( 11th September 2019 )
Mobile Wallet: Mobile wallets overcome the handicap of desktop wallets, as the latter are fixed in one place. These take the form of paid apps on you. Once you run the app on your smartphone, the wallet can carry out the same functions as a desktop wallet, and help you pay directly from your mobile from anywhere. Thus a mobile wallet facilitates in making payments in physical stores by using "touch-to-pay" via NFC scanning a QR code. Bitcoin Wallet, Hive Android and Mycelium Bitcoin Wallet are few of the mobile wallets. Bitcoin wallets do not generally work on both iOS and Android systems. It's advisable to research your preferred mobile Bitcoin wallet as several malware software posing as Bitcoin wallets can be.
Online Wallet: An online wallet is a web-based wallet. You don’t download an app, but rather data is hosted on a real or virtual server. Some online wallets are hybrid wallets allowing encryption of private data before being sent to the online server. Such wallets as MyEtherWallet and Guarda allow you to access your account from any device, all you need to enter is your private key.
Hardware Wallet: Dedicated hardware that is specifically built to hold cryptocurrency and keep it secure. This includes USB devices. These devices can go online to make transactions and get data and then can be taken offline for transportation and security.
Fig: Ledger – A longer PIN supported Hardware Wallet
Universal / Multi-Asset / Multi-Coin Wallet: A wallet that can hold addresses from multiple coins. Please note that just because a wallet is “universal” doesn’t mean it literally holds every crypto asset. From exchanges to the best multi-asset wallet out there, I don’t know of any product that holds literally every crypto.
Fig: Eden – A Multi-Coin Wallet
Hierarchical Deterministic (HD) Wallet: An HD Wallet, or Hierarchical Deterministic wallet, is a new-age digital wallet that automatically generates a hierarchical tree-like structure of private/public addresses (or keys), thereby addressing the problem of the user having to generate them on his own. A standard cryptocurrency wallet is used to store the cryptocurrency tokens or coins. It has a public address which the user can give to others to receive funds from them, and a private key that the user uses to spend the stored tokens. This public/private combination mechanism ensures safety of the cryptocurrency tokens, but comes with an additional overhead of the user being required to repeatedly generate a random pair of private/public addresses (or keys), and back up each time one configures a new pair of addresses. As the number of transactions increases, this process becomes cumbersome for the user. HD Wallets, or Hierarchical Deterministic wallets, solve this problem by deriving all the addresses from a single master seed (hence the name hierarchical). All HD wallets use a variant of the standard 12-word master seed key, and each time this seed is extended at the end by a counter value which makes it possible to automatically derive an unlimited number of new addresses. HD wallets eliminate the need for the user to constantly generate and wait for the secure keys to be generated, so they only need to worry about taking the backup.
Putting together everything above, here are some ideas on what wallet to use. We typically suggest using an official (or officially endorsed) wallet for any given coin. So, for Bitcoin we would suggest using the Bitcoin Core Wallet, for Litecoin we would suggest Litecoin Core, and for Ethereum we would suggest either Ethereum Wallet or MyEtherWallet. Since the full official wallets of coins can require users to download very large files, and since some people tend to own a lot of coins, it is good to look at alternatives.
For those who want to use or invest in many coins, universal wallets / multi-asset wallets / multi-coin wallets are a good choice. There are software wallets that are universal like Coinomi, Exodus, Atomic Wallet, and Ethos that typically have desktop and phone app versions and hardware wallets that are universal like TREZOR and the Nano S (hardware wallets are generally good choices for long-term storage).
In choosing a wallet you’ll also need to decide between a custodial and non-custodial wallet. That is, non-custodial wallets like Blockchain Wallet and MyEtherWallet where you control your private keys directly but use the wallet as an interface, and custodial wallets where you don’t control your private keys directly like Coinbase (although people are advised against keeping all their funds on an exchange, exchanges like Binance generally double as custodial wallets as well).
Lastly, you should also be aware there are wallets designed for specific networks and their functionalities. For example, other features aside, Coinbase Wallet (a Coinbase product) and Trust double as Ethereum-based wallets that let you store a range of Ethereum-based tokens and also act as web browsers for the decentralized web (they allow you to interface with DApps).
In simple terms, which wallet you choose depends on your needs. Generally speaking, non-custodial offline wallets like TREZOR are great for long term storage, custodial wallets like Binance are essentially mandatory for trading, and a software wallet that you can use as an app like Coinbase, Blockchain Wallet, and Trust are solid choices for everyday use. If you stick to the big names and use best practices, it is hard to go wrong and a lot boils down to choice.
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