Everything you should know before choosing a crypto wallet

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So, after contemplating for a while whether to give crypto a try, you’ve finally taken the leap and decided to jump in. Now, you’re thinking about buying your first coin and hopefully, making some big profits.

So, after contemplating for a while whether to give crypto a try, you’ve finally taken the leap and decided to jump in. Now, you’re thinking about buying your first coin and hopefully, making some big profits.

Whether you want to buy Shiba Inu coin, or any other crypto that interests you, it’s very easy to do so because you can find the most popular coins listed on Binance, a reputable crypto exchange that will equip you with the tools and resources to navigate the market with confidence.

Getting started with crypto is empowering, as you’re not dealing with intermediaries, which gives you much more freedom and control over your money.

On paper, this sounds great, but the reality looks a little bit different when it comes to crypto, and the truth is that you have to make lots of big decisions along the way that will impact your success.

One of the most important is choosing the right crypto wallet, which is essentially a tool that enables you to manage, send, receive, and interact with digital assets. Think of it this way: when you don’t control your private keys, you aren’t in full control of your tokens.

A wallet means you have autonomy over your crypto by protecting your cryptographic keys, which are required to access your holdings.

But how do you choose a crypto wallet, anyway? We will walk you through everything you need to know about crypto wallets below, so that you can make an informed decision.

The different types of crypto wallets

The way you plan to use your crypto and the number of tokens you want to hold will determine your wallet choice. Based on these factors, there are two types of wallets to choose from:

• Hot wallets represent an app or browser extension that stores the private keys of the wallet on a device connecting to the Internet. They are easier to use and offer some functionality, such as no-fuss connections to dApps, but they raise concerns about hacks and bugs that could expose your private keys.
• Cold wallets generate and store their private keys offline. It’s basically a hardware device connecting to your smartphone or computer whenever you need to authorize a transaction or access your crypto, and it’s considered more secure than a hot wallet.

Another aspect to consider when choosing a crypto wallet is whether you control the private keys or a third party does:

• Custodial wallets don’t give you access to the private keys. You can log in to the exchange and use the crypto you hold there for trading, but that’s pretty much it. This type of wallet can be more prone to breaches, and in some instances, access to your account may even be blocked, and you may find yourself unable to withdraw your crypto. On the bright side, however, custodial crypto wallets are the easiest option if you’re a crypto newbie and don’t keep too much cash on the platform.
• Non-custodial wallets enable you to control the private keys of the wallet, which is often achieved with the use of a 12 or 24-word seed phrase that generates the private keys of the wallet through cryptography. If you use this type of wallet, however, you are entirely responsible for keeping the private keys and seed phrase safe. If you lose access to the latter, it won’t be possible to access your crypto anymore.

How to choose the right crypto wallet

Each type of crypto wallet has its pros and cons, and there are a few questions you should ask yourself to figure out which one is right for you:

1) Are you considering trading actively or holding for the Long term?

A cold wallet provides a more secure choice if you’re aiming to buy and hold for a longer time. However, if you expect to use crypto frequently and the value is relatively low, a hot wallet is a more convenient option.

2) Is security or convenience more important to you?

This consideration is related to the value of your coins. Suppose you have more to safeguard, then it makes sense to invest in a cold wallet which provides protection against online threats as it stores your private keys offline.

But you can also pair cold storage with supported hot wallets if that suits you more. Just note that hot wallets offer more convenience compared to cold wallets as a standalone solution. A cold wallet, on the other hand, requires connecting it, and it’s the better option if security is what matters more to you.

3) Are you planning to hold a large or a small crypto amount?

Convenience aside, if you’re planning to hold a large amount of crypto, a cold wallet provides a much more secure option.

Think of it this way: if you step out the back door temporarily, you won’t likely lock the house; however, if you leave for a week, you’ll lock the windows and doors, set the lights on timers, and even set the alarm. It’s the same for crypto: risk management decisions all depend on the level of exposure.

4) Do you want control over your private keys?

Many users decide to withdraw their crypto from an exchange to a non-custodial wallet once they are done trading or after completing a purchase.

The reason is that this allows them to keep control of their crypto funds and sidestep the risks that we earlier discussed that are often associated with exchange wallets.

If you expect to utilize your crypto only on the exchange itself and practice safety measures, a custodial wallet is much easier to use, as it’s similar to online banking or payment services.

The bottom line

Choosing a crypto wallet comes down to assessing your needs and risk level. Exchange wallets are the easiest option, but they don’t let you access your private keys, and there’s a risk of your funds being stolen or your account being compromised.

Hot wallets allow you to retain full control over your private keys, but they may still be vulnerable. Hardware wallets offer the best protection because they store private keys offline.

However, many investors balance the benefits of both, using a hot wallet for daily activity while keeping most of their assets in cold storage. You could consider doing the same if it sounds like a good fit for you.

Have any thoughts on this? Drop us a line below in the comments, or carry the discussion to our Twitter or Facebook.

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