Crypto Wallets 101 | FarmVille For Blockchain Investors

Playing FarmVille on your Samsung Galaxy or iPhone is a fun way to enjoy getting your hands dirty, without actually getting your hands dirty.

But what does that have to do with cryptocurrency wallets?

Playing Farmville is all about role-playing.

But not just growing corn and raising Icelandic Chestnut ponies. It’s also about dealing with the ups and downs of supply-side economics, country style.

Of course, if you’re role-playing as a FarmVille character you don’t need to actually shovel manure. The only way it could be more fun is if you could also make a real-world profit!

But, what if playing FarmVille could give you a leg up on choosing the best crypto wallet for cryptocurrency investing? That could end up being very profitable!

Imagine you’re Marie or Chad from FarmVille.

You enjoy tending your livestock and growing crops, but you also want to keep leveling up, so you can expand your farm.

It’s kind of like real life. You appreciate what you have, but you want to take the best care of your loved ones, so you’re always looking for ways to level up.

For Chad and Marie that might mean breeding new animals. For you, that could mean investing in cryptocurrencies.

And a critical part of investing in cryptocurrencies is having a safe way to secure your coins and have them available to sell or trade.

To do that you’ll need a cryptocurrency wallet.

It’s like having a barn or a silo in FarmVille.

Ready to get started? You can bet the farm here’s what we’ll cover. Feel free to skip ahead.

Table of Contents

What is a Cryptocurrency Wallet?

Reasons to get a Cryptocurrency Wallet

The different types of Cryptocurrency Wallets

What can you do with a Cryptocurrency Wallet?

You’ll need an App for that

The FarmVille Method: Choosing the best Cryptocurrency Wallet for you

How to choose a Cryptocurrency Exchange that works with your wallet

Crypto Traps to Avoid

FAQs

Top 10 Recommended Crypto Wallets

What is a Cryptocurrency Wallet?

Cryptocurrency wallets are similar to physical wallets, but they don’t actually hold cryptocurrency coins. Your crypto holdings live and breathe on their own blockchain. Blockchains are secure online network records of transactions.

Cryptocurrency wallets are actually software programs that store public and private keys that allow their owners to access and manage their crypto tokens on the blockchain.

These wallets allow users to store, send, and receive cryptocurrency coins like Bitcoin, Ether, and Dogecoin. Wallets can be desktop, mobile, or online.

Crypto wallets have 2 essential features:

1. Public Key – links to a digital address where you can receive or send transactions
2. Private Key – this is your secret, secure password that gives you access to your funds

Your pubic and private keys work together. You need both of them in order to buy, sell or transfer cryptocurrencies.

Your public key is what identifies you to other parties on a blockchain network. No one but you sees your private key. It’s tied to your public key using a cryptographic code, and works as a digital signature for your transactions.

Reasons to get a Cryptocurrency Wallet

It might not seem like it today, in the middle of the “crypto winter,” but it’s still early days for crypto and blockchain infrastructures.

According to Jim Cramer of Mad Money there are still fortunes to be made in cryptocurrencies.

Even if you don’t make a fortune though, there are many reasons to invest in crypto. And if you buy cryptocurrency you’re going to need a safe way to keep it.

Top 6 reasons to get a cryptocurrency wallet:

1. A cryptocurrency wallet provides a secure place to store your coins.
2. A cryptocurrency wallet allows you to easily and quickly access your coins, without having to go through a third party.
3. To use your coins to make purchases. A cryptocurrency wallet can be used to make purchases with merchants who accept cryptocurrencies.
4. To receive payments in cryptocurrency. If you are paid in cryptocurrency, a wallet is necessary in order to receive and store your coins.
5. To avoid losing your coins. If you do not have a wallet, there is a danger of losing your coins if you forget your password or if the exchange you are using goes out of business.
6. To remain anonymous. When you use a cryptocurrency wallet, your identity remains confidential.

FarmVille Insight:

To level up in FarmVille you need your animals to produce items or breed. That won’t happen until you build them animal houses.

It’s the same with crypto, only you need a wallet instead of a house.

Just as you can have several animal houses in FarmVille you can also have several crypto wallets that hold different cryptocurrencies or work with different cryptocurrency exchanges or other apps.

The different types of Cryptocurrency Wallets

There are a few different types of cryptocurrency wallets, which can be broken down into hot and cold wallets. Hot wallets are connected to the internet, while cold wallets are not.

Hot Wallets

The most common type of wallet is a hot wallet, which can be used for everyday transactions.

You might think of hot as being connected to power, but with crypto wallets, it means being connected to the internet.

They are generally easy to use and many come with mobile apps, making them convenient for people who are always on the go. However, because they are connected to the internet, they are also more vulnerable to hacks.

Web wallets

Crypto web wallets are accessed from the internet, and are a great option for those who want to use cryptocurrencies but don’t want to worry about managing a software or hardware wallet.

Web wallets are often offered for free by third parties. They are easy to use and allow you to store and use a variety of coins. However, they are also less secure than other options, so be sure to choose a reputable provider.

More secure web walleting: To add security to your web wallet funds or other assets you can use a crypto exchange that offers vaulting. Vaulting adds a preset delay to the withdrawal of cryptoassets from a wallet. This gives the wallet owner the opportunity to stop any unauthorized withdrawals.

Desktop wallets

Crypto desktop wallets allow you to store and use a variety of coins. They are a great option for those who want to use cryptocurrencies and are comfortable downloading and managing wallet software.

Desktop wallets offer more security than web wallets, but may be susceptible to hacking if the user’s computer becomes infected.

Mobile wallets

Mobile wallets are a convenient way to store your cryptocurrencies. They allow you to store your coins on your phone, which makes them easy to access and use.

There are a variety of mobile wallets available, so it’s important to choose one that is compatible with the cryptocurrencies you want to store.

Some of the most popular mobile wallets include Coinbase Wallet, Trust Wallet, and Enjin Wallet.

Mobile wallets work using simplified payment verification technology, which means they are not as secure as cold wallets. Mobile wallets are also susceptible to malware and hacking.

