The word digital currency or cryptocurrency is not unfamiliar to many people today. However, a lot of people do not understand that how can they use virtual currency to buy or sell goods or services? The answer is simple; to store a digital currency, it is necessary to have a digital wallet. To understand the concept more effectively, take the example of any modern money transferring application like PayPal, Venmo, WorldRemit, MoneyGram, etc. These apps provide a virtual space for a person to store their fiat money in one place. The crypto wallets perform the same functions for cryptocurrencies.
Any person who owns Bitcoin or any other altcoins like ETH, ADA, XLM, LTE, UNI, etc would be able to use the application that is called crypto wallet to store, transfer, and receive the digital assets. In technical terms, a crypto wallet records encryption keys that are used to digitally sign transactions and provide storage space for the address on a blockchain where the owned digital asset resides. There are different types of digital wallets available for use. Some digital wallets are facilitated by the blockchain itself, others are provided by crypto exchanges like Coinbase, and third-party payment platforms like PayPal also present some. For the most part, when a person is using a digital wallet to store the cryptocurrency in their possession, they are not charged for it. However, most digital wallets charge some percentage of transaction fees when the currency is withdrawn, deposited, or exchanged, etc.
Storing the digital asset on an exchange is possible, but to have better control over the digital asset, most users try out a third-party application designed for the specified purpose. When it comes to picking out the right digital wallet for a person, many important factors should be kept in mind.
Here are some of the most important factors to consider while picking out a digital wallet for your personal use.
- User Interface and tool
For many people, digital wallets can be a foreign concept that has too many technological hassles. However, some digital wallets like Exodus offer the customers a simple user interface and let them treat their digital assets just like the fiat currencies, i.e., dollar, euros, yuan, etc. Some tools are simplified and easy to understand and use, which could be under the grasp of a person who is not a coder, programmer, or IT expert.
- The Background of the Service Provider
Many people hear about digital currency scams in the news and think that the system is filled with flaws and cybercrimes. The truth could not be further from that. The fear of being robbed or hacked is rational, but the people who have invested their money in digital assets have returned as high as 300% within a week or month. The key is to research the company’s reputation whose services you are going to use. It is better to search for that is providing the service, how many people are currently using the service, if the service providers are insured, and are there any reported hack incidences, etc.
- The Type of Technology used by the Service
A person with a cryptocurrency has a private key on them to keep the digital assets from getting stolen. It is very important to understand that if the person would hold the private key or it would be stored on the server of the service provider. The first option is more secure. Also, open-source wallets allow third parties to access and review the code, which is a better option. Some wallets also offer secluded storage with propriety code which is a less secure option due to the absence of transaction confirmations. It is also important to read the FAQs and the company policy to find out about the service provider’s privacy laws.
- The Number of Backup Features that are Offered
There are some cases when the theft of a mobile phone or a laptop can result in the loss of digital money in its entirety. This could be a huge problem for many people. Sometimes, people accidentally damage their devices, or they can get plagued with software or hardware issues. Therefore, it is important to have back options like rescue link, password recovery, numbers, or phrases to access the backed-up content on a digital wallet. It is also useful to have an entrance gateway from multiple platforms like desktop apps, mobile applications, and others. Don’t forget that wallets with two-factor verification are more secure as well.
- The Diversity of the Wallet with Different Cryptocurrencies
Many digital wallet platforms allow users to deal in multiple digital currencies in one place. However, some others are simply purpose-built wallets that deal in only one currency. Some digital wallet service providers deal in premium or mainstream altcoins. Depending on the needs and requirements of the person, every type of digital wallet can offer a unique utility.
- The Ease of Crypto Conversion
The facility of cryptocurrency arbitrage is a real thing. Many users wish to diversify their digital asset investments and invest in different types of cryptocurrencies. With the help of the crypto conversion feature, it is more convenient to exchange and deal in different digital assets without having to install more applications or transfer your stash to a new platform. It should also be noted that how much is the conversion charges on the platform and what is the speed of conversion per second.
- Public Key Storage and Shared Wallets
A cryptocurrency requires all parties to confirm a new transaction on the blockchain. Many digital wallets allow multiple users to access code and provide this confirmation of transactions universally. This type of wallet is called a ‘Multisig’ account. This feature is like a joint bank account that is ideal for the use of family members or business partners.
- Integration with other Platforms
Many people use different wallets on different platforms. This process can take a lot of time and can also create the hassle of keeping track of the total digital currency balance sheet. Therefore, the new digital wallets are trying to be more inclusive of several platforms and offer the users the ease of third-party integration. The more a digital wallet is compliant with other platforms, the easier it would be for the owners to use their wealth.
- Built-in QR Scanning
For the users who prefer to work with mobile wallets, the ability of the digital wallet to scan and generate QR codes is a great facility. The address of a blockchain consists of at least 30 or more alphanumeric values. Keeping track of such a number can be quite problematic. However, dealing with a QR code is easier, and it is also very secure since there is a new QR code for every new transaction.
