Investing in cryptocurrency involves making tough decisions. After treading the steep hill of deciding which asset to buy and how much you want to invest, managing your digital assets securely becomes the next crucial step. One option in this process is selecting the right non-custodial wallet. Non-custodial wallets give the responsibility of storing and securing private keys solely with the wallet owner. This article examines two main types of wallets—hot wallets and cold wallets—and provides an outline of popular options for each.
What Are Non-Custodial Wallets?
Non-custodial wallets provide users with a seed phrase—a sequence of 12-24 random words that store the data needed to recover or access a cryptocurrency wallet. Non-custodial wallets give the owner the sole power of managing their own keys by eliminating the use of a third party. However, if you lose your seed phrase, it could result in a permanent loss of your funds.
Hot Wallets: Convenience Meets Connectivity
Hot wallets are software wallets that are connected to the internet and stored on devices such as smartphones or laptops for easy access to your cryptocurrency. The defining feature of a hot wallet is that it generates your seed phrase online and stores your private keys online too, making transacting straightforward and convenient. However, their connection to the internet makes them more hackable.
Popular Hot Wallet Options:
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MetaMask:
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How It Works: Designed around the Ethereum-cased token and can store any digital asset that is built on Ethereum.
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Benefits: Offers staking and (decentralized) finance DeFi apps through its MetaMask Portfolio feature with an intuitive interface.
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Weaknesses: If hacked, funds are at major risk if private keys or seed phrases are compromised.
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Trust Wallet:
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How It Works: Storage wallet that integrates with many “Web3” applications.
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Benefits: Supports just about any cryptocurrency; built-in Web3 browser for accessing dApps.
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Weaknesses: No 2FA; which could be a vulnerability if the device is hacked.
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Exodus Wallet:
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How It Works: Has a mobile and desktop app and browser extension designed for beginners and experienced users alike.
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Benefits: Users can buy, trade or stake cryptocurrency directly from their wallets.
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Weaknesses: Lacks security options that competitors have. Supports a smaller amount of cryptocurrencies.
Cold Wallets: Offline Security
Cold wallets store your private keys offline, extending a higher level of security. It is a physical device, like a thumb drive, that stores your private keys offline. They are best suited for protecting long-term, high-value crypto assets due to their online threat immunity. However, they are less convenient for regular transactions and are simply for sending and receiving assets.
Popular Cold Wallet Options:
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Trezor:
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Versions: Trezor One and Trezor Model T.
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Benefits: Touch screen available for fully on-device entry. Includes PIN protection and recovery options.
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Weaknesses: Expensive compared to hot wallets; less convenient for daily transactions.
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Ledger:
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Versions: Ledger Nano S Plus and Ledger Nano X.
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Benefits: Compact design; Ledger Nano X is Bluetooth-enabled with strong security protocols.
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Weaknesses: Has some issues on Apple devices. Software isn’t fully open source.
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Arculus:
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How It Works: Easy-to-use and combines cold storage with a mobile app for added convenience.
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Benefits: Multi-factor authentication; has NFT and DeFi integrations.
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Weaknesses: Newer to the market and supports a limited number of cryptocurrencies.
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Blockstream Jade:
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How It Works: Open-source hardware wallet supporting Bitcoin and Liquid (Bitcoin’s sidechain) assets.
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Benefits: Affordable price; open-source firmware for transparency.
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Weaknesses: Supports smaller number of cryptocurrencies compared to other wallets.
Key Considerations When Choosing a Wallet
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Security: Always prioritize security features when considering wallets.
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Compatibility: Confirm that the wallet you choose supports the cryptocurrencies you store.
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Ease of Use: Choose a wallet that matches your level of technical expertise.
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Purpose: Hot wallets = frequent transactions and cold wallets = long-term storage.
Final Thoughts
After taking days, or maybe even months or years to decide what crypto to invest in, it is vital to select the right non-custodial wallet. By understanding the pros and cons of both hot and cold wallets, as well as the popular features of options like Arculus, MetaMask, Trezor, Ledger, and Blockstream Jade, you can make a confident decision that satisfies your crypto needs. The key to managing your digital assets securely revolves around keeping your seed phrase accessible to you, but hidden to others and staying vigilant against potential threats.