Mobile wallet security can be enhanced with two-factor authentication, including authenticator apps, personal identification numbers, answers to secret questions, a fingerprint scan or a voice print.

Also, you can take advantage of the convenience of mobile wallets and at the same time limit your vulnerability to hacking if you only store the amount of crypto you need for trading. That means you could keep most of your crypto in hardware wallets, and a smaller amount in your mobile wallet.

Custodial & Non-Custodial Wallets

Hot wallets can either be custodial, or non-custodial. Hosted, or custodial wallets are provided by cryptocurrency exchanges to their customers. The exchanges have custody of the wallets.

Custodial wallets are often easier to use, because the cryptocurrency exchange takes responsibility to keep customers’ private keys safe. This convenience comes with some risk, however. The cryptocurrency exchange could be hacked and you could have your cryptocurrency assets stolen. Or the exchange could go out of business.

Non-custodial wallets do not share their private keys. If you have a non-custodial wallet, you control the private key.

That means you don’t need to worry if your cryptocurrency exchange gets hacked. It also means your crypto assets cannot be confiscated or interfered with.

Owners of non-custodial wallets must take responsibility to protect their private keys. If a private key is lost, that means any coins in the wallet will also be lost, forever.

Cold Wallets

Cold wallets, by definition, are not connected to the internet. That removes the most common vulnerability to hackers and makes them more secure. Cold wallets are controlled by their owners, so they are considered non-custodial.

They are usually used for storing larger amounts of cryptocurrency that is not needed on a day-to-day basis. Cold wallets can can take take the form of a physical device, such as as a USB drive, or or even a piece of paper with a QR code on it.

Obviously, paper wallets aren’t connected to the internet, so in that way they are safer from hacking. But, there are still risks. You could lose your paper wallet, or leave it in your pocket on laundry day, or spill your Starbucks Latte on it.

Cold hardware wallets provide security in different ways. Not having an internet connection is the first line of defense. But, even when a hardware wallet is plugged into your computer with internet access, it’s still secure.

With a hardware wallet your private keys stay in your wallet and let you approve any transactions within the wallet, before that transaction is sent through the internet.

Storing large amounts of cryptocurrency is the best use of cold wallets. But it may not be the most practical solution if you make a lot of small, everyday transactions, or if you plan to do a lot of trading.

Another consideration is the fees associated with your crypto wallet. Hot wallets usually come with higher fees to access internet and crypto exchange apps. Cold wallets usually have lower fees.

Multisignature Wallets

Multisignature wallets are crypto wallets which require two or more private keys in order to sign and complete a transaction. Just like a safe deposit box that needs two keys to open it.

In the case of a family or business owning cryptocurrency assets, having only one person in charge of a crypto wallet may seem too risky.

What if that person dies?

Or what if members of the family or business want to make sure any actions involving their crypto assets will only happen when designated members agree?

With a multisignature wallet, you can decide how many keys to give out and how many keys it will take to open the wallet.

In the example below, the multisignature wallet is set up with three keys, and it can be opened with any two of the three keys.

Multisignature wallets can be used with hardware wallets, such as Trezor or Ledger. Gnosis Safe Wallet has robust multisignature capabilities and can be used as a Web Wallet, a Desktop Wallet or a Mobile Wallet.

One of the benefits of multisig wallets is in providing a backup in case you lose your key. Normally, losing a private key means losing everything in the wallet, but having more than one person with a key for a multisig wallet could save an unthinkable disaster from happening.

FarmVille example

What if Marie and Chad had a real-world farm, and Marie uses a Bitcoin account to buy tractors and seed for spring planting, and cover the mortgage. But Marie falls into the grain silo and dies tragically.

Marie takes her private key to her grave. But fortunately, she set up a multisig wallet that could be opened either with her key or Chad’s key. Chad won’t have to sell off all the livestock, and the farm won’t be lost.

Web3 Wallets

Web3 wallets are the next generation of non-custodial crypto wallets. They don’t just let you store and access your digital funds independent of banks or crypto exchanges, they also let you

• Interact with smart contracts.
• Transact with peer-to-peer decentralized applications or exchanges.
• Store NFTs and other digital assets.
• Provide entry to financial services not controlled by banks.
• Interact with GameFi play-to-earn-blockchain-games – think Decentraland or The Sandbox. Most games only work with specific wallets.
• Potentially do away with passwords.

Many Web3 wallets have their own browsers.

Popular Web3 wallets include MetaMask, Rainbow, Trust Wallet, Coinbase Wallet and Argent.

A Web3 wallet that doesn’t use passwords?

“It’s official, passwords suck!”

If you use Touch ID or Face ID with your smartphone then you know what biometric recognition is. But most systems revert to password recognition if they experience failed attempts.

But when it comes to security, ParallelWallet takes a different approach. (If this were FarmVille, it wouldn’t be just a cow or a chicken, it would be an exotic animal.)

There are no passwords or secret keys with ParallelWallet. It’s all biometric recognition. The wallet uses a combination of

1. Anti-spoofing facial recognition
2. Palmprint recognition
3. Voice recognition

Wallet owners can choose how many of these bio-keys they want to enable for each type of action. Just for peeking inside a wallet a user might require face recognition only. Then the user could ramp up the security level with all three bio-keys as a precondition for allowing any cryptocurrency assets to leave the wallet.

Web3 wallets don’t come with “I forgot my secret key” buttons, but with ParallelWallet that situation never comes up.

For even better security ParallelChain Lab, creator of the wallet, cannot see or access users’ biometric data. All that data lives in users’ personal ParallelChain blockchains, in non-readable format.

As CEO Ian Huang likes to say, “it’s a blockchain in your pocket.”

Bitcoin and Ethereum Wallets

Bitcoin and Ethereum are the number one and number two cryptocurrencies in the world, both by popularity and by market cap. So it’s no surprise that most cryptocurrency wallets are designed to work with either Bitcoin or Ethereum, or both.

But there are differences between Bitcoin’s and Ethereum’s blockchains that have to be taken into account by a crypto wallet’s design.

