Once you become involved with cryptocurrency, one of the major questions becomes how to secure your holdings. The nature of cryptocurrencies is such that whoever ithas them can spend them, much like cash. A major concern is the chance that someone may take your cryptocurrency from you.
There have been a handful of high profile and costly heists over the lifetime of cryptocurrency, and even more instances of someone losing their wallet on a forgotten hard drive or thumb drive, leading to lost money.
You don’t want that to happen to you. These digital wallets can help.
Things to Keep in Mind
Two notes on all the recommendations provided here. First, because of drastically different financial regulations and other applicable laws, these wallets may not be available or even legal in your particular jurisdiction.
Second, cryptocurrency purists will argue that some options here are “banks” instead of “wallets” — the difference being who has control of the keys tied to your cryptocurrency. It is, functionally, just as it sounds: wallets are when you have the money in your sole possession, whereas banks are when you trust another party to secure what you own for you. Each has its advantages and disadvantages, and your decision should be made according to your own aims. Together, they are storage options for your cryptocurrency. We are going to be calling them wallets for ease of reading.
A refresher on public and private keys is helpful. Public keys are the part of your cryptocurrency coins which are used to create the public ledger, or the record of transactions to ensure we know who has a set coin. Private keys are for authentication and encryption of your transactions, and verify that you are able to make the transactions you enter into. Banks hold the private and public keys of your cryptocurrencies, so in the instance of a bank failing and winding up or encountering some other problem, you may lose your funds.
You need to note the difference between hot and cold wallets. Hot wallets are connected to exchanges, online options, and other exposure points for your digital assets. Cold wallets have no connections to anything when they are not in use, ensuring that — short of the physical wallet being stolen — your digital assets are secure.
Best Bitcoin & Cryptocurrency Wallets
With the above information in mind, here are the best cryptocurrency wallets to consider today.
Commercial, Trading, and Storage Hot Wallet
- Pros: Best in class for entry-level functionality with an all-in-one solution
- Cons: If you want to go more advanced, this platform may not grow with you; limited control over the private and public keys
Coinbase offers cryptocurrency trading platforms, commercial options, and a wallet, all among the easiest in class to use. With both an in-browser and app versions on both Android and iOS, it takes mere minutes to set up and get going.
The wallet is free and supports many of the most popular cryptocurrencies out there, further cementing its position as a great entry-level option. Further, Coinbase is a software-based wallet — that is, the software stores your coins rather than you having complete control over your keys. It is, however, compatible with some hardware options, including Trezor, discussed below.
Unfortunately, Coinbase pays a lower interest rate and is tied to one of the more expensive crypto exchanges, which is a concern for those who are engaged in regular trading or conversion to and from cryptocurrencies. Some users have reported — as recently as this summer — usability and reliability issues during peak usage times. This can lead to crashes at the times you need it most, particularly if you are trying to close trades.
Cryptocurrency purists would argue that because you do not hold your own keys, Coinbase is a bank instead of a wallet.
Cryptocurrency Banking and a Mobile Wallet
- Pros: Competitive interest rates and some loans; crypto banking that resembles classical bank accounts
- Cons: Fewer currency options; interest on holding coins may underperform other investment vehicles
Having raised over $50 million in Series C funding — the third round of major fundraising for a company in order to grow it further — BlockFi is threatening to both disrupt and legitimize the Bitcoin wallet space with its approach to wallets that resembles how the banks we are all familiar with operate. Unlike many other wallets, BlockFi treats your savings with them as an interest-accruing account, much like a normal bank account.
With up to 8.6% APY on your Bitcoin and interest accruing daily, BlockFi has some compelling rates of return. Further, its platform also serves as both a trading and lending platform. Its trading platform boasts no fees and interest gained on any coins you purchase, making it an intriguing option. Its interest rates are above savings account rates, but below the historical average returns of stocks.
BlockFi’s cryptocurrency-backed loans compete with those of traditional lending institutions, with the company hoping to one day offer mortgages and car loans through its platform. At the time of writing, you can only get rates as low as 4.5%, and only to a maximum of 50% of the cryptocurrency you have on deposit with Blockfi.
The result is a cryptocurrency wallet that most closely resembles a classical bank. You can earn competitive interest rates on a handful of different cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and Gemini Dollar (GUSD), and gold-backed cryptocurrencies. The company intends to offer more as it continues to grow. The downside is that, to date, your holdings with BlockFi are not FDIC insured, and the types of coins it handles and provides interest on are relatively few.
On the security front, Gemini is the primary custodian of assets deposited with BlockFi; they have fulfilled all requirements for security. That being said, Gemini was part of a $1 million hack in 2018 after a thief convinced a cellphone company to do a sim-swap, resulting in the hacker being able to withdraw the entire holdings from Gemini.
Social Investing Meets the Market
- Pros: Wide number of cryptocurrency options, free digital practice account, and the ability to see and copy what top investors are doing.
