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Crypto wallet types: What's the difference?

18 May, 2020 Martin Petkov
Crypto wallet types: What’s the difference

So, you've decided to take the cryptocurrency plunge? That's great news! Now all that's left to do is choose how to store all your coins! If you haven't heard, wallets aren't just made out of leather and stored in your coat pocket. Following the crypto revolution, a new type of virtual wallet has emerged. They are completely digital, and their purpose is to keep their users' cryptocurrencies both safe and easily accessible.

Different types of crypto wallets: Cold vs hot storage

When it comes to crypto wallets, there are countless specific solutions on offer, but more or less all of them fall into two main categories: hot or cold. Hot storage media are entirely online and include a wide range of individual wallet types. They are generally considered more user-friendly and accessible than their cold alternatives, but this comes with an elevated security risk. Cold wallets, on the other hand, are offline and — while a bit tricky to get to grips with — there's no safer way to store large amounts of crypto.

Web/online wallets

These are perhaps the most popular hot storage option, particularly among casual buy-and-hodl investors. Typically, these wallets are hosted on crypto exchanges and are used to hold currency purchased on the exchange in question. They are incredibly convenient and thus make owning cryptocurrency a possibility for a wide range of people of different ages with varying levels of technological literacy. The only downside to online wallets is their relative vulnerability to hacker attacks. Indeed, every year, we see numerous stories of big-name exchanges falling victim to coin thefts.

Luckily, StormGain uses online cold storage technology so you can have all the security advantages of a cold wallet with the ease-of-access of a hot wallet. With our industry-leading encryption, there's no chance of any would-be coin bandits getting their hands on your crypto. If that wasn't enough, StormGain also uses two-factor authentication to protect your money, even if your account details have been compromised. And that security doesn't come at the cost of convenience. All six of your StormGain wallets are easily accessible directly from the platform's home screen. Just see for yourself:

View of wallets sidebar in StormGain

Mobile wallets

In essence, there's a lot of difference between a standard online wallet and a mobile one. Putting aside the fact that mobile wallets are portable and take the form of an app, the technological basis is much the same. That said, some mobile wallets are integrated with trading platforms and, therefore, offer greater functionality. They might, for example, include live charts and one-touch trading capabilities.

StormGain is one such provider that integrates its wallet storage into its trading app, which is available for both iOS and Android. With StormGain, you can hold up to 6 of the biggest cryptocurrencies around using your personal, in-platform wallets. StormGain supports Bitcoin, Bitcoin Cash, Ethereum, Ripple, Litecoin and Tether, enabling you to keep your entire crypto portfolio all in one place.

Desktop wallets

Desktop wallets are quite similar to mobile wallets in that they're software-based and stored as a programme file. They also offer integration with exchanges and trading platforms while allowing users to purchase goods and services from vendors who accept crypto payments.

Some argue that desktop wallets are more secure than their mobile counterparts, a claim that does have some truth to it. However, while there are many more attacks on mobile systems due to their widespread use, desktop wallets are only as well-protected as the machine they're installed on. If you don't have a strong firewall and good anti-malware set-up, you're just as vulnerable as any other hot wallet user.

Hardware wallet

This is probably the most popular cold storage medium in use. Hardware wallets come in various shapes and sizes, but their users usually look for small, portable devices that are, of course, durable. The two biggest brands on the market are Ledger and Trezor, both featuring in most top hardware wallet rankings. The image below shows just how compact these devices have become in recent years:

Trezor One Wallet

The most significant benefit of these devices is their security. Since they only connect to the internet via the manufacturer's website, there are no back doors for hackers to exploit. As mentioned earlier, hardware wallets are favoured by those with significant crypto holdings, who stand to lose serious money if their accounts are hacked. While they do offer greater protection, it's also worth noting that you must set up a recovery seed password that you must also keep safe. Otherwise, you'll not be able to recover your coins if your wallet is lost, damaged or stolen.

Paper wallet

This kind of storage was trendy in the early days of Bitcoin, but it's now generally considered to be technologically obsolete and risky. Firstly, it's essential to make the point that no cryptocurrency can be stored on paper. When people refer to paper wallets, what they mean is the act of generating a wallet address and then printing (or writing) one's private keys as a QR code on a piece of paper (see image below for an example).

Commercially-produced paper BTC wallet

Provided you generate the paper wallet offline and then delete your internet history afterwards, it should be invulnerable to hacker attacks. It's a huge advantage, and it was the safest way to store crypto before encryption technology managed to catch up. The massive downside of paper wallets, compared to more modern cold storage methods, is the risk of damage or loss, rendering your coins totally irretrievable.