Bitcoin is a blockchain cryptocurrency that is designed to act like money, both for buying things and as a store of value.

Ethereum uses its own unique blockchain, but unlike Bitcoin it has also designed its blockchain to be a foundation for the creation of other cryptocurrency tokens and decentralized applications (dApps).

There are currently 932 different active cryptocurrency tokens based on Ethereum’s blockchain and smart contracts. (etherscan.io/tokens)

Out of those 932 tokens, which doesn’t include Ethereum’s own ETH token, the top 5 ERC20 tokens (BNB, Tether USD, USD Coin, Binance USD and HEX) have a combined circulating market cap of $223 billion.

That’s why most crypto wallets are designed to be ERC20 (Ethereum standard) compatible.

Bitcoin Wallets

Not every crypto wallet works with Bitcoin. Wallet software must be compatible with the blockchains of any cryptocurrencies they hold.

Most Bitcoin wallets are Segwit compatible. Segregated Witness was a 2017 upgrade to the Bitcoin blockchain that increases the number of transactions it can handle.

Compatible Bitcoin wallets include Ledger, Trezor, Exodus and Electrum (and hundreds more).

Transactions carried out using Bitcoin wallets must also pay Bitcoin transaction fees. These fees are specific to Bitcoin to incentivize Bitcoin miners. Larger transactions cost more in fees. Faster transactions also cost more, especially during high transaction demand periods.

But there is a way to avoid paying fees when you transfer Bitcoin to someone else. It’s called the Lightning Network.

Lightning Network Wallets

The Lightning Network is a second layer of code built on top of the Bitcoin blockchain that was designed to create separate payment channels. These channels allow payments to bypass the main blockchain. So they’re really fast, and there are no fees.

Lightning Network wallets include:

• Wallet of Satoshi
• Bitcoin Lightning Wallet
• Breez
• Zap
• Eclair Mobile

Bitcoin full-node wallets

Any computer that connects to the Bitcoin network is known as a node. Crypto wallets that contain their own full nodes are able to verify transactions using a copy of the crypto blockchain. That means they don’t have to trust any third party verifications.

Bitcoin Light Wallets

Otherwise known as SPV wallets or thin clients, light wallets are more practical for the average user. SPV, or simplified payment verification, allows transactions to be verified without needing the wallet to hold a full copy of the cryptocurrency blockchain.

Popular light wallets include Electrum, Jaxx and Coinomi.

Ethereum Wallets

Ethereum wallets take advantage of the fact that hundreds of different tokens have all been designed to be traded within the Ethereum ecosystem, all meeting the same ERC20 standard.

So Ethereum wallets can trade at least 932 different tokens based on a single blockchain standard design.

Popular ERC20 compatible wallets include MetaMask, Trust Wallet, Atomic Wallet, Ledger Nano, Enjin Wallet, KeepKey and MyEtherWallet.

Multi Asset Wallets

Multi asset wallets are designed to let you store public keys for more than one cryptocurrency.

What are the top 10 multi asset crypto wallets?

Creating Your Own Crypto Wallet

Why would anyone want to create their own crypto wallet when there are already hundreds of choices?

If you have your own business, or even a farm, you can create a wallet that integrates with your own backend software systems or payment applications.

If you don’t have the technical chops or time to do this yourself you can hire a developer on upwork.com, toptal.com or fiverr.com.

How many addresses will you need?

If you have customers and you want to be able to tell them apart, then you’ll want unique addresses for each customer.

On the flip side, when you send payments creating multiple addresses helps to keep you anonymous.

Having multiple private keys that control your cryptocurrency funds means that even if one of your private keys is compromised the rest will not be affected.

Key Derivation

If you create your own crypto wallet you will also need to create your public and private keys. There are different ways to do this:

• Non-deterministic wallets randomly generate private keys as addresses. The downside is that each private key needs to be backed up to make sure you always have access to your wallet and the assets it controls.
• Sequential deterministic wallets only require a single backup of your original wallet seed (a 128, 256 or 512-bit random number).
• Hierarchical deterministic (HD) wallets create new addresses with every transaction, making it more difficult to hack your wallet.
• Armory deterministic wallets are based on open source Python coding used on the Bitcoin network. They allow separate creation of private and public keys, which means more security and also more convenience.

What can you do with a Cryptocurrency Wallet?

The 3 basic functions of crypto wallets are sending, receiving and storing both crypto coins and tokens.

Cryptocurrency Coins & Tokens

Both coins and tokens can be stored in a crypto wallet. Cryptocurrency coins have their own blockchain, but tokens don’t. Every coin is also a token, but not all tokens are coins.

• Cryptocurrency coins are considered a form of money. Their purpose is to make payments or act as a store of value. Bitcoin, Ethereum, Dogecoin and Litecoin are crypto coins.
• Cryptocurrency tokens are not money. They are a digital form of other things, such as non-fungible tokens (NFTs), or they may be coins that also perform a function or utility. Examples are ERC20 tokens that use the Ethereum blockchain, game tokens, payment tokens, exchange tokens, and security tokens. Helium is a utility token. Bitcoin and Monero are payment tokens. ArCoin and INX are security tokens.

Currency conversion

Inside of your crypto wallet you can convert cryptocurrencies to dollars, euros, pesos, etc. and vice-versa.

Independent Trading

Wallets that have trading and exchange functions allow crypto traders to buy and sell crypto without help or interference from exchanges or other third parties.

Cryptocurrency transactions are enabled by your public key – private key combination to provide digital signatures.

Swap

Crypto swapping is trading funds in one cryptocurrency directly for another cryptocurrency, with having to first convert to dollars. It’s quicker and users may avoid some transaction fees.

Wallets that make it easy to swap between different cryptocurrencies include:

• MetaMask
• Crypto.com DeFi Wallet
• Bitcoin.com Wallet
• Exodus Wallet
• Solflare Wallet

Keep Track of Trading Fees and Calculate IRS Taxes

The goal is to invest in or trade crypto assets and make some money. No one wants the hassle of keeping track of trading fees or taxable events. That’s why you want a crypto wallet that integrates with automated tax software.

