Different Types of Cryptocurrency Wallets and Their Benefits

You need a cryptocurrency wallet to interact with a blockchain network. A wallet acts as an interface between you and the network. Similar to how you need a bank account number and pin to access your funds, you also need a public and private key to access your crypto savings account.

Some cryptocurrency wallets offer improved security over others, but crypto wallets don’t store cryptocurrencies. They simply connect users to blockchains and ensure the storage of keys.

Different Types of Crypto Wallets

These are the five types of crypto wallets:

1. Online Wallets

Online crypto wallets are owned and controlled by third parties. You can store the keys remotely or download them as encrypted files to your computer. Examples include HolyTransaction, Coinbase, and Cryptonator.

Pros of Online Wallets

• Easy to set up and use
• Anonymity, because most of them don’t require identity verification

Cons of Online Wallets

• Share the risks of centralized exchanges
• Highly vulnerable to online attacks and censorship

2. Mobile Crypto Wallets

These are software wallets you download on your smartphone. They're ideal for people who use crypto to pay for goods and services regularly and day traders. Examples include MetaMask, Trust Wallet, and NOW Wallet.

Pros of Mobile Wallets

• Safer than online wallets
• More convenient than paper and hardware wallets
• Have extra features such as face identification and QR code scanning

Cons of Mobile Wallets

• Prone to online attacks and aren't ideal for long-term holding

3. Hardware Wallets

These are offline wallets that often resemble USB devices. While they're ideal for long-term holding, hardware wallets aren't widespread. Examples include Ledger Nano S and Trezor Model One.

Pros of Hardware Wallets

• Don’t expose private keys to computers and are immune to computer viruses
• Require users to verify transactions on their devices (not a downloaded app on their desktop or mobile) before adding them to blockchains

Cons of Hardware Wallets

• Costly (but still a good investment because they provide more security).

4. Desktop Wallets

Desktop wallets are software you install on your desktop. Examples include the MetaMask browser extension and Exodus.

Pros of Desktop Wallets

• Store private keys on your hard drive, which is less risky than storing them online.

Cons of Desktop Wallets

• Require regular updates, consuming much memory
• Prone to computer viruses

5. Paper Wallets

Paper wallets present a unique way of storing keys in written or printed papers with QR codes. Examples include MyEtherWallet, Wallet Generator, and Bitcoin Paper Wallet.

Pros of Paper Wallets

• Store private keys offline, minimizing online attacks

Cons of Paper Wallets

• Easily lose or misplace the paper containing your keys