What is the most secure crypto wallet?
If you’re looking to purchase cryptocurrency, you’ll need to set up a crypto wallet first; but what is the best crypto wallet for beginners? In short, the answer will be different for each person. However, regardless of individual circumstances, security should always guide crypto wallet selection. In this post, we break down these security considerations in relation to crypto wallet custody and type.
Custodial vs non-custodial wallets
Deciding whether to use a custodial or non-custodial crypto wallet is the first choice you’ll need to make as a new crypto holder. While many beginners use custodial wallets to start, you can also opt to use a non-custodial wallet, depending on the level of security you prefer.
Like traditional bank accounts, custodial crypto wallets are under the care of a central authority. For example, when you set up a crypto exchange account, your wallet is under the custody of that particular platform. In this case, the exchange holds your private keys and is responsible for securing the funds in your wallet. Similar to a bank card PIN, your private key is a unique alphanumeric password that allows you to “spend” or send cryptocurrency out of your wallet.
Unlike custodial wallets, non-custodial wallets give you complete control of your private keys. In other words, only you hold the private keys, which means you’re the only one with access to the wallet. If you hold a lot of crypto, this type of wallet can be more secure as there’s no third-party custodian involved that might compromise account security.
While custodial wallets are sometimes considered less secure than non-custodial wallets, they also don’t require key management. Conversely, if you select a non-custodial wallet, you’ll need to consider the risks associated with managing your own private keys. For example, if you somehow lose access to your non-custodial wallet, you’ll be unable to recover the funds without the recovery or key phrase.
A recovery phrase is a randomized string of 12, 18, or 24 words, provided only once when your wallet is set up. You’ll need to record this phrase as it appears, because order matters, and store it in a safe place for future reference. Unfortunately, if you lose access to your crypto wallet and don’t have the key phrase, there’s no way to recover your funds. If you hold a lot of crypto, the loss could be financially devastating.
In contrast, custodial wallets hold your private keys, which means you’ll likely be able to recover your funds in the event you lose access. For this reason, many new crypto holders are more comfortable using a custodial wallet. Out of all custodial wallets, those held on crypto exchange platforms are the most popular because they offer an easy way to buy and sell digital assets.
Whether you choose a custodial or non-custodial wallet, you should never give out your private keys. With this key, anyone can access your wallet and withdraw crypto, sometimes without your knowledge.
Hardware vs software wallets
Once you’ve decided between a custodial or non-custodial wallet, you can start to consider the features of each wallet type. In general, wallets are split into two categories, software, and hardware.
Software wallets can be custodial or non-custodial and exist as desktop, mobile, web, and browser extension apps. While there are many different software wallets available, some of the most popular are listed below:
Browser-based wallets: Unlike extension wallets, browser-based wallets are fully integrated with their host. For example, the Brave crypto wallet is browser-native, making it compatible with any device that hosts the Brave browser. As a fully integrated solution, the Brave crypto wallet is less susceptible to software vulnerabilities and leverages existing security features. As a result, your crypto wallet is more secure, and functional, across all devices.
Desktop wallets: The non-custodial Exodus wallet is available as both a desktop and mobile app. My Ether Wallet (MEW) is another non-custodial wallet available as both a desktop and mobile app. It’s important to note that each wallet will support select cryptocurrencies, also known as tokens. For example, Exodus supports over 100 tokens across several different blockchain networks, while MEW only supports ERC-20 tokens on the Ethereum network.
Mobile wallets: Mobile wallets are similar to desktop wallets. The only difference is that these wallets are apps on your mobile device instead of your computer. In many cases, desktop wallets are available as mobile apps, as seen with MEW and Exodus. Other platforms, such as Trust Wallet and Aqua, are mobile-only crypto wallets. It’s important to remember that mobile wallets can be custodial or non-custodial, depending on which one you choose.
Web-based wallets: These wallets are found on exchange platforms such as Gemini, Binance, and Coinbase, although there are many others. Web wallets are almost always custodial because private keys are held by the exchange platform.
Extension wallets: MetaMask is one of the most popular browser extension wallets available for Ethereum tokens. However, there are many others, such as Phantom for the Solana blockchain, and Binance Chain Wallet for the Binance Smart Chain (BSC), and Binance Chain (BC) networks. These extensions make it easier to interact with decentralized applications (dApps) and decentralized (DeFi) protocols like the Uniswap exchange.
Hardware wallets are portable devices, similar to a flash drive, that sync with your computer or mobile device through a USB or Bluetooth connection. It’s important to note that all hardware wallets are non-custodial, which means you hold the private keys. Although hardware wallets must connect to the internet during a transaction, private key transaction signing happens offline.
As a result, the private keys are never visible online. After transactions are signed, they’re sent to the blockchain for confirmation. When hardware wallets aren’t in use, they don’t have an internet connection, which is why they’re also known as “cold” wallets. For this reason, even a malware-infected computer or mobile device can’t access your funds when stored in a non-custodial hardware wallet.
While all hardware and software wallets fulfill the same purpose, determining which is best depends on your specific goals. First, because hardware wallets are non-custodial, you’ll need to consider the risks associated with holding your private keys. In addition, you should also determine how comfortable you are with the idea of connecting a hardware wallet to a desktop or mobile device. While these non-custodial responsibilities might seem daunting to some, you might feel confident taking them on.
If you opt to use a software wallet, you’ll need to consider the risks associated with storing your private keys with a third-party custodian, depending on the platform you use. In addition, because software wallets are held on internet-connected devices, there’s an increased risk of malware exploiting vulnerabilities in your crypto wallet software.
What is the best crypto wallet for you?
As you’ve seen, there are many considerations when it comes to selecting the best crypto wallet for you. For example, while exchange-based custodial wallets streamline crypto purchases, they also require that you give up your private keys. Conversely, non-custodial hardware wallets maximize security, but often at the expense of convenience.
However, all factors considered, we recommend browser-based wallets as the optimal crypto wallet solution. For example, in contrast to most software wallets, the Brave crypto wallet fully integrates with the Brave browser. As a result, your wallet is less susceptible to hacking or spoofing attempts and leverages existing security features like ad or tracker blocking. In addition, the Brave crypto wallet performs across any device compatible with the Brave browser, enabling superior interoperability.
Finally, compared to hardware wallets, the Brave crypto wallet can’t be physically lost, damaged, or stolen, preventing devastating financial losses. As such, although choosing the best crypto wallet depends on your unique needs and comfort level, the Brave crypto wallet combines the best of both worlds. By bringing together the convenience of software wallets and the security of hardware wallets, we believe Brave offers the best crypto wallet.