A good crypto tax automation will keep track of all your transactions, calculate capital gains, expenses, deductions and support tax-loss harvesting. It will also create reports you can file with the IRS and integrate with TurboTax or other tax software.

Some of the most popular crypto tax automations include Koinly, CoinLedger, CryptoTax and TokenTax. More details about which wallets these automations work with is provided below, in the You’ll Need An App For That section.

Wallet use with Crypto Debit Cards

Crypto debit cards let you spend your cryptocurrency funds anywhere debit cards are accepted. When you make a purchase funds are deducted from your crypto wallet balance and converted to dollars or other fiat currencies.

Popular crypto debit cards that work with crypto wallets are:

• Coinbase Debit Card
• BlockCard Visa Debit Card
• Voyager Crypto Mastercard
• Nexo Debit Card

Crypto Credit Cards

When you make purchases with a crypto credit card you don’t need a crypto wallet, because you’re not spending your own cryptocurrency funds, you’re borrowing from the credit card issuer.

Executing Smart Contracts

ERC20 wallets can be used with Ethereum based smart contracts. Your wallet’s public and private keys are used to digitally sign these contracts, similarly to the way wallets authorize cryptocurrency trades.

Smart contracts can be used for any transaction or action that will benefit from automated performance and a level of assurance that’s greater than just hoping individual parties will perform as agreed.

Examples of smart contract applications:

• peer-to-peer transactions
• DeFi lending, borrowing and trading
• acquisition and management of online gaming digital assets
• healthcare records access
• recording property ownership
• mortgage transactions
• insurance claims processing
• voter validation

DeFi functions

DeFi functions include most of the types of financial services handled by banks, except in a decentralized manner. Lending and staking, filing taxes, mutual funds and even checking credit card balances are all available through DeFi.

Non-custodial Web3 wallets are designed for DeFi applications. Coinbase Wallet works with Compound, a DeFi lending and borrowing application built on Ethereum that acts like a money market, except on a blockchain.

SolFlare’s wallet lets you manage staking accounts. Argent will let you buy crypto funds with your debit card and then stake those funds with low fees.

Store digital collectibles such as NFTs

If you’re interested in investing in NFTs, then you’ll want a wallet that can connect to NFT marketplaces, such as

• OpenSea
• CryptoKitties
• Solanart
• SuperRare

OpenSea operates on the Ethereum, Klatyn and Polygon blockchains. Many NFT traders use Metamask Wallet for their OpenSea purchases. Top offerings at OpenSea include “Bored Ape Yacht Club” and “CryptoPunks.”

CryptoKitties was developed as a blockchain game on Ethereum. It promotes purchasing, breeding and selling of virtual NFT cats. CryptoKitties recommends MetaMask Wallet “for the best CryptoKitties experience,” but Coinbase Wallet and Trust Wallet are also popular choices.

Solanart uses the Solana Blockchain and Solanart wallets must be compatible with that blockchain. Ledger, Sollet and Phantom wallets work with Solanart, but there are many others. Solanart is famous for their Degenerate Ape Academy, Aurory and Galactic Gecko Space Garage NFT collections.

SuperRare uses the Ethereum blockchain, which is compatible with hundreds of crypto wallets.

The NFT wallet you choose will also need to support whichever cryptocurrency is needed to buy the NFTs.

Popular NFT wallets include:

• MetaMask
• AlphaWallet
• Coinbase Wallet
• Trust Wallet
• Rainbow Wallet

These wallets are not all the same, however. For example, Rainbow Wallet will let you visualize the NFTs you hold, but MetaMask will not.

You’ll need an App for that

Cryptocurrency apps are software shortcuts that let you trade crypto or perform other management tasks.

Cryptocurrency exchanges are a type of crypto app.

So are cryptocurrency wallets.

Crypto wallets are master apps, because most wallets allow other crypto apps to be uploaded to them. For example, the Ledger Nano S hardware wallet allows up to 3 crypto apps to be uploaded. But active traders who want access to more crypto exchanges can use the Nano X and upload as many as 100 crypto apps.

Cryptocurrency trackers

Cryptocurrency trackers are crypto apps that let you see what your assets are worth in real-time. This can be helpful if you hold your crypto assets in a hardware wallet instead of on an exchange.

Crypto trackers also give you real-time trading prices and fees on multiple exchanges, letting you pick the best one at any time.

Decentralized apps

Decentralized apps let you earn interest on your crypto. You will need a wallet to work with decentralized apps. Watch out for high transaction fees.

Bitcoin Lightning Network apps

If you’ve got some Bitcoin you want to splurge with and a Lightning Network wallet, there are apps designed to make it easy for you to spend your BTC. You can buy Amazon or Starbucks gift cards with the Fold App, or use Bitrefill to top off your prepaid phone plans. Other apps include Moon, Y’alls, Strike, Sphinx, Tipping.me and LN.PIZZA.

Tax Automation apps

No one likes to do taxes, even if you’re making money. Fortunately, there are apps for that.

CoinLedger does all the heavy lifting for your crypto tax obligations. It integrates with TurboTax and TaxDirect and with more than 100 crypto exchanges. It also handles NFT transactions. It even offers a free trial.

CoinLedger Crypto Wallet Integrations include:

• Ledger
• Trezor
• MetaMask
• Exodus
• Trust Wallet

Koinly features automated data importing and also works with many crypto exchanges and wallets. Also, you can track every fee and verify your crypto exchange data. You can start with its free plan.

Koinly Crypto Wallet Integrations include:

• Ledger
• Trezor
• Jaxx Wallet
• Uphold
• Atomic Wallet

App Security

Just like downloading files from the internet, you need to check the security features for any crypto app you want to download. Two-factor or biometric authentication and back-end encryption are methods used to add security to crypto apps.

The FarmVille Method: How to Choose the best Cryptocurrency Wallet for You

Just because FarmVille is designed for fun and social interaction doesn’t mean strategy doesn’t play an important part in the outcome of the game. Most FarmVille strategies involve a combination of efficiency and leveling up, but as you’re probably aware the cryptoverse is a spectacularly bigger challenge, one that requires a combination of understanding, courage and timing in order to “level up.”

