Cryptocurrency investors and traders have a few options when it comes to holding their assets.
However, different types of cryptocurrency wallets are designed for different types of investments, so it’s important to understand what each of them has to offer.
Read on to find out about the pros and cons of the five main types of cryptocurrency wallets to start learning about options.
#1 Web Wallets
Web wallets like XMRWallet.com for Monero (XMR) run in investors’ browsers to give them access to their crypto investments from anywhere they can connect to the Internet. Be sure to use a private and safe Monero Wallet to store your XMR. They store private keys on secure servers and allow users to make and accept payments on the go.
Pros of Web Wallets
There are many advantages to being able to access your bitcoin wallet from anywhere. Web wallets can be used to make purchases using cryptocurrency or get started trading it, often without having to invest in any additional hardware or software.
Many trading platforms offer free web wallets to investors that use their services, and most offerings feature easy-to-use interfaces that make it possible for just about anyone, even those with limited knowledge of computers, to start trading small amounts of cryptocurrency.
Cons of Web Wallets
Web wallets are the least secure form of cryptocurrency wallets. They’re more prone to attacks by hackers, so most investors only use them to hold small amounts of cryptocurrency that they plan on trading or spending immediately.
Many investors also find that allowing other companies to store their private keys is an unacceptable security risk when it comes to holding large amounts of bitcoin or altcoins.
#2 Mobile Wallets
Mobile wallets work like other payment applications, allowing users to pay for goods and services at retailers that accept cryptocurrency.
Some online wallets have mobile options, but specialized mobile wallets offer added security over traditional web wallets in the form of QR codes.
Pros of Mobile Wallets
Mobile wallets are very convenient. They can be downloaded to any cell phone and used to transfer small amounts of cryptocurrency for easy on-the-go transactions.
They’re also slightly more secure than web wallets, but they are still subject to many of the security risks associated with all hot wallets.
Cons of Mobile Wallets
Mobile wallets are only good for holding small amounts of bitcoin since they’re still at risk of malware and virus attacks.
Since investors use them on their phones, there’s also a chance that they will lose their assets if they lose their smartphones.
#3 Desktop Wallets
Desktop wallets can be either hot wallets or cold wallets depending on whether investors use them to connect to the Internet.
Desktop wallets held on computers that are not connected to the Internet are cold wallets, while those that are held on Internet-connected computers are hot wallets.
Either way, they come in software packs that can be downloaded directly to the desktop and accessed from the computer instead of a browser, allowing for offline transactions.
Pros of Desktop Wallets
Desktop wallets held on offline computers are more secure than online or mobile wallets. They store private keys on the computer itself instead of on off-site servers, giving investors more control over their privacy and security.
As long as investors keep their computers offline or adopt smart cybersecurity practices, they shouldn’t have to worry about malware and viruses.
Cons of Desktop Wallets
Desktop wallets are only good for those who trade cryptocurrency using their desktop computers exclusively.
They can’t be used for on-the-go trading, and since investors themselves are responsible for keeping track of their private keys, they require frequent backups.
#4 Paper Wallets
Paper wallets are a form of cold wallet designed for holding cryptocurrency assets. Investors who go this route can print out their private and public keys, then hold those in a safe or a safety deposit box.
They can then use these keys when they are ready to transfer funds by transferring money to their wallets’ public addresses, scanning the paper wallet’s QR code, or entering the private key.
It’s important to use a secure computer that has been disconnected from the Internet to generate the keys, then wipe its history after it the keys have been created.
Pros of Paper Wallets
Paper wallets are cold wallets, which are inherently more secure than online wallets.
If investors take precautions while they are generating their private keys, they won’t have to worry about hackers. They will then have complete control over their keys.
Cons of Paper Wallets
Paper wallets create a different kind of security issue. If the computer isn’t fully secured and taken offline during private key generation, hackers can still gain access to the information.
Once the key is printed, anyone who can access it will also be able to access investors’ cryptocurrency assets. Plus, it can be very hard to access those assets if investors lose their paper printouts.
#5 Hardware Wallets
Hardware wallets are the most secure form of cold storage. They function like USB drives, allowing investors to store their assets offline without giving up the convenience of online wallets completely.
They’re one of the best options available for storing large amounts of cryptocurrency.
Pros of Hardware Wallets
Hardware wallets are a form of cold storage, so they’re very secure. The fact that they can also be used online also adds an extra level of convenience not found with paper wallets.
Cons of Hardware Wallets
Hardware wallets require a substantial upfront investment, which can make them prohibitively expensive for some investors. They’re also less convenient than online and mobile wallets for on-the-go transactions.
The Bottom Line
Investors have plenty of options when it comes to storing and transferring assets. Most hold both hot and cold wallets.
They use cold wallets for storing large amounts of cryptocurrency as a long-term investment strategy and hot wallets for day trading, paying for goods and services, and other minor transactions.
This approach allows investors to maximize both security and convenience, making cryptocurrency trading much easier without exposing large caches of private keys to hackers and other malicious people who could attempt to steal those hard-earned assets.