Public and private keys

All blockchain-based cryptocurrencies work with both public and private keys. As the name suggests, your public keys aren't secure and don't contain any information that would allow the user to spend your coins. Your private key instead controls the rights to use your cryptocurrency. This two-key authentication technique is part of a wider cryptographic field known as Public Key Cryptography (PKC) or Asymmetric Encryption.

Put into practice for cryptocurrency transaction authentication results in a one-way mathematical function. It's a problem that's very easy to solve in one direction, but which is virtually impossible to reverse. Since the key pair is linked mathematically, whatever you encrypt with a public key can only be deciphered by its corresponding private key.

Say Person A wants to send private information to Person B. They'll encrypt the data with Person B's public key. Because nobody has access to the corresponding private key other than Person B, there's no way for anyone else to intercept and read the information in the message. The principle is the same for cryptocurrency transfers. The sender uses the recipient's public key to encrypt the transfer, so only the receiver has the key to decrypt the communication.

Multi-currency wallets

As you might have guessed, multi-currency wallets allow the storage of multiple different cryptocurrencies. They are useful because they enable users to keep all of their various coins in one place for easy access, which is of particular benefit at a time when most crypto investors/users have more than one coin in their portfolios. There is a wide range of both hot and cold options available, including Android and iOS-optimised apps and hardware USB stick-type wallets.

The most popular type of multi-currency wallet is the hot variety, with many users understandably opting for mobile solutions. One of the biggest names in this sector is Coinomi and, while they do offer great functionality and performance, there's one major drawback. You can't buy, exchange or trade coins directly in their app. StormGain, on the other hand, supports the storage of up to 6 different cryptocurrencies, while also facilitating the purchase, exchange and active trading of all these coins and more.

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Close-up of StormGain wallets

Multisignature wallets

Multisignature (or multisig) wallets essentially refer to wallets with two private keys, each held by a different person or group of people. An excellent way to think about it is like a bank safety deposit box with two locks and two separate keys. If the box's owners wish to open it, then they both need to present their individual keys simultaneously. This makes it impossible for either user to access the contents without the express consent of the other.

The same exact principle applies to multisignature cryptocurrency wallets, the only difference being that multisig wallets are not limited to just two owners. At their most basic level, people use multisignature wallets as a way of creating an additional layer of security to protect their funds. They are also an excellent way of managing joint crypto accounts with multiple stakeholders given that, unlike traditional joint accounts at a bank, there are no physical controls to prevent individual holders from draining the wallet.

Which wallet is best for trading?

Now, if you've got a small crypto fortune and just want to make sure nobody can get their hands on it, you'd probably be best served by a hardware wallet. However, if like most people, you've not managed to attain millionaire status just yet, you're probably going to be interested in trading your cryptocurrencies actively. And for this, you really can't beat a secure hot wallet that's fully integrated into your trading platform.

While there are many options in this day and age, none of them can offer the same level of functionality and ease-of-use as StormGain. As soon as you register your StormGain account, you're automatically provided with wallets in six of the most popular cryptocurrencies in circulation (Bitcoin, Bitcoin Cash, Ethereum, Ripple, Litecoin and USDT Tether). From there, you can then trade up to 23 different crypto pairs on the open market. Best of all, your coins are almost as safe as in a hardware wallet because the private keys are kept safe on StormGain's cold storage servers.

What are the benefits of the StormGain wallet?

Apart from being fully integrated with the trading platform for simple and effective management, StormGain's wallets are also protected by state-of-the-art encryption – all at no extra cost to you. StormGain will even pay you 15% on all your crypto deposits up to a $50,000 USD-equivalent. Guaranteed. As far as we know, there aren't any banks offering that sort of return on deposits!

With StormGain's wallets, you can sleep easy knowing your money will always be available at any time of the day or night. Furthermore, you can manage your wallet on any device you like for ultimate convenience on-the-go. Another noteworthy addition is StormGain's super-fast registration procedure, which allows you to purchase, store and trade cryptocurrency in just 5 seconds. As you can see on the image below, the amount of information required to set up an account is minimal:

New account registration page

Final thoughts

The enigmatic Satoshi Nakamoto once famously wrote: "If you don't believe it or don't get it, I don't have the time to try to convince you, sorry". As you've probably realised, we're a little more patient and keen to educate. Hopefully, you found this guide helpful and are now sufficiently well-versed on all the different wallet types available. Ultimately, your own personal needs and requirements will guide you towards the type of wallet you will choose to store your crypto in, but it's good to know all of your options before making a final decision.

While there truly is a world of possibilities when it comes to choosing a wallet for your crypto portfolio, there aren't many solutions that can offer everything StormGain can. With the perfect balance between security, convenience and functionality, StormGain is head and shoulders above its closest competitors. Create an account today to start making a guaranteed return of at least 15% per year. It really couldn't be easier and — with the current market volatility — there really never have been more opportunities to make a profit.

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