The basic purpose of crypto wallets is to store your digital assets safely, but if you want to win the game you’re going to need a strategy and a wallet that supports that strategy. And by “win the game” we mean achieving or surpassing your financial goals with your crypto investments.

Just as with FarmVille, you can play around with crypto investing as a kind of entertainment. But, you can also get serious about it. With FarmVille, that means becoming obsessive about planting crops, producing goods, pleasing your customers, building livestock shelters, going on quests with your exotic animals, and so on. FarmVille farming becomes less about having fun and more about winning.

Picking the right crypto wallet or wallets may seem like a trivial detail, but just as with FarmVille, obsessive attention to detail is how you win. Here are some important factors in picking your crypto wallet.

Tip #1. You may need more than one wallet.

Many experts and cryptocurrency exchanges recommend protecting most of your cryptocurrency assets with a hardware wallet. But, for convenience and practicality they also recommend using a hot wallet for trading, with however much cryptocurrency you expect to trade.

Tip #2. Pick A Wallet That Works With Cryptocurrencies You Want To Hold Or Trade

Not all crypto wallets work with every cryptocurrency or other crypto asset.

If you’re only interested in holding your favorite cryptos for the long term, then a hardware wallet will provide the best security. But, even hardware wallets are not compatible with every cryptocurrency.

Things to consider for your crypto wallet strategy

• Cryptocurrency choices
• Cryptocurrency exchange choices
• Web3 flexibility – do you want DeFi functions or to store NFTs?
• How easy it is to trade or check on your crypto?
• Security
• How much it will cost upfront and in trading fees?
• Customer support

The number and variety of crypto wallets available means that you can work with thousands of cryptocurrencies for hodling, trading, lending, staking, executing smart contracts, performing any number of DeFi and Web3 functions, and taking advantage of new blockchain innovations.

But, an important lesson from FarmVille is not to try to do everything, especially all at once. Just as in FarmVille, it pays to follow the 80-20 rule with your crypto investment and crypto wallet approach. Understand your risk tolerance and your preferred investment strategy, then pick the crypto wallet or wallets that will support getting the most bang for your crypto-buck.

As an example, in FarmVille your wallet barn has limited capacity. If you need more storage you must either upgrade your barn or get rid of less desirable items in your barn.

Similarly, in the crypto space, if you go with a Ledger Nano wallet, consider that the S model app capacity is limited. If you work out your crypto strategy before you get a hardware wallet, then you’ll know whether the Nano S or the Nano X, with its larger app capacity, is the right solution for you. And, you may avoid having to delete apps in your wallet to make room for different apps or the cost and trouble of having to upgrade from a Nano S to a Nano X.

Helium Wallet Strategy

Another example is choosing a wallet for Helium tokens. Helium has its own native wallet for HNT tokens and is introducing a new wallet to support HNT, IOT and MOBILE tokens as it adds 5G network mining. You will need the new wallet if you have a Helium or Helium 5G hotspot and you want to store the IOT or MOBILE tokens you earn.

Helium’s wallet is not designed to handle Bitcoin or Ethereum based tokens, so Helium hotspot miners may also need to consider adding a second wallet for trading or Web3 flexibility.

Helium has added Ledger Wallet compatibility, which provides some flexibility and secure storage options to Helium hodlers. If your Ledger Wallet is your second wallet this would also provide trading flexibility.

The Two-Phone Mostly Secure Method

Maybe you decide that you need a hardware wallet in addition to your hot wallet, to maximize the security of your cryptoassets, but you don’t want to pay for a Trezor Model T or a Ledger Nano X. Did you know you could use a smartphone as a cold wallet?

Just not your primary phone, since that one is open to the internet.

A second cellphone, without a cellular plan, can be used for cold storage with no internet accessibility. When you want to transfer cryptocurrency out of your cold storage phone to the hot wallet in your primary cellphone you just power on the second phone and connect them together via Bluetooth.

After you transfer funds to your hot wallet phone, you just power off your cold wallet phone.

Bluetooth works with short-range radio waves, which limits your vulnerability, but doesn’t eliminate it. You might not want to power up your cold wallet phone or transfer funds with it in a crowded coffeeshop.

How to Choose a Cryptocurrency Exchange that Works with your Wallet

Cryptocurrency exchanges are where most people buy, sell and trade cryptocurrencies.

Crypto exchanges let their users connect their bank accounts through ACH. Most exchanges also allow debit or credit cards to be used to buy crypto.

When you pick a cryptocurrency exchange to trade on, you need to make sure that the exchange works with the type of wallet that you choose.

For example, if you decide to use a desktop wallet, then you need to make sure that the cryptocurrency exchange supports desktop wallets. Otherwise, you won’t be able to transfer your cryptocurrencies between your wallet and the exchange.

The same is true for other types of wallets. So, it’s essential to do your own research before you choose an exchange, so that you know which exchanges work with the type of wallet that you choose.

Something else to consider when you choose a cryptocurrency exchange is how secure the exchange is.

Make sure that the exchange you select has first-class security features in place so that your cryptocurrency funds are safe and secure. You can also read reviews written about the exchange to find out what other investors have experienced with the exchange. This may help you to decide if the exchange is trustworthy enough for your peace of mind.

Top Exchanges for Beginners

• Coinbase
• Kraken
• Robinhood

Top Exchanges for Bitcoin Wallets

• Cash App
• Gemini
• Electrum

Top Exchanges for Ethereum Wallets

• Coinbase
• Crypto.com
• KuCoin

Top Exchanges for DeFi Wallets

• Crypto.com
• DeFi Swap
• Pancake Swap

Top Exchanges for Web3 Wallets

• KuCoin
• Binance
• eToro

Top Exchanges for NFT Wallets

• Crypto.com
• Binance
• Coinbase

Top Exchanges for Robust Security

• Gemini
• Crypto.com
• Kraken

Top Exchanges for lots of Cryptocurrency Choices

• Crypto.com
• UpHold
• Voyager

Top Exchanges for Low Fees

• Binance.US
• Kraken
• Voyager

Top Exchanges for Mobile Wallets

• Mycelium
• Coinbase
• Crypto.com
• eToro

Top Exchanges to earn Interest

• Hodlnaut
• BlockFi
• Nexo

Top Exchanges for IRA accounts

• Bitcoin IRA
• BitIRA
• BlockMint

Crypto Traps to Avoid

Buying a used or third party hardware wallet

If you don’t buy your hardware wallet from the manufacturer or from an approved reseller you could unknowingly buy a fake wallet or a wallet that has been tampered with. These wallets could allow your crypto to be stolen.

