The Different Types of Crypto Wallets

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In response to ash368 here is my roundup of the many different types of crypto wallet. I try and give an outline of the main types along with the pros and cons of each type. As always feel free to ask any questions in the comments below.

Online Wallets

An online wallet is a cryptocurrency wallet that you access via your web browser. They are the easiest type of wallet to create, however in most situations you don't control your private keys, although there are exceptions. In this discussion I'm going to also lump exchanges in with online wallets.

There are also incredibly attractive to hackers and they work much harder to get money from them. It happens, you’ve been warned. Just look at the Mt Gox hack.

Advantages:

• Ideal for holding small amounts of cryptocurrency for trading
• Some are able to manage multiple cryptocurrencies, transfer amounts between them, or be directly integrated into an exchange

Disadvantages:

• Users are susceptible to phishing scams, malware, insider hacking, DDOS attacks, and outdated security measures
• Your wallet is "out of your hands" and coin information is stored on a third-party
• Your computer is open to malware, keyloggers, and viruses.

Examples: Exchanges like Bittrex or Poloniex, and online wallets like MyEtherWallet.com and MyMonero.com.

Software Wallets

A software wallet is considered somewhat more secure than online wallets, however that depends on your commitment to online security. You have to download a software wallet onto your desktop or mobile and in the case of QT wallets completely download and sync the blockchain which can often take a long time, although there are light wallets like electrum which don't require you to download the blockchain.

In cases where you use an old laptop, completely offline, on a clean operating system install – you could consider this a really effective cold storage method. Like phones, a lot of people have an older laptop floating around and this could be a great use for it.

Advantages:

• Generally fairly easy to use
• Private keys not stored on a third-party server
• TOR network or VPN can be used for more privacy

Disadvantages:

• If connected to the internet there are security and privacy caveats
• If you forget to back it up and your HD fails you'll lose your coins
• Your computer is open to malware, keyloggers, and viruses

Examples: Exodus, Bitcoin Core, Any QT wallet for desktop or stuff like Copay and MyCelieum on mobile.

Hardware Wallets

Hardware wallets are a perfect solution for long term cold storage of large amounts of cryptos which you don't need day-to-day access to. There are also very secure.

Advantages:

• If it has a screen, it’s the most secure way to store crypto long-term
• Stronger security than all other wallets, for the most part

Disadvantages:

• Cumbersome for some beginners to use, but an absolute must for large quantities of cryptocurrencies
• Often sold out, but if you perservere you'll get one

Examples: Ledger, Trezor and KeepKey are really great solutions.

Paper Wallets

Before there were hardware wallets, paper wallets were the defacto standard for cold storage of cryptocurrencies. They consist of a private key and a bitcoin address, often with QR codes for easy import.

Advantages:

• One of the most hacker-proof crypto wallet choices
• Not stored on a computer
• Private keys not stored on a third party server

Disadvantages:

• More effort required to move cryptocurrencies around
• More technical understand required

Examples: BitAddress.org and Bitcoin Armory can help you create and print your paper wallet.

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