Which Crypto Wallet Should I Use?
Obligatory Disclaimer: To modify a quote from Tim Ferris, “I am NOT a financial advisor, and none of this advice should be taken without speaking to a qualified professional first. Also, none of this advice is a guarantee of security, and you should always do your own research before trusting any service.
When I’m preparing to invest in a new token, I ask myself four make-or-break questions. I do a ton of research, and I find out as much as I can about the company in question. But at the end of the day, the type of wallet I’ll have to use to store the token is just as important as anything else.
Security is a huge issue in the cryptocurrency world. Tokens are made to be secure, but unfortunately they’re not made to protect against stupid. Where you store your tokens and how you protect them is vital to the safety of your investment. While there are literally hundreds, if not thousands, of options when it comes to wallets and security, I’d like to share with you my personal preferences.
First, please understand that the best way to protect your tokens is through a wallet where you, and only you, hold the private keys.
To avoid confusion, these types of wallets are ones like MyEtherWallet, or Decred’s command-line wallet (for a step-by-step guide on setting up a MyEtherWallet, check out my article here).
Virtually the only way these types of wallets can be compromised is if you inadvertently provide a hacker with your private keys. That being said, these wallets aren’t necessarily the most secure, because a hacker could still access them if your computer is compromised with a virus, malware, spyware, etc., or if you accidentally give them the keys.
Never, EVER give anyone your private keys, and always ALWAYS double-check the URL you’re using to make sure it’s the real thing.
Perhaps the absolute most secure way to store your tokens is with a hardware wallet (like the TREZOR wallet or the Ledger Nano S, both of which I’d highly recommend), or to put them in a paper wallet. At the end of the day though, many people don’t use these options simply because they’re not convenient.
When I’m considering a token, a major plus is that it’s an ERC20 token. Put simply, these tokens are ones that are built on the Ethereum Blockchain, and are thereby compatible with MyEtherWallet (which happens to be my favorite wallet service). Check out the full list of compatible tokens here.
If the token isn’t an ERC20 token (let’s take Sia, for instance), I generally choose to keep it on Bittrex. Please note, this is not secure, because Bittrex holds the keys to those wallets. Not you.
Keep this in mind whenever you store any token on any exchange. Many exchanges have been hacked, compromised, or shut down, and millions of dollars have been lost forever. Always enable two-factor authentication when available, don’t overuse passwords, and store briefly.
My rule of thumb is this — if I plan to trade the token shorter term, I’m ok with keeping it on an exchange. If I’m going to hold the token long term, I want it in a wallet where I hold the keys.
Nearly every token has its own unique wallet. For instance, I really love Decred, and I like to proof-of-stake mine. This requires that I keep my Decred on a command-line wallet on my computer, which happens to be pretty secure.
Other tokens have their own wallets that operate differently. If your token isn’t an ERC20 token, and you don’t want to store it on an exchange, be sure to thoroughly research how to operate its native wallet. Remember, one small slip-up could cause you to lose your funds.
In summary, feel free to purchase ETH or BTC on Coinbase or Bittrex, but consider other options if you’re going to store long term. MyEtherWallet is my go-to, but popular alternatives are Jaxx and Mycelium. Always hold your own private keys when possible, double-check URLs, and never distribute them.
If you have a specific wallet you’d like a guide for, let me know! I’d be happy to help.
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If you’d like to start investing in cryptocurrency, the easiest way is with Coinbase (just remember you don’t hold the keys!). Get $10 of free Bitcoin when you use this link — it’s my referral link — and get started now!