As an example, infected software installs have been seen with BHUNT malware, attacking Bitcoin, Litecoin, Ethereum, Jaxx, Atomic, Electrum and Exodus wallets.

Brain Wallets

Brain Wallets refers to creating your own tailor-made private key, using words that you choose or make up. You might think if you’re clever enough you can come up with a semi-random private key, but do this at your own peril. If your private key words are not random enough you will be at much greater risk of being hacked.

Losing or forgetting your Wallet Private Key

According to crypto data firm Chainalysis, about 20% of all Bitcoins have been lost or stranded in wallets without access to private keys. That’s about 3.7 million BTC, worth about $74 billion at today’s price.

Putting all of your CryptoAssets in one Wallet

Doing this could put all of your funds or other digital assets at risk, either by losing or forgetting your private key, by cybertheft, or by being hacked. Splitting your crypto into multiple wallets makes it a lot harder to lose everything.

Less likely, but even scarier, is a physical attack or threat. Imagine being forced to give up your crypto hardware wallet and keys under threat of physical violence.

If you give up a decoy or duress wallet with only a little bit of crypto in it, then most of your crypto can stay hidden and safe in your “real” wallet.

Putting most of your Cryptocurrency in a Custodial Wallet

Custodial wallets can be hacked. Cryptocurrency exchanges that have custody of your crypto can go out of business, or suspend deposits and withdrawals.

It’s easier for governments to seize cryptocurrency if it’s in a custodial wallet, especially if you have to comply with KYC (Know Your Client) identify information disclosure.

Logging into your Hot Wallet in a public space

Resist the urge to trade or check your crypto holdings while you enjoy your morning coffee at Starbucks or Dunkin Donuts. It could be your most expensive cup ever.

FAQs

What is a cryptocurrency?

Cryptocurrencies are digital or virtual currencies created with secure mathematical codes, which means it’s nearly impossible to spend twice or counterfeit.

Cryptocurrencies are also decentralized, which means they can be traded or used as a medium of exchange without a bank or other central authority managing or approving activities.

Each member or computer within a decentralized crypto network has a copy of the identical currency data as part of a widely distributed ledger. If someone tries to alter a cryptocurrency transaction or if there’s an anomalous data error at one location then the majority of network members will reject the discrepancy.

Each cryptocurrency is set up with specific rules, enforced by the decentralized network, that govern how coins are created, how transactions are allowed to occur, how to keep the cryptocurrency safe, and how and when changes are allowed to improve the cryptocurrency or its blockchain.

What is a blockchain?

Blockchains are databases that are distributed amongst the members of a computer network. This is where cryptocurrencies, NFTs, smart contracts, etc. live.

Blockchains are where cryptocurrency transactions are recorded and distributed within their decentralized peer-to-peer network, but never edited.

What are public and private keys?

Public keys are how your cryptocurrency accounts are uniquely identified when you send, receive or trade crypto. Public keys are created with cryptographic encryption technology that enables your crypto wallet information to be authenticated by crypto exchanges or other people’s wallets.

At the same time Public Key encryption acts as a one-way gate, not allowing crypto exchanges or other people’s wallets to breach your wallets. Transactions can only be decrypted by a Private Key.

Private Keys act as partners with Public Keys.

Anyone can send transactions to your Public Key, but it’s your Private Key that unlocks those transactions and authenticates your wallet as the owner of the cryptocurrency involved the transactions.

A Private Key can be a mnemonic phrase, a 64 digit hexadecimal code, a 256 character binary code or even a QR code. Your Private Keys are stored in your crypto wallet, never on a blockchain network.

What is the master seed for a cryptocurrency wallet?

A master seed is a randomly generated set of words that is used to create a new cryptocurrency wallet. The master seed can be used to restore a wallet that has been lost or damaged. It is important to keep the master seed safe and secure, as it is the only way to access your funds.

What is the safest type of crypto wallet?

Hardware wallets, because they allow you sign crypto transactions offline.

This means that if someone gets access to your hardware wallet, they can’t steal your coins.

Additionally, most hardware wallets come with a built-in screen which allows you to visually confirm transactions before you approve them.

Should you invest in cryptocurrencies?

Cryptocurrency investing has created many millionaires, but as an investment category continues to be highly volatile and therefore very risky.

There is a lot of speculation when it comes to cryptocurrencies and whether or not investors should put their money into them. According to Motley Fool “crypto should be considered a long-term investment, not a ‘get rich quick’ strategy.“

How do you buy cryptocurrencies?

Cryptocurrencies can be bought in a few ways. One way is through an online exchange, which allows users to buy and sell cryptocurrencies. Another way is by using a crypto ATM, which are machines that allow you to buy or sell cryptocurrencies. Finally, you can also purchase cryptocurrencies from other people in person or online.

What is cryptocurrency swapping?

Cryptocurrency swapping is the process of exchanging one cryptocurrency for another. For example, you could swap Bitcoin for an equivalent value of Ethereum, or Litecoin for Dash.

Swapping allows you to take advantage of different price points and trading opportunities, giving you the opportunity to maximize your profits. It’s also a great way to build up a portfolio of different cryptocurrencies.

Most swaps occur on centralized crypto exchanges. Swapping is similar to normal cryptocurrency trading, except there are no dollars or other fiat currencies involved in the swapping.

A benefit of crypto swapping is avoiding exchange fees that would be charged if fiat money is part of the trade.