- Live Customer Service
The value of customer services does not go down with the digital wallet service as well. At any given point, a user can encounter a problem or have a question about the service. The digital wallet platforms that offer 24/7 live customer services are the ones that can be trusted the most.
- Funding or Cash Flow Liquidity Risk
Many digital wallet platforms have a weak server at their back, and some also offer poor transaction speed. It is important to cross-check before signing up for the service that if there have been any records of server crashing down during a high upsurge of trade volume on the service. The values of digital assets are always changing; it would be a big disaster if a user is unable to trade their digital assets at the right time; therefore, check for liquidity risk factor first.
- Updates and Upgrades
Blockchains like Ethereum and Cardano keep sending updates, and these updates would not be applied to the current possession of the digital assets if your wallet cannot handle these changes. Improvements like Segwit (Segregated Witness) and occasional hard forks from the blockchain are always emerging. There is also the option of storing your wealth on a hard ward wallet until things settle down.
The Top-Rated Crypto Wallets of 2021
Coinbase was established in 2012, and it is the largest crypto exchange platform operation in all US states except Hawaii. The crypto exchange has over 43 million users in 100 different countries across the globe. The best feature about Coinbase is that it is a well-known brand with a simplified yet effective user base. It offers security features like insurance against any hack attacks and also had two-factor authentication verification.
Coinbase also offers a more advanced rendition for the users who want to access features like trade charts and market analytics tools. The advance upgrade is free for all the registered users of Coinbase. The platform can be accessed from both iOS and Android devices. However, it is not available in the application stores yet and only operates on browsers. The security protocols on this platform are great as it offers features like bio-metric login too.
- Simple and effective user interface
- Breach insurance
- Known and stable brand
- Listing of over 25 cryptocurrencies
- High liquidity rates
- High transaction fees
- User independent wallet keys
- Have a limited number of altcoins
MyEthereumWallet or MEW is not a digital wallet originally; it has an interface that acts as an access point for the investors of the digital assets on Ethereum blockchain, namely Ethereum classic and Ethereum 2.0. While it is not a traditional digital wallet, it is still a highly sought-after service among Ethereum Traders. The digital wallet is completely free of cost and does not charge the users any type of money.
It is primarily a hot digital wallet which means that it can only be accessed via an internet connection. However, the cold wallet storage support is great. The MEW generates a unique private key for the connected wallet that cannot be accessed by any person online. On the other hand, it also allows the users to transfer their money to the hardware wallets.
- No Fees Charged
- Great online and offline storage support
- Open-source platform
- No theft of personal information
- Available in 192 countries and 18 languages
- Deals only in Ethereum and Ethereum 2.0
- Reported incidents of phishing attacks
- Knowledge base customer support only
The Exodus wallet is famous for its straightforward and intuitive user interface. It is often dubbed an ideal platform for users who are only starting their digital currency journey. There is also a built-in exchange where the users can trade in with 100 others altcoins. The only issue with Exodus is that it is not completely open-sourced. The third-party users are unable to access the code and confirm the transaction.
This could create some issues with the security, and users have no choice but to depend on the Exodus team to ascertain that there are not suspicious currency transfers. However, the platform has other great features like the backup of data with Shapeshift protocol, and it is also compatible with hardware wallets like Trezor. Exodus also offers custom fee setting options for currencies like Bitcoin. It is also available on iOS and android mobile applications other than the desktop platform.
- Built-in crypto exchange
- Great Customer Support
- Hardware storage capability
- Updated regularly
- User-friendly Interface
- Partially open-sourced
- Custom fee structure for Bitcoin only
- Lack of advanced trading features
This mobile wallet is originally designed for supporting Bitcoin and has been around since 2011. The most important feature of this digital wallet is that it is a light application; rather than installing the entire Bitcoin blockchain, it allows the users to connect with different servers and ascertain their current BTC balance. The setup speed is many times higher, and it also occupies a very small amount of storage space.
The platform can also be accessed from platforms like Android, Mac, Windows, and Linux. Electrum is also well-known among advanced users for its great security protocols. The users can custom their key phrases according to their needs. When a person registers on the platform, it gives a 12 worded seed phrase. If the users save this key, they would be able to recover their account later on. The users can also encrypt their wallets during the file setup if they wish to do so.
- Advance trading features
- Great speed and small storage requirement
- Fully open-sourced
- Switchable to cold wallet mode
- 2-factor authentication and multi-signature wallet options
- Relies on other servers for payment information
- Rudimentary user interface
- No customer support
Mycelium was first launched in 2013, and it is also a hot digital wallet but also offers cold storage support. The users of Mycelium can enjoy a more advanced user interface with better security features. The platform is, of course, 100 percent open-source that makes it a great choice for reliable trading. On the other hand, it only works for BTC, ETH, ETH 2.0, and FIO tokens thus far.
