Using a wallet to store your digital assets is a must for adequately securing your cryptocurrency. Exchanges such as Coinbase and Binance are useful for purchasing crypto assets, but they are not recommended for storing funds for long periods of time. Exchanges are famously targets for cyber-attacks. Even worse, they do not give users access to their private keys.
What is a private key?
Your private key is the code that gives you ownership of your crypto assets, and allows you to recover them in the case the wallet you are using is no longer working.
Your private key should be backed up only offline, on paper. Desktop software wallets give users increased security as they are not online, and they provide you with easy access to your private key.
This guide gives an overview of the top software wallets and explains how hardware wallets differ. All software wallets are free and greatly more secure than exchanges, but still less secure than hardware wallets.
The Best Bitcoin Only Wallets
Electrum is one of the Bitcoin wallets with the longest track record. Electrum offers all of the useful security features of a wallet including encryption, a recovery seed, and multi-signature and 2-factor authentication. The recovery seed (link to our recovery seed article here) is a random phrase of 12 words that can be used to recover all of your Bitcoin funds. The Electrum wallet generates recovery seeds that correspond to 256 bits of security which is the same as Bitcoin private keys.
The multi-signature option allows users to require multiple keys to authorize a Bitcoin Transaction. This can divide the responsibility between multiple people or multiple computers. The two factor authentication works by requiring a code from a cell phone to authorize the transaction.
Even though the original Electrum is only compatible with Bitcoin, the software is open source, so developers have created Electrum wallets for other top crypto assets such as Dash, Litecoin and many more. While Electrum offers top notch security, its interface is not as intuitive and polished as the multi-currency wallets listed below.
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Armory is an open source Bitcoin wallet that offers many unique advanced features.Armory depends on the Satoshi client, the original open source Bitcoin software, to securely connect to peers, validate blockchain data, and broadcast transactions. Armory’s most secure feature is that it offers wallets that can be created on entirely offline computers and devices.
Other advanced features of the wallet include customizable recovery seeds and one-time paper or digital backups. The wallet can toggle between Standard, Advanced, and Expert modes. Armory offers excellent security for Bitcoin, but its advanced technical nature and lack of customer support make it not ideal for beginners.
The Best Multi-Currency Wallets
Multi-currency wallets are each compatible with a variety of different crypto assets. Furthermore, the following wallets all allow you to use only one recovery word seed for all of your different crypto assets stored on the particular wallet. In the event that the software wallet is no longer working properly, the recovery seed can be imported into any wallet that is compatible with the 12 word seeds, and the user will then be able to regain access to their assets.
Jaxx supports many of the top crypto assets including Bitcoin, Ethereum, Litecoin, Zcash and a variety of ERC20 tokens. Jaxx is also compatible with Android and IOS.
In addition to the recovery seed, the wallet has a password and face ID option.
Jaxx is not only a wallet but can also serve as an exchange by allowing users to trade one coin for another inside the app itself. The wallet features cryptocurrency market data that shows price changes, market caps, trends and news for the various cryptocurrencies.
2. Atomic Wallet
Atomic Wallets supports hundreds of crypto assets and all the of ERC20 tokens. This open source wallet allows you to also exchange coins for each other and it features the following coins available to buy with a credit card: BTC, BCH,ETH, LTC, XRP, BNB, TRX , ATOM. The wallet has a sleek and intuitive interface that clearly displays useful transaction data.
As one of the most popular desktop software wallets, Atomic Wallet has over 1000 reviews with a 4.6average on TrustPilot. The wallet offers 24/7 customer support which is particularly helpful for new investors of cryptocurrency.
Exodus supports over 100 cryptocurrencies and has a beginner friendly and aesthetic interface that offers an easily understood visual representation of one’s investments. The built in exchange allows users to trade between about 70 of these coins.
The Exodus company offers 24/7 customer support and the website also has a frequently updated knowledge base and a variety of educational resources regarding not just the wallet, but the world of cryptocurrency.
Exodus is compatible with IOS and Android mobile devices, though only 50 of the100 coins work with the mobile option.
The Best Ethereum Wallet
MyEtherWallet is an online wallet that supports Ethereum and all ERC20 tokens. This wallet is open source and is the most extensive storage option for Ethereum based coins. ERC20 tokens are stored on the Ethereum blockchain and therefore can all be sent and stored with the same public address.
Users do have the option to create as many public addresses as they like which can serve as multiple accounts.
MyEtherWallet allows users to easily swap between fiat currency and Ethereum and ERC20 tokens. The interface of MyEtherWallet is also fast and convenient.
A risk of MyEtherWallet is that it is online which has made it the target of hacks. However, MyEtherWallet can be used with hardware wallets (link to article), and this strategy negates the risk of any online hacks.
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Software Wallets Vs. Hardware Wallets: What's the Difference?
Desktop and mobile software wallets are much safer than online exchanges, however they are not as safe as hardware wallets. With software wallets, your private key is stored offline but is still on your computer and in reach of hackers. Because your computer is connected to the internet, it is possible that it can be infected with malware designed to steal your cryptocurrency.
For example,one possible vulnerability this system is that the recovery seed of a software wallet must be entered in via your computer, where a hacker could be using a virus to record your keystrokes. The security ofyour software wallets therefore depends on the security of your computer and internet system, where much remains outside of your control and prone to catastrophic risk.
Hardware wallets are the safest storage solution for crypto assets and they are immune to these vulnerabilities of software wallets. Hardware wallets, also known as cold storage devices, keep the recovery word seed entirely offline and are isolated from the computer or mobile device that is connected to the internet. Hardware wallets are separate devices that plug into the computer, but the recovery seed remains isolated in a specialized microprocessor of the device. Even if a hardware wallet is plugged into an infected and compromised computer, the private key and thus all of the crypto assets will remain completely protected.
Investors can have virtually impenetrable security with hardware wallets, as long as they make sure of the following: the device comes from an authorized seller and has an authentic tamper proof seal intact, the physical hardware wallet device remains secure, and the recovery word seed is backed up properly and remains secure.
Hardware wallets can also be used with many software wallets such as Electrum, MyEtherWallet and Exodus. When a hardware wallet is synchronized with a software wallet, the recovery seed still remains entirely secure and only stored on the hardware wallet. The software wallet will then not generate a seed, and only act as an interface to view the balances and transaction data of the seed of the hardware wallet.
For example, Exodus can be used with the Trezor Model T, and users can enjoy the best of both worlds, the maximum security of a hardware wallet, and the intuitive interface of Exodus.
While software wallets are good free solutions for the initial step of getting your assets off an exchange, purchasing a hardware wallet is well worth it for serious cryptocurrency users and investors.