Blockchain technology has carved itself a niche place in the domain of cryptocurrency. Never has it been so more comfortable to execute peer-to-peer transactions without delays and bureaucracy than it is now.
The conventional approach for fund transfer has always been via a central mediator who overlooks the integrity of the transaction. This mediator is usually the bank.
When we discard the mediator and execute via the one-to-one channel, we need a seamless way to monitor and record the transaction. The distributed public ledger technically called Blockchain provides such a framework.
Blockchain is a technology in which all transactions between users of the ecosystem are recorded and are made public. Such a system allows traceability and the lifetime of these ledgers are infinite.
Another vital aspect of Blockchain is that there is no situation where the ledger could be misplaced or deleted since replication is done on several nodes or devices working in the scope of cryptocurrencies.
Users can easily explore the whole or portion of the Blockchain ledger and cross verify that transactions did go through. Also, Blockchain has been productively evolving to bring in automation and is being applied to several domains like IoT.
When we use cryptocurrencies, we need a placeholder to save our public and private keys, with the available balance. Wallet programs provide such an infrastructure that are also known cryptocurrency wallets.
This article discusses in depth about cryptocurrency wallets. It provides an insight into how to choose a wallet for specific needs. You will be updated which wallet is setting the trend in the market and how it is achieving it. We will consider in depth wallets of different categories and their plus and drawback.
Introduction to Crypto-wallets
When transactions go through, we need a host and a target. We need dedicated handshake between a sender and receiver to acknowledge either an asset or information went through.
When we consider cryptocurrencies, the transaction is sending units of cryptocurrency from a sender’s address to a receiving address. This address in the realm of Blockchain is called public key.
We also need security that no one tampers with our account by stealing our funds. The private key provides such protection. Each user has to maintain the responsibility to keep their private key secure.
This is the essential requirement which requires a placeholder in cryptocurrencies. We need something to hold our public and private keys and are available balance of bitcoins or Altcoins.
Such an infrastructure is provided by crypto-wallets which are often sophisticated software programs catering to the need to use cryptocurrencies anywhere. The purest form of a cryptocurrency wallet is a paper wallet where users secretively store their public and private keys.
Different types of Crypto-wallets
Crypto-wallets are broadly classified into – software, hardware and paper wallets. Each of these wallets can further be segregated into hot or cold wallets. Hot wallets are those that are always connected or online. Cold wallets are those that store public and private keys offline.
- Software wallet: Software wallets are further classified into – Desktop, Mobile and Online.
- Desktop: User installs a client application on Windows, Linux or Mac, creates accounts and starts transacting. Public and private keys are saved locally on the machine.
Often there is provision for backup and restoring of funds when the system breaks down. Such an arrangement is facilitated by remembering private keys.
- Mobile: User installs Android or iOS apps on their smartphone or tablets and starts transacting. Public and private keys are saved locally on the mobile device.
Mobile wallets are often smaller applications due to limited hardware resources on the device.
- Online: Online wallets are cloud applications where users can register for an account and start transacting.
Online wallets are plagued by the problem that they are easy to hack. However, sometimes they offer the user some great features for e-commerce.
- Hardware wallet: Hardware wallets are dedicated devices purpose-built for the only use to save public and private keys. They serve no other purpose than to be plugged in to make transactions.
Hardware wallets are often robustly built and can be designed to be used on systems infected by malicious content. Hardware wallets are cold wallets and are generally recommended for saving relatively large amounts.
- Paper wallet: These are the most accessible and most secure. There are certain facilities wherein after account creation, the system prints out the public and private keys.
Paper wallets suffer from the fact that sometimes they are difficult to use, locating controls on the screen to enter public and private keys and noting balance.
Features of Crypto-wallets
The different brands of crypto-wallets try to offer their unique selling point. An advanced user will never be satisfied with one type of wallet and will opt for a handful.
Some unique points that go in selecting wallets are:
- Ease of use: Wallets have to be user-friendly. They must be easy to set up and not involve lengthy verification processes.
- Good user interface: Good UI and beautiful graphics attracts the user. Often such features imply to be a good wallet.
- Great security features: The wallet should emphasize security and at least features like two-factor authentication are a must.
- Availability of exchange: A good wallet will have access to cryptocurrency exchange using which users can buy and exchange Bitcoins and Altcoins.
- Support for multi-currencies: A good wallet will support not just Bitcoins but various other Altcoins like Ether and Ripple.
- Flexibility to choose between a full node and thin wallet: A good wallet, especially desktop wallet, should have the flexibility to disallow downloading full Blockchain.
Blockchain sizes up to several hundred GBs and a desktop wallet which mandatorily downloads this loses usability.
An overview of crypto-wallets in the market
There are several crypto-wallets in the market. They serve the purpose as being either software or hardware wallet. The user has to assess the requirement they have when choosing a wallet carefully. It is evident that hardware wallets are more secure than software wallets.
However, hardware wallets are slower to use and need a machine to be plugged in. Software wallets are quicker to use but are prone to hacking.
Clearly, software and hardware wallets have their pros and cons, but with the right approach to using them, they will be indispensable. A few crypto-wallets that are very popular running in the market are:
Category: Hardware Wallet. Setting up Ledger is simple with the only requirement being Chrome and a computer. Ledger allows a sequence of secret words called seed to be set up in case of lost private keys.
