Cryptocurrency Wallet: are they safe? [Guide]
Published: 27 November 2020 by Andrew
In 2018, cryptocurrencies worth over a billion dollars in value were stolen, so it is obvious that choosing the safest Cryptocurrency Wallet is at the top of the minds of those investing in this market.
Each cryptocurrency wallet has its pros and cons and the choice depends on your “trading style”, ie the frequency of your investments, the number of cryptocurrencies you wish to purchase and the level of security you are looking for.
In addition to explaining what they are, what they are for and the differences between cryptocurrency wallets, we will also offer you an alternative to invest: CFD brokers like eToro, where security is guaranteed and no wallet is needed.
But let’s go in order and see what these cryptocurrency wallets are.
Cryptocurrency Wallet: what is it?
The term “Wallet” has a literal meaning. A cryptocurrency wallet allows you to store, send and receive digital currencies.
It is particular wallet because cryptocurrencies are not “physically tangible” so the wallet is basically a software.
Some cryptocurrencies have their own proprietary wallets, while there are wallets capable of holding many different cryptocurrencies.
Cryptocurrency Wallet: how does it work?
A cryptocurrency wallet contains a public and a private key, let’s see what it is.
- The public key is a long sequence of letters and numbers that make up the wallet address. It is similar to the IBAN of a bank account and identifies that specific cryptocurrency wallet.
- The private key is also a sequence of numbers and letters (similar to the public one) but it is a sort of password and is used to access funds. This key must be kept safe because it gives full control over the cryptocurrencies in your possession.
In addition to storing public and private keys, cryptographic wallets interface with the various blockchains so that you can check your balance, send and receive funds.
How wallets and blockchain interact
The blockchain is a public ledger that contains all the transactions performed on that cryptocurrency, since its origin.
Cryptocurrency wallets track the movements of your wallet and know how many cryptocurrencies you have available.
The amounts sent and received and the public addresses (public keys) of your cryptocurrency wallet are all public information.
If you want to invest in cryptocurrencies, know that everyone can see your transactions, unless you use CFD brokers, which we will talk about later.
What is public, on the blockchain, is the address and the amount of the transaction, but obviously it is not written that that wallet is your property.
Cryptocurrency Wallet: typologies
As we have already said, a cryptocurrency wallet is software that stores your public and private keys, allowing you to store, send and receive cryptocurrencies.
Buying cryptocurrencies (or selling them) is relatively simple but deciding how to “keep” them safe is more complex.
Cryptocurrency wallets are divided into different types, let’s now see the main ones.
Online Cryptocurrency Wallet
Online cryptocurrency wallets are websites that allow you to store transactions and keep your public and private keys on an online server.
Being accessible directly with a browser, they allow you to interact with your cryptocurrencies from any device in a very simple and quick way.
On the other hand, they are certainly not the safest option because being connected to the internet they suffer frequent cyber attacks and can be subject to theft.
Hardware wallets, on the other hand, are “physical” cryptocurrency wallets, that is, keys, usually USB, which contain the public and private keys relating to your cryptocurrencies.
The fact that they are offline makes them much safer even if obviously if you lose them you will have lost everything!
In the event of theft, however, it is not certain that a thief can actually steal your cryptocurrencies. These wallets are password protected and difficult to access.
Mobile Cryptocurrency Wallet
By mobile cryptocurrency wallets we mean software wallets made in the form of apps for smartphones.
By now, there are apps of all kinds on our smartphone, including those for home banking and financial investments, so why not also install a wallet for cryptocurrencies?
The security factor is undermined by the fact that even these software are “theoretically” accessible via web in the event of a cyber attack, and obviously if your phone is stolen, the problem is the same as with hardware wallets.
Desktop Cryptocurrency Wallet
Whether you’ve invested in emerging cryptocurrencies or decided to buy Bitcoin, you can use a desktop cryptocurrency wallet and store it there.
These wallets are programs for PC or Mac that keep the entire history of the blockchain on your computer. These are files of considerable size, even tens of Gigabytes and usually these wallets allow you to “own” a single cryptocurrency, so they are definitely uncomfortable.
Paper Cryptocurrency Wallet
One of the methods used by some investors is to simply write the public and private keys on a piece of paper!
It is a bit like keeping “bearer” certificates, they are not accessible online but the risk of theft still exists.
Cryptocurrency Wallet: alternatives?
We have described the main types of cryptocurrency wallets, as you may have noticed they all have strengths and weaknesses and none are totally secure.
Online wallets are at risk of hacking and offline ones are at risk of theft.