- Cons: Withdrawing money can be slow.
eToro is a great all-in-one option compared to many other brokers out there. It provides stock trading, access to exchange-traded funds (ETFs), forex trading, and crypto all in one platform for most jurisdictions it serves. (United States residents can only trade crypto.) This comes along with the ability to see what high-level investors are doing. Beyond that, in a few clicks you can copy the investment strategy of someone else, allowing you to set your plan and all but forget it. With generally low fees, eToro is a competitive option.
This does not mean eToro is perfect for all users. There is limited availability internationally, leaving some jurisdictions like Canada in the cold. The entire platform is run in U.S. dollars, which some users may find an inconvenience. eToro allows United States residents to withdraw at no cost. Some users have complained of longer withdrawals than elsewhere, but eToro reports that it takes up to two business days for funds to be processed internally, and three to eight days for the funds to reach your account.
eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
One-Stop Shop for Crypto Trading and Investing
- Pros: A popular platform that’s a one-stop shop for investing
- Cons: You can’t move crypto into or out of its system, meaning you can only invest in currencies; you can’t make purchases; your holdings don’t accrue interest
Having recently made the news as the platform of choice for at-home day traders, Robinhood has opened its platform to cryptocurrencies. Known for its ease of use on any mobile device or web-based platform, Robinhood is another great option for those who want to buy and sell their cryptocurrency with as few hindrances as possible.
The platform has already gone through several growing pains; with users often frustrated by the server limitations, it has been increasing its spending to increase the stability of their service. Over the course of 2020, several problems that Robinhood faced have been addressed and it continues to be developed, becoming something of a celebrity app in the investing space.
More than 2,000 Robinhood accounts were hacked in October 2020, with the cause behind the hacks not yet known. Robinhood has claimed this was entirely due to external emails having been breached. Some observers in the space have argued that’s not a sufficient explanation. The matter continues to develop, but Robinhood has been making a push for two-factor authentication — requiring a second way of verifying who you are in order to log in — to increase security.
Unfortunately, at the time of writing, Robinhood does not allow cryptocurrency transactions into or out of its ecosystem, limiting its usage to investing. Although Robinhood has expressed an interest in relaxing these limitations once it feels it can do so in a way that all parties are protected legally, there is no timeline for this. Using Robinhood’s system also causes you to not have control over your private keys, which is a concern for many crypto aficionados.
Secure your Private Keys and Partner with a Hot Wallet
- Pros: Open source and widely compatible with many currencies and apps; one of the best offline options
- Cons: Some concerns about Bluetooth and counterfeit versions of the software being a vector for attack; maximum tied wallets cap
The other big name in cold storage wallets, the Ledger Nano X gives Trezor a run for its money. With over 1,500 cryptocurrencies compatible with its system out of the box, and the ability to sync with a hot wallet over either USB or Bluetooth, it is a powerful little piece of hardware.
At a price point about 60% of that of Trezor, it also is a lesser hit on your wallet. For those who are willing to trust their currency moving to and from their other devices through wireless Bluetooth, it can pair well with a hot wallet for more transactional purposes, with the cold wallet on hand serving as the last redoubt for security. Ledger also provides its own software that can manage or interact with your device, with many reviews touting it as being among the easiest of all cold wallets to set up and use. With support for plenty of different cryptocurrencies, from Bitcoin and Ethereum to lesser-known Litecoins, it provides a powerful option for your crypto wallet. There is a limitation to the Ledger Nano X; you are limited to only 100 different cryptocurrencies of the more than 1,000 available with their system.
This wallet’s software and the Bluetooth connections are worth a note of warning for the wariest of users. Transmitting to your device over Bluetooth results in data being developed that gives Ledger knowledge of how much of the different cryptocurrencies you own. Setting up your own node to get around this can be a more advanced and difficult choice, which may preclude using the device or the Bluetooth options. For Android users, there have been some instances in the past where fake versions of the Ledger software have made their way onto the Google Play store. Installing and logging into phony software could result in the theft of your Bitcoin or personal information.
Huge and Well-Known
- Pros: One of the most legitimized exchanges, a long-standing history, and a relatively reputable operation. In 2018, they were the fifth largest exchange by market share.
- Cons: Not available everywhere — like New York state — and it takes a little longer to get started.
Kraken is one of the largest and longest-standing platforms for trading cryptocurrencies. Founded in 2009, Kraken was designed as a replacement for Mt. Gox after major security breaches threatened that exchange. With margin trading, many currencies accepted, and a fine balance between compliance with regulations while also protecting its customers, Kraken is a bit of a darling among some circles.
It was the first cryptocurrency exchange to get a special purpose depository institution charter in Wyoming, giving the firm a bank-like status in the state. By contrast, it did relatively little to cooperate with the New York Attorney General inquiry into cryptocurrencies, citing concerns that the state’s policies were bad for business and hostile to the cryptocurrency market. Some have lauded the company’s navigation of the regulatory regime, while others have pointed out that it may make them less credible to institutions and governments alike.