The most significant advantage of Ledger is that private keys are completely stored offline and never presented to the computer making the chance of getting hacked to zero.
Category: Hardware Wallet. Trezor is nearly identical to Ledger in terms of workflow, but with few unique points. Trezor is a small device straightforward to carry around and is robust.
The high point about Trezor is that it can even work on computers infected by malware without any compromise.
Category: Client Wallet. Exodus provides a seamless interface to store and use Bitcoin and other Altcoins. So enthusiasts who want to transact Altcoins find Exodus very attractive.
Exodus’s built-in exchange allows users to trade Altcoins to bitcoins and bitcoins to Altcoins. Also, Exodus provides a great UI and most of its features are free.
Category: Client Wallet. Jaxx is available in Windows, Linux and Mac and also on Android and iOS mobiles and tablets. One point worth taking care is that Jaxx also works online hence making it riskier.
Jaxx is easy to use and has a stylish design. Nada privacy model is used in Jaxx.
Category: Mobile Wallet. Edge mobile wallet is distinct in its ease of use. Users can create an account within a minute and start transacting without long verification process.
Edge also provides multi-currency support and for security offers two-factor authentication. However, Edge team recommends users to save only small amounts in their wallet.
Category: Mobile Wallet. MyCelium offers excellent privacy and security features. Some users find its usage tricky but later appreciate its transparency.
Category: Online Wallet. CoinPayments is a versatile online wallet that allows users to store almost 900 types of cryptocurrencies in their online wallet. It charges nothing for registration, but for transactions, users have to pay a small fee.
CoinPayments has high visibility since many online stores accept their payments.
Coins supported by popular Crypto-wallets
Although most of the crypto-wallets support Bitcoin, Altcoin support is provided by many wallets. Some popular currencies backed by wallets are:
- Ledger: Bitcoin, Bitcoin Gold, Ark, Bcash, Dash, Digibyte, Dogecoin, Ethereum, Ripple and many more.
- Trezor: Bitcoin, Ethereum, Litecoin, Dash, NEM, Dogecoin and a host of others.
- Exodus: Bitcoin, Litecoin, Ethereum, Dash and many more.
- Jaxx: Bitcoin, Bancor, Edgeless, Dawn and many more.
- Edge: Bitcoin, Ethereum, Litecoin, Monero, Dash, Augur and many more.
- MyCelium: Bitcoin.
- CoinPayments: Bitcoin, Litecoin, CPS Coin, Bytecoin and many more.
The clear winner of Crypto-wallets
We can rank some crypto-wallets based on their categories. However, it has to be noted that this ranking is relative since use case may be different.
Winner of desktop or client wallet: The clear winner of the desktop wallet is Exodus, due to its great UI and support of Altcoins.
Winner of mobile wallet: The clear winner of the mobile wallet is Edge with its ease of use and versatility.
Winner of online wallet: The clear winner of the online wallet is CoinPayments, due to its high visibility and diverse Altcoin support.
Winner of hardware wallet: There is no clear winner between Ledger and Trezor. Both of them are equally capable. It is the user’s choice in case either offer a better quality of service.
Other wallets to be under the radar
There are few wallets to be aware of, even if they are not used. These wallets are often rated as some of the best ones around. They are:
This wallet is a full node Bitcoin client meaning the entire Blockchain will be downloaded onto the machine by connecting to other nodes. A noticeable advantage of this wallet is that it provides enhanced protection against fraud.
The obvious drawback is that requires significant bandwidth and space.
Electrum is a ‘thin wallet’ meaning the entire Blockchain is not downloaded. This makes it lightweight and easy to set up.
Electrum works on the model of ‘hierarchical deterministic wallet’, which means when the user first launches the program Electrum creates a seed of a couple of dictionary words. These words must be noted down by the user.
If the user loses the current version of Electrum, they can reinstall and reinstate their Bitcoin account using the seed.
The apparent drawback of Electrum is that it relies on a server to verify transactions which makes it vulnerable to certain types of hacking.
Ripple is one of the top five cryptocurrencies which was designed initially for transactions between banks. However, even individuals use it.
Rippex is the official desktop client for Ripple. Although the original creators no longer maintain Rippex, the community works on it.
Rippex is easy to set up and provides a layer of protection for encrypting wallets with a password. The drawbacks of Rippex are that it is a Beta Software and charges a small fee to activate the wallet.
A broad overview of crypto-wallets and their features have been presented to the user. It is evident to confirm no wallet is perfect and have their own set of drawbacks.
Perhaps the ‘silver-bullet’ of wallets is the paper wallet, with its only low point being need-based entry and usage. Wallets allow user to use their cryptocurrency from any location with minimum hardware being their smartphones and data connectivity.
It is advisable to the user to study websites, blogs and reviews of a wallet before opting for one. The user should not bypass any security measure that wallet recommends.
Hackers are on the top of the game when intruding digital wallets. There have been cases of entire websites getting hacked and millions of dollars getting lost. An active awareness and a willingness to learn and adapt will make the experience with digital wallets enjoyable and worthy.