The platform uses Simplified Payment Verification or SPV that allows the users to download the service without having to install the entire blockchain. It was first launched for android users but later become available for iOS as well. It is only accessible on mobile applications. The platform also offers a built-in exchange.
- Integrated with hardware wallets
- Customized transaction fees
- Minimal storage space
- Advance wallet tools and features
- Free download
- Available only as a mobile application
- Not suited for beginners
- Only deals in Bitcoin, Ethereum and FIO
Ledger Nano X
This digital wallet was first launched in 2014 by a French enterprise named Ledger. It is a hardware wallet that was designed keeping in mind the needs of the HODLers. It means that this wallet uses a hardware device where the users can store their digital assets. However, the users can connect the device with their mobiles or laptop via Bluetooth as well as a type-c USB cable.
The security protocol of the digital wallet has been confirmed by French National Cyber Security Agency or ANSSI. Despite being a primary storage device, the users can interact with the crypto exchanges due to the recent partnership with Coinify, Changelly, and DeFi protocol compound. Another noteworthy feature of the digital wallet is the availability of Ledger Live software that allows the users to create different wallet accounts and diversify their portfolios.
- Deals in more than 1,500 altcoins
- Intuitive user interface
- Open-sourced software for better security
- High-Security Protocols
- DeFi functionality
- Recent security breach incident exposing the personal information of users
- Available for an initial price of $119
- Limited Wallet storage
Trezor Model T
Trezor is also a hardware wallet like Ledger Nano X. However, it is a second-generation digital wallet that is developed by Trezor Inc. This digital wallet is well-suited for both HODLers and active traders. The level of security on the platform is quite impressive. Users can install their encryption key on the small touch screen on the USB itself.
The USB also comes with a MicroSD card that allows the users to encrypt the PIN and enjoy a higher level of security. The users can also trade their digital assets on integrated exchange platforms like Changelly and Shapeshift. There is also a web portal for the users who prefer to manage their digital assets on the desktop. The Trezor currently deals in 1,600 different digital currencies, which is great from a trading point of view.
- Integrated crypto exchange
- Better Bluetooth integration
- High count of supported cryptocurrencies
- Open-source software and hardware
- Color touchscreen
- Higher Prices
- Mobile support for Android only
- Confusing UI for beginners
Wasabi is an open-sourced digital wallet that is available for online transactions. This wallet is specifically designed for users who are very conscious of security issues. The wallet makes it almost impossible to have a hack attack since it routes the transactions through an anonymous TOR network which masks the IP address of the end-user.
The implementation of the CoinJoin protocol adds another layer of security. The CoinJoin makes every single Bitcoin transaction more secure by jumbling up the inputs and outputs and conjoining coins from multiple users in a single place. This platform is great for traders who prefer to deal under a pseudonymous persona. The only downside to Wasabi is that it is more suited to the needs of advanced users rather than beginners.
- Open-source security protocol
- IP address protection
- CoinJoin integration
- Custom fee options
- Advanced security features
- Confusing for starters
- Only deals in Bitcoin
- No built-in exchange
Robinhood did not start as a digital wallet, but it, later on, added the feature for its users to deal in cryptocurrencies. It is a remote brokerage application that works as a stock trading platform. The most eminent feature of this digital wallet is that it does not charge the users any transaction fee on Bitcoin buying or selling. There are a total of seven cryptocurrencies available on the platform for now.
In the beginning, the users could only access the mobile versions, but now there is also a desktop platform. The users also have the option to upgrade to a premium account with an advance trading feature by paying for the upgrade. Robinhood works both as a digital storage platform as well as a crypto exchange, but the users cannot export or import their digital assets from other digital wallets.
- Suitable for both beginners and advanced users
- Ability to access stocks, forex, and digital currencies
- Upgrade to advance trading charts
- No transaction costs for Bitcoin
- Easy to understand Interface
- Not a dedicated digital wallet
- Recorded downtime
- The threat of security breach
It is also a brokerage platform for providing financial solutions to students and beginners. The minimum account opening requirement is a 10 dollar deposit. The platform charges the users a 1.25% universal markup on all transactions. For now, the users can only access a limited number of digital assets like Bitcoin, Bitcoin Cash, ETH 2.0, Litecoin, Ethereum Classic, and Dash coin. The advanced features of the application are also nothing to boast about. However, this platform is good for users who are only getting started on cryptocurrencies. One point of concern for users is that they cannot transfer their altcoins from other digital wallets or blockchains.
- User-friendly Interface
- Simple trading tools
- Free download
- Stocks and digital asset trading
- Free access to financial charts
- Limited digital currencies
- Unable to integrate with other digital wallets
- Deposit fee mandatory