With security as a touted front-of-mind concern for Kraken, all customer accounts must be verified and go through a direct deposit process. This can take more time than getting started on some other exchanges that offer more streamlined processes. Also, Kraken has pulled out of or avoided some jurisdictions, like New York, to avoid dealing with certain regulations.
The Exchange of Choice for Institutions?
- Pros: There is significant money behind the platform, it is among the exchanges seeking the most professional and legitimized approach, and it is actively courting institutional investors. Gemini also offers a number of financial services beyond just trading.
- Cons: Site has buckled under high trading volumes at times, regulatory compliance requires the company to collect more of customers’ personal information, and the platform may not have all the cryptocurrencies you want.
Though a relatively smaller exchange, Gemini has been growing quickly over the past two years. Many of the company’s actions seem to be around courting major institutional investors and getting on the good side of government regulators. The platform only lists digital assets that have proven themselves over time, avoiding the new hotness in favor of the tried and true.
Gemini has recently begun growing its financial offerings, adding a cryptocurrency credit card in early 2021, and launched its own stable coin that is tied to the American dollar. The company has been able to make these moves because it is so compliant with regulations — a factor that irks some who move through the more wild parts of the cryptocurrency space. Setting up an account requires two-factor authentication, linking a bank account, and documentary verification of your address and identity.
The major concern for Gemini has thus far been stability of its servers. During periods of very high trading volume, the Gemini exchange has buckled, causing delays or even fully crashing from time to time. Despite this, the company has support from many institutions including the Chicago Board Options Exchange, which suggests the company is planning and positioning itself for the long haul and preparing for a world with increasingly legitimized cryptocurrency offerings.
Hardware Cryptocurrency Wallet at Top of Class
- Pros: Secure cold storage that just plain works, making it a powerful offline option
- Cons: It’s small and can cost you more than just the purchase price if you lose it
Trezor is among the most recommended hardware wallets out there. Called the “bulletproof” Bitcoin wallet, it boasts several security features including a password manager app built in, two-factor authentication, and compatibility with ERC-20 tokens that ensure secure exchanges on the Ethereum platform.
The hardware comes with a USB adaptor and it works with Windows, Linux, Mac, and Android out of the box. Further, it has a suite of developer tools that means that there are several integrations still being developed for it. Out of the box you need to do some basic software installation to help ensure the absolute security of your device, but once that is complete it is compatible with hundreds of cryptocurrencies without further effort.
In terms of downsides, Trezor is a little on the pricier side, coming in at $169.99. Further, it is a physical piece of hardware, making it susceptible to physical theft or loss — a limitation that all hardware-based wallets have.
Contactless Payment and Crypto
- Pros: Buy and sell cryptocurrency and use it to make purchases or send and receive money securely
- Cons: Limited cryptocurrencies supported
Not to be confused with blockchain technology, Blockchain.com is a wallet and cryptocurrency exchange that provides some of the easiest person-to-person cryptocurrency transfers available. With built-in options for requesting and sending funds, the ability to transfer funds via either a QR code or a single-use unique Web address, and other go-between options, it allows for a payment platform akin to PayPal but with more privacy. It even works on both your Android and iOS devices, giving you access on the go. In areas with sufficient support, it’s even a contactless payment technology.
Blockchain.com works with relatively few cryptocurrencies — only BTC, ETH, and a handful of others, including two stable coins pegged to the U.S. dollar. Its cryptocurrency exchange and wallet do not come linked by default, but you can access that option after you set up both your wallet and account. You may, however, maintain your own cold wallet separately from the exchange, ensuring further control.
With much of its source code and APIs made publicly available through GitHub, Blockchain.com has positioned itself as a bit of a darling for those who are interested in mucking about with automated trading scripts and bots.
This has also helped on the security front, as multitudes of users and interested parties can help find and address any flaws that may crop up. For the especially paranoid, however, the single-use unique addresses and QR code options may prove to be a point of concern , because they are highly susceptible to human error.
The world of cryptocurrency is here to stay, and with the ease of making gargantuan transactions, you need to be secure. Many companies offer different allegedly secure options but doing your research is always going to be important. One of the most important lines of security is always going to be your gray matter, so engaging your brain will continue to be important. Cryptocurrencies have the potential to be among the most secure transactions in human history, so long as we can continue to manage the human part of that equation.
Several older wallets and exchanges specialize in a few coins — often Bitcoin, Ethereum, and Ethereum Classic (ETC) — resulting in options that do not reflect newer developments in the larger digital currencies space. They often provide top-tier security, but the lack of coins supported may limit their efficacy for your usage.
Do you prefer a cryptocurrency bank or a wallet? Which wallet do you use?