Before we dive into how to choose a crypto wallet, we will first explore what a wallet is, a wallet address, types of crypto wallets, and some popular wallets in the space.
What is a crypto wallet?
A cryptocurrency wallet is a digital wallet with a unique string of mostly alphanumeric characters called a wallet address that is used to receive and send crypto assets in web3. Most web3 applications require a wallet to interact with digital assets.
Crypto wallets have two main components - a public and a private key that is used to sign transactions.
The wallet address in layman's terms is like your email address - where you receive emails, and it is public information that can be shared with anyone. A crypto wallet address is comprised of randomly generated alphanumeric characters that serve as the public identity for a crypto wallet.
When you want to receive funds, you share a public address that is capable of receiving funds from others. The private key on the other hand should NOT be shared as sharing it could compromise the funds in the crypto wallet.
Different web3 ecosystems use different standards for wallet addresses. As an example, Ethereum and EVM-compatible networks use 0x… followed by other alphanumeric characters to begin a wallet’s public address.
Types of crypto wallets
To get the best experience while navigating web3, you need to take some time to carefully understand the different types of wallets, their unique advantage, and cost implications for you. Wallets are broadly categorized into software (hot) and hardware (cold) wallets.
1. Software or Hot Wallet: this is a typical web wallet extension or downloadable software on mobile or computer that allows the user to store their funds and enable them to buy, sell, swap, and earn crypto directly within the app.
2. Hardware or Cold storage: Cold storage or hardware wallet offers a more advanced form of storing cryptocurrencies. This is supposedly the most secure way to store assets as it does not expose the user's private key online.
Popular wallets in crypto
Below is a list of some popular wallets, and though it is not an exhaustive list of all the wallets available nor an endorsement of a select group of wallets, it is highly recommended to do further research on each wallet based on product support, availability, and if it can be easily accessed by you.
Software (hot) wallets: MetaMask, Rabby, Coinbase, Trust wallet
Hardware (cold) wallets: Ledger, Trezor, Safepal
How to choose a good wallet?
As a web3 beginner, deciding which crypto wallet to set up can be one of the most daunting experiences in your crypto journey. To simplify, there are a few starter factors to consider when deciding on what wallet to choose from:
- Purpose: crypto wallets come in many forms and offer different unique features to sustain your crypto experience. Why you need a crypto wallet can greatly influence the type you settle for; for example:
- For everyday frequent and ease of use, a self-custody hot wallet or cold storage such as MetaMask or Ledger wallets can come in handy.
- For long-term storage of crypto assets, having a cold storage device such as a Ledger has proven to be far more secure.
- Security: The Web3 ecosystem is fraught with many bad actors who are constantly seeking out unwitting crypto enthusiasts to take advantage of. As a rule of thumb, never share private wallet details such as private keys, usernames, and passwords with anyone. The best wallets in terms of security rank from cold storage to hot wallets with the latter being the least secure.
- Flexibility of Use: when dealing with certain web3 applications, hot wallets are seemingly easier to interact with on-the-go, and usually provide very little barrier to entry for first-time users. However, savvy crypto enthusiasts can over time become more comfortable with the additional effort of using a ledger to constantly interact with web3 applications.
- Cost: when it comes to putting a price tag on the security of crypto assets, there is no price high enough to ensure that you sleep better at night in the wild-wild west of crypto. However, the cheapest wallets to set up are mostly hot wallets. Cold or hardware wallets come with a bit of a cost depending on the size and features of the wallet.
Depending on the purpose of obtaining a wallet and the level of experience in web3, a good wallet can mean different things to different users.
- For new crypto users, a simple yet secure means of storage may be the go-to choice for a wallet to ease the entry barrier. For this, a hot wallet is a readily available option for easy onboarding. However, be aware that the risk of storing large amounts of assets in a hot wallet comes with an increased likelihood of being exposed or becoming a target to bad actors. That said, any wallet can be a target for bad actors, so it is recommended to always observe a high-security consciousness, and where possible move assets into cold storage for optimal security.
- For advanced crypto users, depending on the level of interaction with web3 applications, users under this category are often known to have more than one wallet type. This could be a hardware wallet for long-term and large-sum storage paired with one or more hot wallets for better management.
On a final note, it is strongly recommended to never share your wallet's private key, passphrase, or any other sensitive data with non-trusted parties. Another important tip is to never click on suspicious links, as you could become a target lured into signing malicious transactions which could further grant access to bad actors, thereby, compromising the funds in your wallet.