Most people have a physical wallet that holds cash and cards, you may also use an electronic wallet such as an Apple, Google, or Paypal wallet. When it comes to storing crypto, its not that much different.
What is a crypto wallet?
A self-custodial wallet can be physical or digital. The main difference between a self-custodial wallet and a regular wallet is that the wallet owner is the only person who has access to it. This is achieved through the use of private keys. Every self-custodial wallet has two “keys”, a public and a private key that allow you to access your crypto assets. These keys are not physical keys but strings of words or numbers.
Your public key is what allows your wallet account to be identified on the blockchain. They can be thought of as your bsb/account number. It is what you send someone when you want crypto transferred to your account.
Your private key can be thought of as your bank account password. If somebody else has your private keys, they can access your digital wallet and its assets. It is extremely important that you never share your private keys with anyone. Remember, “not your keys not your crypto”!
What are the different types of crypto wallets?
There are many wallets on the market, hot wallets, cold wallets, hard wallets, soft wallets, custodial/non-custodial there are even paper wallets!
Wallet types can be broken down into two main categories: hot and cold. Hot wallets are connected to the internet, and cold wallets are not.
The main benefits of hot wallets are ease of use and convenience. When storing crypto in a hot wallet you do not need to go through the extra step of transferring your crypto offline.
While this option is less secure than cold storage, it is still safer than storing your crypto on an exchange. There are many beginner-friendly hot wallets such as Metamask that go through the basics of private, and public keys and different blockchain networks and blockchain transfer fees.
Cold wallets are crypto wallets that are not connected to the internet. Hardware and paper wallets fall under this category. Cold wallets are the most secure option when it comes to storing your crypto. The drawbacks of hardware wallets are that they are less convenient for more frequent trading activity, compared to hot wallets. Cold wallets are a popular option for those who value security, or traders holding crypto as a more long-term investment.
Which crypto wallet should I use?
Nobody can answer that question for you. The crypto storage solution that’s right for you will greatly depend on your individual needs. Elbaite recommends conducting your own research before deciding on the wallet that is right for you.
When deciding the wallet that’s best for you there are some basic questions that can be helpful: What tokens are you storing? How much do you want to store? How often do you want to move the crypto?
A person’s trading habits can often influence their choice of wallet, traders who make many short-term trades, may prioritise speed over security and decide to use a hot wallet.
Traders who are holding their crypto for long-term investing may decide to use a more secure cold storage option such as a hardware wallet.
Many investors use a mix of cold and hot wallets. Holding smaller amounts of crypto intended for more frequent trading in hot wallets, and larger amounts of crypto in cold wallets for greater security.
The type of crypto you own will also influence what sort of wallet you use as you can only use a wallet that supports the type of crypto that you own. For example, Bitcoin cannot be stored in a Metamask wallet. This is because Metamask only supports ERC20 tokens (tokens built on the Ethereum network).
When it comes to storing cryptocurrency off the exchange, there are a lot of options out there. The ideal wallet will be unique for every trader and may even be a combination of multiple wallets. No matter what self custody crypto wallet you use, it can be connected to your Elbaite account, so you can trade wallet to wallet with confidence!
Elbaite is the Australian cryptocurrency exchange that allows you to buy & sell crypto directly from your crypto wallet. Make an account today to start your crypto investment journey!
Disclaimer: The information on this website is purely for information. Elbaite is not a financial adviser, and nothing stated here is to be taken as financial advice. You should seek independent legal, financial, taxation or other advice relevant to your financial situation before making any investment decisions.