But there is an alternative to remedy these problems and that is not to own cryptocurrencies.
It seems absurd to you but we are not saying to give up on investments in cryptocurrencies but to use intermediaries that allow you to speculate on price changes without actually holding digital currencies.
Cryptocurrencies can be purchased on cryptocurrency exchanges or can be traded with CFD brokers.
They offer a very high level of security: They allow you to trade cryptocurrencies, without paying commissions and without having to worry about storing them in a cryptocurrency wallet.
CFDs are contracts that are used to invest without actually buying cryptocurrencies, aiming up or down on the price changes of these digital currencies (and many other assets).
Before using these brokers you must check that the intermediary chosen is in possession of the minimum security requirements:
- A license issued by a control body such as our CONSOB or CySEC
- The ability to invest both up and down and earn (if the forecast is correct) in any market scenario.
- Don’t charge commissions
Let’s briefly analyze the 3 CFD brokers most suitable for investing in cryptocurrencies safely and without commissions: eToro, ForexTB and IQ Option.
eToro is the most popular online broker in the world, with its intuitive platform you can trade numerous cryptocurrencies and many other assets such as stocks, indices and commodities.
The security of this broker is enshrined in the CONSOB license and since it is a CFD Broker, you can buy or sell (short) cryptocurrencies, without paying commissions and without having to worry about where to store them.Sign up for free on eToro by clicking here
Over 10 million users have chosen eToro, but before making investments in cryptocurrencies with this Broker, try its Demo account, it is free and unlimited, after evaluating the platform you will be ready to really trade in cryptocurrencies.Click here and try the eToro Demo account
ForexTB is one of the brokers that are most appreciated by investors, even by those who invest mainly in cryptocurrencies.
The security of its platform is confirmed by the authorization of CySEC and for novice traders, ForexTB offers a free Trading Course to learn how to invest.
The course is in ebook format and explains the basics of investing, including those in cryptocurrencies.Click here and download the Trading Course for free
Iq Option is perfect for those who are starting with investments and want to buy cryptocurrencies starting with modest capital.
The level of security is very high and the CONSOB license confirms its absolute reliability.
The minimum deposit to open an account with IQ Option is only 10 €, a very small amount, ideal for starting to invest.Click here and register for free on IQ Option
Hot Wallets vs. Cold Wallets
The types of cryptocurrency wallets that we have examined are divided into 2 broad categories: Hot Wallets and Cold Wallets.
What does this division mean?
- Hot wallets are those connected to the internet, which have security problems related to cyber attacks.
- Cold wallets are those disconnected from the network, which can be stolen “the old way” or lost.
Is storing Cryptocurrencies on Exchanges a mistake?
Many investors, for convenience, keep their cryptocurrencies in the exchanges where they bought them, let’s see why they shouldn’t.
- The private key is not under control, the wallet is actually not in your possession but it is controlled by the exchange you are trusting blindly.
- Exchanges are the favorite targets of hackers and therefore suffer frequent attacks and related cryptocurrency thefts.
Even if the convenience of keeping cryptocurrencies “at hand” is obvious, you should transfer the purchased coins to a cryptocurrency wallet, but which one to choose?
We’ll see this in the next paragraph.
Cryptocurrency Wallets: Which to Choose?
The choice of the cryptocurrency wallet is not to be done lightly, first of all we need to evaluate how often we need to access our cryptocurrencies, because some wallets are not suitable for frequent access.
If you are a speculator looking to make money by buying and selling digital coins based on the cryptocurrency prices on the market, it is better to use CFD brokers, so you completely eliminate the risk factor and save on commissions.
If, on the other hand, you have purchased cryptocurrencies and want to keep them for a long time, “cold” wallets are certainly the safest.
These factors also contribute to the choice:
- Supported cryptocurrencies: if you invest in various altcoins, it is better to choose a wallet that supports different cryptocurrencies
- Security: check that the wallet has 2-factor authentication.
- Assistance: check the functioning of customer assistance.
- Ease of use: the wallet must be easy to use
- Cost: Hardware wallets must be purchased and their cost starts at around € 50. Online wallets are generally free and charge fees for transactions performed.
- Reputation: The company behind the portfolio must be totally transparent and reliable.
Best Wallets for Cryptocurrencies
We have collected the best cryptocurrency wallets on the market, each with distinctive features that make it the best in its sector, choose according to your needs.
Each portfolio has pros and cons, but if you want to trade in total safety, we recommend using CFD Brokers.
