Peter Kent - Cryptocurrency All-in-One For Dummies

© John Wiley & Sons, Inc.

FIGURE 3-1:Popular cryptocurrency wallet types.

Online wallets may be less secure, but they do have a bunch of advantages for small amounts of cryptocurrencies. An online (or web ) wallet allows you access to your cryptos via the Internet. Therefore, as long as you’re connected to the Internet (the cloud), you can reach and store your coins and make crypto payments. The online wallet provider stores your wallet’s private key on its server. The provider may send you the crypto code but store your keys and give you the ability to access your keys. Different services offer various features, with some of them linking to multiple devices such as your mobile phone, tablet, and computer.

Advantages of online wallets include the following:

They enable fast transactions.

They may be able to manage multiple cryptocurrencies.

They’re convenient for use on the go and for active trading.

Disadvantages include the following:

They risk your online security because of potential vulnerability to hacks and scams.

They risk your personal security because of potential exposure to computer viruses.

You aren’t storing your cryptos; a third party is.

Table 3-1shows some popular online wallets.

TABLE 3-1Popular Web Wallets

Mobile wallets are available on your cellphone through an app. You can use mobile wallets when shopping in physical stores as cryptocurrencies become more acceptable. Note: Other types of wallets, such as online wallets (see the preceding section), offer mobile versions as well. But some wallets are specifically and only used for mobile phones.

Mobile wallets (see Table 3-2for some popular ones) fall into the category of software wallets and have these advantages:

They can be safer than online wallets.

They’re convenient for use on the go.

They offer additional features such as QR code scanning.

Some disadvantages of mobile wallets include the following:

You risk losing your crypto assets if your phone is lost or damaged.

They run the risk of getting mobile viruses and malware.

TABLE 3-2Popular Mobile Wallets

You can download a desktop wallet and install it on your computer. Some argue that desktop wallets are safer if your computer isn’t (or even better, has never been) connected to the Internet. If a desktop computer has never been connected to the Internet, it essentially becomes a cold wallet. On the other hand, a computer that has never been connected to the Internet may expose you to malware that may automatically move from the wallet drive that you connect to the computer and infect the desktop because it’s never been patched with software updates that require an Internet connection. Talk about a catch-22!

To set up your wallet on a computer that has never been connected to the Internet, you must first download the latest version of the wallet on a computer that is connected to the Internet. You then move the file to a USB drive or something similar in order to move it to your offline computer.

See Table 3-3for examples of popular desktop wallets. Some advantages of desktop wallets (which fall into the category of software wallets) include the following:

They’re a convenient choice if you trade cryptos from your computer.

You aren’t storing your private keys on a third-party server.

If your computer has never been connected to the Internet, a desktop wallet can be safer than an online wallet.

TABLE 3-3Popular Desktop Wallets

But desktop wallets do come with some disadvantages:

Using your crypto assets on the go is more difficult.

If you connected the wallet to the Internet, it turns into a less secure hot wallet.

If you don’t back up your computer and it dies, you lose your cryptos.

A hardware wallet can arguably be one of the safest types of crypto wallets out there. These wallets store your private keys on a device like a USB drive. You’re still able to make online transactions, but the wallets are offline most of the time, so you can consider them cold wallets. Check out Table 3-4for a short list of popular hardware e-wallets.