How are cryptocurrency transaction fees determined?

Cryptocurrency transaction fees are determined by the amount of data that is being sent. For example, if you were to send a text message, the fee would be minimal because the amount of data is small.

However, if you were to send a large file, the fee would be larger because more data is being transferred.

Transaction fees can also vary depending on the busyness of a blockchain network. Investors may be given the ability to choose to pay higher fees to get their transactions processed more quickly.

Transaction fees are also used to ensure that all participants have an incentive to contribute to the network.

Miners are rewarded with cryptocurrency for verifying and committing transactions to the blockchain. The amount of cryptocurrency awarded per block is set by the protocol and reduces at a predetermined rate over time. In addition to the block reward, transaction fees are also paid to miners for including transactions in their blocks.

Top 10 Recommended Crypto Wallets

Trezor Model 1

If you’re looking for a hardware wallet that can handle more than 1000 cryptocurrencies and tokens, the Trezor Model One is a great choice. It’s easy to set up and use for beginners and is extremely secure. In addition, it’s cheaper than the Nano S with a comparable level of security.

Both the Trezor Model One and the Model T offer built-in exchange capabilities, which makes it easy to purchase crypto with $US without even having to register with an exchange.

The Trezor Model One wallet features a “Limited USB connection”, which means when you plug your Trezor into your computer your crypto is safe even if your computer is infected with hacking software.

The PIN code required to access the Trezor One wallet, as well as the physical buttons that must be pressed to confirm transactions, provide an extra layer of security against potential theft or loss. Additionally, you can create a separate account with its own passphrase for even greater security.

The Trezor One is recommended for beginner cryptocurrency investors and for investors who specialize in ERC-20 tokens.

Find out more about the Trezor Model One.

Trezor Model T

The Trezor Model T is an improved version of the Trezor One hardware wallet. It has a larger touchscreen, which makes it easier to use. The hardware is even more secure, if that’s possible, thanks to features like firmware verification and an encrypted communication protocol. It also holds a few coins that the Model One does not, including Ripple’s XRP.

At around $260, however, the Trezor Model T is one of the most expensive hardware wallets. You’ll only pay around $72 for a Model One so you may wish to consider if the size of your overall crypto portfolio justifies getting the Model T.

Find out more about the Trezor Model T.

Ledger

Ledger is a hardware wallet that allows you authorize transactions offline. That means your private key cannot be seen on the internet, and it’s the reason people choose hardware wallets.

Ledger wallets are compatible with more than 1,100 crypto currencies.

Ledger offers two ways to securely hold your crypto assets: Ledger Nano S and Nano X.

Both models work with Ledger Live, a mobile or desktop app that lets you buy, sell, stake or swap your crypto funds. Ledger Live also lets you buy cryptocurrencies through Coinify.

Ledger cautions users against counterfeit Ledger Live applications, so make certain to download the application from its authority page.

Ledger Nano S

The Ledger Nano S is one of the safest ways to keep your cryptocurrency. Your assets are protected from internet spying, hacking or theft, but the physical device makes it easy to get to your crypto or view your accounts.

Before you opt for the more expensive Ledger Nano X (about $149) you might consider the Ledger Nano S Plus wallet (about $79). It has a bigger memory than the Nano S, and it will handle more than a hundred installed apps. You can also use the Nano S Plus to send and authorize NFT transactions.

Ledger Nano X

The Ledger Nano X is a powerful hardware wallet that enables purchases and management of all your cryptoassets in a single application.

You can buy, sell, trade, loan and stake 27 different coins straight from your PC or cell phone. You can link your Ledger Nano X hardware wallet to the Ledger Live application through Bluetooth, which will let you manage all your crypto funds with safety from your telephone.

You can also link the hardware wallet to your Android telephone or PC and download up to 100 applications on your Ledger Nano X from more than 1,500 supported choices.

Ledger Nano X uses a 100 mAh battery with a capacity of a few hours use at a time or up to a couple of months when not in use. The battery has a 5 year design life.

Coinbase Wallet

The Coinbase Wallet is one of the most popular and safest hot wallets in the world. The wallet is incorporated with the Coinbase exchange platform. The majority of traders invest in Bitcoin through the Coinbase Consumer exchange, making Coinbase Wallet one of the most popular wallets for Bitcoin. The wallet is also popular for its ease of use and safety features.

One of the safety features of Coinbase Wallet is its two-factor authentication. This security measure requires users to verify their identity with a code sent to their mobile device. Coinbase also uses industry-leading security measures, such as storing 98% of customer funds offline in cold storage. These safety features make Coinbase Wallet a safe and secure option for storing digital assets.

The Coinbase wallet makes it easy to use decentralized applications on the Bitcoin and Ethereum ecosystems. This wallet can be integrated into dApp browsers, making it easy to create a Coinbase account on all devices, including Android and iOS mobile platforms.

Coinbase wallets also have multisignature capability, are good for Web3 interactivity and are flexible enough to handle multiple digital currencies.

MetaMask Wallet

Metamask is a digital wallet that allows you to store and access Ethereum tokens. It also allows you to interact with decentralized applications on the Ethereum network. Metamask is available as a Chrome extension, and it can be used to manage multiple accounts and identities.

MetaMask was created by Consensys to make it easy to access decentralized applications know as dApps, including online gaming platforms, decentralized exchanges (DEX), and DeFi staking.

MetaMask is unique, compared to other hardware wallets, because of its encryption capabilities. Users only have to take care of their independent seed phrases, as the private keys and seed phrases are stored safely.

MetaMask wallet specializes in the Ethereum network, but it does work with other networks, including BSC (Binance Smart Chain). MetaMask lets users switch between mainnet networks to connect hardware wallets.

MetaMask has also partnered with Asset Reality to help scam victim users with recovering stolen digital assets.

The biggest limitation of using MetaMask as your primary wallet is that it doesn’t work directly with Bitcoin.

Crypto.com Wallet

The Crypto.com ecosystem includes a seamless integration of its crypto exchange, a mobile app and a DeFi wallet. Even though the mobile app is custodial, but the DeFi wallet is non-custodial.

