Wondering why a crypto wallet is better than an exchange wallet? Then this is the article for you – let’s discover what makes the best private crypto wallet!
What is a crypto wallet with a private key?
What is a crypto wallet?
The purpose of a crypto wallet is essentially the same as the wallet you’re carrying right now, only it’s based online rather than in your pocket. It helps you store and manage your cryptocurrency assets like coins and tokens, as opposed to your physical cash.
Early crypto wallets could just store one kind of cryptocurrency, but nowadays, multi-coin wallets are more popular. Thanks to technological innovation, many crypto wallets are integrated into decentralized exchanges (DEXs), allowing users to buy and sell coins directly.
How do crypto wallets with a private key work?
Private keys are like the PIN you use to access your bank account, while public keys are similar to your bank account number.
Every public key requires a private key for access, allowing the key holder to manage, buy or sell their crypto assets. For this reason, and much like a PIN, your private key should be kept confidential and if anyone else knows what it is, your assets may be compromised.
With this in mind, your crypto wallet of choice works as a gateway between you and your address (your crypto-bank account). Much like an internet banking portal, it is basically there for you to enter your private and public key and access your account easily.
Why not use an exchange’s crypto wallet that doesn’t have a private key?
Holding crypto assets has become pretty popular nowadays but with its rise, safety concerns have also increased. As many exchanges were hacked in 2019, it is clear that those who hold cryptocurrencies need to be aware of their own security and privacy.
While cryptocurrency exchange accounts always have their own crypto wallets, they also take care of the hosting – meaning that they’re the ones who hold and control your private key, not you.
As previously mentioned, giving control of your private key to someone else is far from ideal – it places a lot of trust in the exchange and means that your assets could be at risk.
In addition, if your assets are part of a smaller sized wallet on an exchange, then they are more likely to be the target of hackers or other cybercriminals. You may well have heard about how many exchanges have been hacked in just the last 10 years and you definitely do not want to be one of the victims.
In short, you can always hold coins in a cryptocurrency exchange wallet but it’s far safer to use a dedicated crypto wallet to take full control of your funds.
Types of crypto wallet
Despite there not being as many wallets as the number of crypto exchanges, new ones come and go all the time. As demand grows, the race to be the most widely-used crypto wallet has naturally become even more competitive.
At first, it might seem difficult to choose the right crypto wallet and find one that gives you ownership of your private key, so it’s important to check out the different types in order to find the best fit for you.
A Hardware Wallet is a physical device that plugs into your computer, tablet or phone to access your coins, but it then stores them offline. This means cybercriminals cannot access this kind of wallet via the Internet, as they can with other types of private crypto wallets.
- The most hacker-proof kind of storage
- More expensive than other kinds of wallet
- Only used to store cryptocurrencies, not to trade them. Requires connection to an exchange platform in order to do so.
Best hardware wallet:
Trezor Wallet is currently the best one on the market.
As previously mentioned, this is a cryptocurrency exchange account and gives you access to exchange-hosted wallets.
- Holding coins on the exchange helps you to trade instantly if there are price movements. Not needing to wait for a transaction confirmation can be a vital time-saver for trading.
- You can store and trade all the different coins and tokens the exchange supports, which can be in the hundreds.
- You do not have ownership of your private key and public key, the exchange provider does.
- The more popular the exchange, the bigger the target it is for hackers.
Best Exchange Wallet:
This is pretty subjective as there are many popular, trustworthy and secure exchanges running in the crypto space. Binance, Coinbase, Huobi, Okex or Gemini are all good choices.
A paper wallet comes from the idea that you should keep your private keys on physical paper, so no one can see them and steal your assets. Paper Wallets let you print your own encrypted keys and without a scanner, no one can read the encrypted code.
- Physical wallets have long been considered one of the safest ways to store coins. If properly constructed, and provided that certain precautions are taken, it will be nearly impossible to access your holdings. A paper wallet is considered an extremely secure way to keep your coins safe from cyber-attacks and malware.
- For many users, the biggest risk with a paper wallet comes down to user error. If inexpensive ink is used, it may run, bleed or fade with time, rendering the wallet inaccessible. If the paper is lost, stolen, ripped or otherwise damaged, the same concerns apply.
- If a user misreads a key or if the wallet software no longer recognizes the private key format of the printed wallet, assets can be lost.
- Paper wallets don’t cater for many cryptocurrencies, giving the holder fewer options.
Best paper wallet:
- Bitcoinpaperwallet.com or bitaddress.org are good choices for Bitcoin paper wallets
- Myetherwallet.com is the best for an Ethereum paper wallet.
Online wallets are the most widely-used wallets nowadays. They work like most apps and give you all the convenience that other kinds of wallets don’t. Online wallets have some sub-categories, such as: desktop wallets, website wallets and mobile wallets. However, many wallet providers have developed all three versions for users to choose from.
- The most user-friendly of all the wallets and easiest to manage on multiple devices.
- Many wallets directly provide you with trading coins.
- Access to additional features, such as staking POS coins and access to DApps.
- Security and privacy are still an issue, creating the need for a private crypto wallet.
- A lot of trust needed in the provider to securely store all your information and transactions.
Best online wallets:
Trust Wallet, imToken Wallet, Blockchain.com Wallet and MyEtherWallet are all solid options. The right choice for you will depend on the purpose you have and which tokens you want to store.
Which is the best private crypto wallet?
Online wallets have been an overwhelming force for good and helped get many people onboard the cryptocurrency train but there still remains one nagging issue – privacy.
To elaborate, the problem with public blockchains (such as the Bitcoin blockchain) is that anyone can track the balance and transaction of any particular address. This is not the sort of information that you want to give out freely to hackers and experienced cybercriminals, who know how to strip assets instantly. So how can you avoid this situation? By getting a private crypto wallet.
The idea of sending Bitcoin anonymously is the main purpose of a private crypto wallet. With one, you can send Bitcoin (or other assets) without anyone having any details of the sender, receiver or how much was involved.
- No one can see your balance or track your activity.
- As a result, you take back control and don’t need to trust any entity with your personal data and transactions.
- Private crypto wallets are new in the space. Users have already got used to their own wallet, so they might find it hard to switch.
- Many private crypto wallets only allow users to send Bitcoin or a limited number of popular cryptocurrencies, of the many available.
Best private crypto wallet:
The Incognito Wallet is the one to go for. Based on the Incognito Blockchain – a project that aims to be a privacy sidechain designed to give access to other blockchains, Incognito Wallet allows you to store, send and receive all your crypto assets with total privacy.
Choosing the right crypto wallet is one of the first things you must consider when entering the cryptocurrency sphere.
At first, it might be best to use an exchange wallet to store some small coins and get used to the process. However, as you gain experience and confidence, it is a lot more secure to select a crypto wallet that gives you full ownership of your private key.
If you are concerned about privacy, and you probably should be, finding a private crypto wallet to send coins anonymously will be the way to go. Keep up-to-date with the latest information on private crypto wallets and you’ll soon figure out which one is best for you in the long run.