Despite a difficult year for crypto and a lot of industry fear, uncertainty, and doubt (FUD), resulting in withdrawals of over 3 billion from industry-leading cryptocurrency exchange Binance, the global user base of cryptocurrency is closing to 300 million people. The collapse of the LunaTerra project at the start of summer and, more recently, the US federal government bringing eight criminal counts against former FTX CEO Sam Bankman-Fried have been catalysts in a mass exodus from centralized exchanges.
Many crypto users doubt the stability and safety of centralized crypto firms, resulting in a wave of withdrawals as digital asset holders look for a safer place to store their funds. When you purchase crypto, you must store your funds securely with the digital keys in safe hands. Crypto wallets are the best tool for the job, but which kind of wallet?
With many options available to users, finding the right crypto wallet to suit your investment profile can take time and effort. Online wallets connected to the cloud are known as hot wallets, though they are decentralized. While cold wallets, or hardware wallets, are entirely disconnected and are held on external memory drives.
There are benefits and detriments to using each type of wallet, though both allow users to hold prominent coins such as Bitcoin (BTC) and Ethereum (ETH). Depending on whether your portfolio is more focused on altcoins or you are stacking BTC will determine which wallet is for you.
Hot or Cold Wallet?
Hot wallets are a much safer alternative to cryptocurrency exchanges but are still connected to the internet. While some of the most popular hot wallets are designed by some of the biggest players in the industry (Coinbase and Crypto.com), often known as exchange wallets, they also exist as a standalone product.
During the recent FTX drama, many crypto commentators and mouthpieces for the industry were using the phrase “not your keys,” which relates to investors losing their funds as they were in control of the “keys” that stored their crypto. Storing funds with centralized exchanges doesn’t require keys, as the crypto firm ultimately manages the funds. However, with hot and cold wallets, your funds are protected by an encrypted string of characters used to unlock the wallet and access the funds. These keys are held exclusively by the investor, meaning funds aren’t accessible by anyone else.
Back to the comparison. Hot wallets make it easy to carry out crypto transactions as they are online. This does make them more susceptible to hacks. Even if only slight, the vulnerability of hot wallets is something cold storage irradicates. Cold storage is a great long-term solution, but being disconnected from transactions doesn’t suit many traders.
The Top Four Cold And Hot Wallets For Investors
To make selecting a cryptocurrency wallet easier, the team here at Cryptowisser combed through the industry’s best crypto wallets and picked the best two hot and cold wallets for you to try out.
Coinbase is one of the biggest names in Cryptocurrency. A large part of the company’s success has been its focus on meeting regulatory standards and providing a secure environment for storing and trading digital assets. One of the great things about this wallet is that it connects to several DEXs, which greatly appeals to DeFi (decentralized finance) enthusiasts. The wallet is also compatible with the leading cold-storage wallet, Ledger.
We were pleasantly surprised by the number of coins supported for staking and support for Ethereum and Polygon-based NFTs. Often with hot wallets, we see companies offering insurance if something were to go awry and funds were lost. Coinbase does not offer this service, which is a mark on an otherwise excellent service.
Crypto.com DeFi Wallet
Crypto.com has gained global attention through sponsorship deals with major sports organizations, notably the UFC. The DeFi wallet was designed to store DeFi products, cryptocurrencies, and tokens. Customers can enjoy the benefits of earn products on over 25 tokens, with an annual percentage yield paid out to those that stake their holdings.
Although the wallet is decentralized, it is integrated with the centralized Crypto.com exchange, giving trading access to customers. Crypto.com users can also store NFTs on the platform. One thing that frustrates us about the company is the need for more phone support, leaving just the Live Chat service, which can sometimes be frustrating.
Ledger Crypto Wallet
Ledger is the most popular name in cold wallet storage. The company has built various devices over the years, with the Ledge Nano S and Ledge Nano X now leading models. A simplistic physical device that offers a range of benefits to those who choose to store their funds offline.
Ledger offers staking for an assortment of cryptos, including Ethereum (ETH) Polygon (MATIC), as well as lesser-known cryptos such as Casper (CSPR). It’s odd to imagine a cold wallet offering staking products, but Ledger has developed its products to appeal to the broader market. The lack of customer support options was a downside but something we hope the company will address shortly.
Trezor is another name synonymous with cold storage of funds. The Trezor Wallet is compatible with several exchanges and supports a vast number of crypto assets, including some of the more niche projects—though sadly if you’re a fan of projects like Solana (SOL), Tron (TRX), and Polkadot (DOT), you’ll be left disappointed. Trezor wallet comes integrated with popular DeFi wallet Exodus, which offers over 235 cryptocurrencies for storage and crypto-to-crypto, peer-to-peer swaps.
A straightforward product and one which offers the levels of security one comes to expect when storing digital funds offline. While this is true for the latest Trezor Wallet, security flaws were identified in 2019. Although, the company has worked tirelessly to address these issues, and there haven’t been any further hacks or security breaches since then.