The Crypto.com DeFi wallet keeps things simple, by design. It works with Bitcoin, Ethereum) and their native token cronos (CRO).

Crypto.com puts user experience first, and it shows. Users don’t have to worry about copying and pasting addresses between applications. Instead the wallet connects directly with their Crypto.com exchange and mobile app accounts. That means the non-custodial DeFi wallet is able to talk directly to the custodial mobile app and the exchange, making funds transfers easy.

As part of its DeFi functionality the Crypto.com wallet can stake cryptocurrencies like CRO and DOT to earn passive income.

The secret to making the Crypto.com DeFi wallet work for you is to take advantage of the whole Crypto.com platform. For example, you can’t buy crypto directly from your DeFi wallet, but you can use the Crypto.com mobile app as your funding source. You can also use the app with a prepaid Visa card, which lets you spend and make payments in crypto.

Another Crypto.com advantage is that you can deposit $US directly into your account by electronic bank transfer or wire transfer, without fees.

Mycelium Wallet

The Mycelium Wallet is a Bitcoin-only wallet that has been designed for security and ease of use. It can be used on both Android and iOS devices, and offers a range of features that make it ideal for storing Bitcoin. These include the ability to add multiple payment addresses, view transaction history, and switch between accounts quickly and easily.

The Mycelium wallet can be used with hardware storage devices, including Trezor, Ledger and Keeper.

The Mycelium wallet uses SPV or Simplified Payment Verification. This is a secure approach that lets users download a full blockchain. The Mycelium platform also offers ultra-secure cold storage, letting users safeguard their funds until they’re ready to spend or transfer them.

If you use a single address account you can remove your private key from your wallet and make your funds completely inaccessible. When you’re ready to use your funds for transactions you just import your private keys back into your mobile device.

Mycelium has its own decentralized exchange, called “Mycelium Local Trader.” This digital marketplace connects traders and lets traders buy and sell Bitcoin in a high-security environment.

Trust Wallet

Trust Wallet is a mobile cryptocurrency wallet that allows you to store, send and receive various cryptocurrencies and other digital assets. The app is available on both Android and iOS devices and supports Bitcoin, Ethereum, Litecoin and many other altcoins. Trust Wallet also has a built-in exchange that allows you to buy and sell cryptocurrencies directly from the app.

Trust Wallet is a non-custodial hot wallet that still manages to be exceptionally secure. It’s also free to users, who are only responsible for separate blockchain transaction fees. Trust Wallet is regarded as one of the top crypto wallets. The crypto exchange Binance purchased Trust Wallet in 2018, and offers it as their own decentralized wallet.

Unlike Crypto.com and Mycelium, Trust Wallet gives you a lot more crypto investment choices. It works with 53 different blockchains, which means it can store more than a million unique cryptocurrencies. For many investors that means they will never need to own a second or third wallet.

If you want to earn rewards on your crypto, Trust Wallet includes a staking feature that integrates with a number of cryptocurrencies.  You can also store NFTs in your Trust Wallet, specifically any NFT created either on Ethereum or with Binance Smart Chain. Plus, Trust Wallet has its own browser that lets you transact with dApps on Ethereum or Binance Smart Chain. 

Electrum Wallet

If you’re only interested in Bitcoin, Electrum is a software wallet available on desktop and mobile that allows you to make Bitcoin transactions without having to download the entire blockchain. This makes it a great choice for people with limited storage space on their devices, or for those who don’t want to wait hours for their Bitcoin client to sync with the network.

Electrum also supports multisignature transactions, which require two or more signatures from authorized users before a transaction can be executed. This makes it a popular choice for businesses and organizations that need to protect their funds against theft or accidental loss.

You can also avoid transaction fees through the Lightning Network, which creates separate payment channels that allow payments to bypass the main blockchain. Not only are there are no fees, but transactions are exceptionally fast.

Electrum is one of the most popular desktop wallets available today. It’s simple to use and offers a variety of features, making it an ideal choice for both new and experienced Bitcoin users. One downside is that it doesn’t support “smart contracts”, which are essential features for certain types of businesses.

Exodus Wallet

Exodus is a desktop and iOS and Android compatible mobile wallet that supports multiple cryptocurrencies. You can store Bitcoin, Ethereum, Litecoin, Dash and many more crypto coins and tokens on Exodus. The company is based in London and was founded in 2016.

Exodus has a user-friendly interface and allows you to control your own private keys.

Exodus is a straightforward crypto wallet that provides access to more than 150 assets. The wallet is extremely flexible for a variety of investor types, including beginner investors.

Want to use Exodus with your Trezor hardware wallet for another layer of security? Exodus has that covered.

Looking to buy, sell or store NFTs? The Exodus NFT Marketplace supports transactions on the Solana network.

The Exodus wallet also lets you earn passive income by staking Cardano, Algorand, Cosmos, Solana, Tezos or VeChain cryptocurrencies.

The Exodus wallet is non-custodial. It can be used completely anonymously, as Exodus does not collect any personal information from their users and prioritizes privacy and decentralization.

Exodus has recently launched their FTX Exchange app, which allows users to exchange crypto assets on the FTX Exchange from within their Exodus wallets. Leveraging FTX trading volumes lets Exodus wallet users swap assets with high liquidity, low spreads and low minimum exchange amount thresholds. Funds from completed transactions get deposited directly into user wallets.

Zengo Wallet

ZenGo is a new, innovative mobile wallet that allows users to store and spend their cryptocurrencies in a simple and convenient way.

Unlike other mobile wallets, ZenGo does not require users to download any special software or create an account. Instead, it uses the built-in camera on your smartphone to scan QR codes and NFC tags. This makes it easy to use ZenGo with any cryptocurrency exchange or merchant that accepts payments via QR code or NFC tag.

ZenGo also offers several features that are not found in other mobile wallets, including support for multiple currencies, facial and fingerprint authentication, and a built-in exchange rate converter. Overall, ZenGo is an excellent choice for anyone looking for a simple and convenient way to store and spend their cryptocurrencies.