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Crypto wallets provide secure storage for cryptocurrency, but they function differently from traditional wallets. Choosing the right wallet depends on the type of crypto you want to store—some wallets support a wide range of coins, while others are limited to specific ones like Bitcoin or Ethereum. Wallets fall into two main categories: hot wallets, which are connected to the internet, and cold wallets, which are kept offline.
To help navigate the options, Forbes Advisor has reviewed and highlighted the best crypto wallets, divided into hot and cold categories for easier comparison.
What Is a Crypto Wallet?
Cryptocurrency ownership is represented by a string of code on the blockchain. When purchasing crypto, ownership is tied to a public key (similar to an account number) and a private key (which proves ownership and grants access). Losing the private key could mean losing access to the crypto, while anyone with the key has full control over the assets.
How Do Crypto Wallets Work?
Crypto wallets store the private keys necessary for accessing cryptocurrencies on the blockchain. They also facilitate sending and receiving digital assets. Wallets can range from online services to physical devices like USB keys or even printed paper keys.
Types of Crypto Wallets
Crypto wallets are categorized as hot or cold:
- Hot wallets: These are connected to the internet and include online, mobile, and desktop wallets. They offer easy access but are more vulnerable to security risks.
- Cold wallets: These offline wallets provide more security by storing private keys away from potential hackers. Examples include USB keys and paper wallets.
Wallets can also be custodial (managed by a third party, like a crypto exchange) or noncustodial (where the owner manages their own keys).
Hot Wallets
Hot wallets require an internet connection and are available in desktop, mobile, or web-based formats. While they offer greater convenience, they also have higher security risks due to their online nature.
Cold Wallets
Cold wallets, including hardware devices like USB sticks, offer stronger protection by keeping private keys offline. To access the crypto, the physical device must be connected, adding an extra layer of security, often with a PIN.
Why Do You Need a Crypto Wallet?
Crypto wallets are essential for securing access to digital assets. Without control over the private key, ownership is compromised, making it crucial to keep keys safe from loss or theft.
