Pros- The enabling Simple Payment Verification (SPV) feature that can instantly verify transactions using fee adjustments. 

Cons- The limited number of cryptocurrencies supported. Additionally, its interface is a bit tricky for a beginner. 

Exodus is a desktop-only software wallet that supports around 100 cryptocurrencies. This wallet is fairly easy for a beginner to operate. On exodus, you can directly trade bitcoins and other altcoins in the wallet itself. The wallet rendres privacy features by not requiring you to reveal any personal information such as your mail-id. 

Pros- Intuitive and easy interface. Facilitating direct transactions between two cryptocurrencies.

Cons- Limitations in security features. Lack of 2FA authentication/

To be fairly honest, online wallets are comparatively quite insecure as compared to other wallet options. The access to your private keys remains in the hands of third-parties. The advantage of an online wallet is that you can access your funds using the internet anywhere, anytime. However, they should only be used in case if you want to transfer your funds from one place to another. 

The Guarda online wallet is a multi-currency wallet supporting a number of different cryptocurrencies and tokens. It is a non-custodial wallet, meaning that it does not store your private keys data. Overall, its system is user-friendly and can be managed from any device. 

Pros- Supports a wide range of cryptocurrencies. It provides a seamless transfer of your assets from one coin to another without complex procedures.

Cons- It lacks advanced unique functions as compared to others. Limited Security. Being an online wallet it is prone to hacking and cyber thefts. 

A popular cryptocurrency platform, coinbase facilitates transactions of different cryptocurrencies that are further stored in its online servers. The exchange claims that private keys are not stored inside the coinbase servers and users retain full control over their wallet. The wallet is quite easy to use even for a beginner.

Pros- Easy transfer of your crypto assets from from one wallet to another. Provides 2 FA authentication

Cons- Requires identity verification, which is a concern for some users. Limited support of cryptocurrencies as compared to its peers. 

Paper wallets are one of the safest ways to store your cryptocurrency funds. It is a software program that basically generates a set of your public and private keys. They are then printed on a piece of paper along with a QR code and kept offline. However, if you lose the piece of paper, you can also lose access to your funds. 

BitAddress and Bitcoinpaperwallet allow users to create and print your private keys and QR codes on a paper. 

We have explored all the different options available in the market today as well as the pros and cons of each one. Each of them has something to offer- while some are focussed on providing security others are focussed on creating easy accessibility. Alas, no one wallet has it all!

Ultimately, it comes down to your needs- how much funds do you have, how frequently do you plan on using it, the measure of privacy do you need, the amount of security you need, and so on. Further, you can also choose a different approach to combine different wallet options. However, whichever method you choose, it requires thorough research and thinking on your part. 

Lastly, it is a fact that the crypto sphere is expanding. Consequently, more wallets with advanced features will be added to the market. Will there be one that caters to all our required needs? Only time will tell.