A crypto wallet is a platform that both stores cryptocurrency and validates transactions using your cryptocurrency. Security is essential, as the wallet stores the private key that is needed for use in validating transactions.
A crypto wallet is often simply a feature of a crypto exchange that offers a wallet as part of the exchange’s account features. In this sense, the wallet serves as a storage mechanism — where investors can stash their crypto or convert the crypto to fiat currency, such as dollars or euros, when needed.
Crypto wallets typically do not charge storage fees. Fees are usually incurred when you complete a transaction in the crypto exchange, usually a percentage of the transaction value. However, standalone wallets without exchange features cost anywhere from $0 to $200 or more.
There are generally two types of crypto wallets: a hot wallet and a cold wallet. A hot wallet is an online wallet that is run on an internet-connected device such as a PC, tablet or smartphone. A cold wallet is not available on a connected device or via the internet. Also known as offline wallets or hardware wallets, cold wallets experience a much lower risk of misuse or compromise.
Let’s review two popular cold wallet storage options, Trezor and Ledger.
Trezor’s Model T is the second generation of hardware wallets released by the company. The Trezor Model T gives users the ability to access third-party exchanges, like Changelly and CoinSwitch, directly in its website interface.
The Model T utilizes a touch screen, giving it the feel of an online hot wallet, which can be helpful for beginners. For increased protection, the Trezor has a MicroSD card slot, allowing users to encrypt the PIN and further protect their devices from cyberattacks.
The Trezor Model T also comes with a USB Type-C cable so that it can be connected to a PC, laptop, tablet or smartphone. Currently, the Trezor Model T supports more than 1,600 different cryptocurrencies.
- Web-based user interface with exchanges built in
- Large number of supported cryptocurrencies
- Open-source software with added benefit of customer and community support
- Higher price point than other cold wallet storage options
- Small touchscreen for typing
- Can be confusing for first-time users
The Ledger Nano X is the second generation hardware wallet from Ledger. The company’s first crypto wallet, the Ledger Nano S, was one of the first hardware wallets on the market and enjoyed market dominance for several years.
The Nano X resembles a USB drive and connects to a device via a USB cable or Bluetooth. This means that you can connect the wallet to a smartphone, either iOS or Android, without the need to use a PC or laptop, though with a USB cable, you can connect to a computer. Ledger supports more than 1,500 cryptocurrencies.
Ledger also includes Ledger Live software that provides a user interface for all your holdings, so it resembles a hot wallet storage option, though it is still classified as cold storage.
- Ledger Live creates a hot wallet-like user interface
- Stores up to 100 different apps and a large number of supported cryptocurrencies
- Open-source software with the added benefit of customer and community support
- Convenience of Bluetooth connectivity
- Bluetooth integration could serve as a potential attack vector
- Limited wallet storage
Adding Title to Crypto for Strongest Security Possible
Security continues to be an ongoing issue for cryptocurrency because whoever holds the private key to a crypto asset is considered the owner. As such, it is extremely difficult to demonstrate proof of ownership should a private key be lost or stolen.
Though cold wallets offer stronger protection than do hot wallets, due to their offline nature, the safety of crypto assets is still not guaranteed, especially when those assets are used in a transaction.
Indeed, the industry is in need of infrastructure to verify the rightful ownership of cryptographic assets. TransitNet is currently developing the industry’s first offchain title registry of record for digital wallets. This will create an additional layer of protection and record-keeping for cryptocurrency assets.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce, and IoT.
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