Ledger: The best cold wallet
Ledger has created the first certified hardware wallet, a bulwark in terms of security. The company produced 4 types of wallets sold in 165 countries.
Platforms: Mac OS, Windows, Linux, iOS, Android
Cryptocurrencies: 1184 (BitCoin, XRP, Ethereum, BitCoin Cash, Monero, Dash, etc.)
- Reasonable price
- Many cryptocurrencies supported
- Cryptographic transfer accepted also offline
- Easy to use
- Not optimised for mobile
- Not very intuitive
- You have to bring it always with you
- It can be lost or stolen
Coinomi: mobile friendly wallet
Coinomi is a “hot” wallet founded in 2014. It has millions of active users and has never been hacked.
Platforms: Mac OS, Windows, Linux, iOS, Android Cryptocurrencies: 125 cryptocurrencies and 382 tokens (Bitcoin, Ethereum, Ripple, etc.)
- Excellent security
- Personalized and dynamic rates
- Fast and multi-platform
- Simplified and intuitive
- No KYC mechanism support
- Public Code Updates
Exodus: Perfect for desktop
Exodus is an anonymous cryptocurrency wallet (without registration). It supports over 100 cryptocurrencies and has both a desktop and mobile version.
Platforms: Windows, Mac and Linux, iOS and Android Cryptocurrencies: 100+ (BitCoin, BitCoin Cash, Ethereum, Monero, Dash, LiteCoin etc.)
- Integrated Exchange
- Technical excellence
- Functional mobile app
- Portfolio management functionality
- Absence of the web wallet
Coinbase: Ideal for trading
Coinbase is an online wallet operated by the popular cryptocurrency exchange.
Platforms: iOS and Android, Windows, Mac and Linux Cryptocurrencies: 20 (Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, TRON and BAT)
- Insured cryptocurrencies
- 2-step verification for added security
- Secure storage
- Limited number of cryptocurrencies
- It is not suitable for storing large amounts of cryptocurrencies
Blockchain.com: The best online wallet
The Blockchain.com platform has gradually become the cryptocurrency wallet with the motto “Be your bank!”. It manages over 40 million portfolios with a transaction volume of $ 200 billion. There are low fees and an excellent level of security.
Platforms: Android, iOS, Windows, Mac and Linux Cryptocurrencies: Bitcoin, Ether, Bitcoin Cash and Stellar Lumens.
- Easy to use
- Great customer support
- Easy to navigate user interface
- Protects individual privacy
- Ability to buy and sell cryptocurrencies directly in the wallet
- Limited number of cryptocurrencies
- Long verification process
Electrum: Ideal for Bitcoin
Electrum is one of the oldest crypto wallets on the market, launched in 2011, it is now considered the number one BitCoin wallet and handles 10% of all BTC transactions.
Platforms: Android, iOS, Windows, Mac and Linux Cryptocurrencies: Bitcoin
- Fast, secure and private
- Reliable and widely used
- Easily integrated with hardware wallets
- It only supports Bitcoin
Wallet Generator: Best paper wallet
WalletGenerator is an open source app that allows you to generate “paper” wallets complete with QR codes, to be printed and stored “in a safe”.
Platforms: Windows, Mac Cryptocurrencies: 197 (Bitcoin, Cashcoin, Litecoin, Emerald, Dash etc.)
- Not subject to malware and keyloggers
- It does not depend on the device on which it is installed
- It can be lost or stolen
There is no cryptocurrency wallet valid for any situation, each has its pros and cons and the security factor is always the Achilles heel of these software.
Furthermore, all wallets have a cost, either for buying them (if they are cold), or for the fees that are paid for each cryptocurrency transfer (if they are hot).
If you want to avoid costs, not pay commissions and overcome the security problem, the alternative are CFD brokers: the best platforms for cryptocurrencies.
They are intermediaries that allow you to trade on numerous cryptocurrencies without commissions and in total safety, you will not need any cryptocurrency wallet.
Try the Demo accounts of the best cryptocurrency brokers, simulate the purchase of your favorite cryptocurrencies and evaluate the platforms and assistance. If you are satisfied you can easily switch to real investments.
Here are the official links for free access to the Demo accounts of the best cryptocurrency brokers:
- Access the eToro Demo account for free by clicking here
- Register on ForexTB and try the Demo account by clicking here
- Access the IQ Option Demo account for free
They are digital wallets that are used to store cryptocurrencies.
No, unfortunately they suffer frequent thefts and cyber attacks.
The physical ones from € 50 upwards, the online ones provide commissions for the transactions performed.
Yes, CFD brokers such as eToro are safe and have no commissions.