If you want to buy bitcoin or any other digital currency, you’ll need to choose a wallet where you can securely store your coins or tokens. But if you’re just starting out, choosing a wallet and learning how to use it can feel complicated and overwhelming.
That’s why we’ve put together this beginner’s guide to cryptocurrency wallets. Keep reading for information and advice on how crypto wallets work, the different types of wallets available and how to choose one that’s right for you.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
A cryptocurrency wallet is a software program that allows you to store, send and receive digital currencies.
Because cryptocurrency doesn’t exist in any physical form, your wallet doesn’t actually hold any of your coins – instead, all transactions are recorded and stored on the blockchain.
Some cryptocurrencies have their own official wallets, while other products allow you to store multiple currencies within the same wallet.
But be aware that different digital currencies have different address types, and you’re usually only able to send coins between like wallet addresses – for example, you’ll need to send bitcoin to a bitcoin wallet address and Ethereum to an Ethereum wallet address.
How do cryptocurrency wallets work?
Instead of holding physical coins, a wallet has a public key and a private key.
Public key. This is a long sequence of letters and numbers that forms the wallet address. With this, people can send money to the wallet. It’s similar to a bank account number in that it can only be used to send money to an account.
Private key. This is used to access the funds stored in the wallet. With this, people can control the funds tied to that wallet’s address. It’s a lot like your PIN number in that you should keep it 100% secret and secure. However, it’s worth noting that not all wallets give you sole ownership of your private key, which essentially means that you don’t have full control over your coins.
As well as storing your public and private keys, crypto wallets interface with the blockchains of various currencies so that you can check your balance and send and receive funds.
How wallets and blockchains interact
The blockchain of any cryptocurrency contains a public record of all the transactions that have been made since it began. Your wallet address keeps a record of all your transactions, and therefore also tracks your crypto balance. By following the chain all the way to the present day, a wallet can figure out how many coins you have.
For example, let’s say Alice sends Bob 0.001 BTC. Once this transaction has been verified and added to the blockchain, the ledger records that the amount of bitcoin at Alice’s wallet address has decreased by 0.001 and that the amount of bitcoin at Bob’s wallet address has increased by 0.001 BTC.
The amounts sent and received as well as the public wallet addresses are all public information.
Now that you know how crypto wallets work, let’s take a closer look at the five different types of wallets available, each with its own advantages and disadvantages in terms of security, ease of use, convenience and a range of other factors.
Easy to use, good level of security, plenty of choice, free to download
Risk of computer viruses and malware, inconvenient if you want to manage your crypto on the go
The most common type of wallet out there, desktop wallets are downloaded and installed on your computer. Easy to set up and maintain, most are available for Windows, Linux and Mac, although some may be limited to a particular operating system. Many cryptocurrencies offer a desktop wallet specifically designed for their coin.
Desktop wallets provide a relatively high level of security since they’re only accessible from the machine on which they’re installed. The biggest disadvantage is that they also rely on you to keep your computer secure and free of malware, so antivirus and anti-malware software, a strong firewall and a common-sense approach to security are required to keep your coins safe.
Most desktop wallets will provide you with a long string of words upon installation. These words are known as your recovery seed or sentence and map with your private key, so it’s important to store them somewhere safe in case your computer dies or you need to format the operating system and re-install your desktop wallet.
Very easy to use, convenient, wide range of options available, free to download
Losing your phone could cause problems, risk of hacking
Mobile wallets are fairly similar to desktop wallets, with the obvious difference being that they run as an app on your smartphone. Mobile wallets feature many of the same advantages and disadvantages as desktop wallets, with your private key stored on your device.
Smartphone wallets are often easier to use compared to their desktop counterparts and include the ability to scan other wallet addresses for faster transactions. They also make it simpler to access your coins on the go and use cryptocurrency as part of everyday life.
You will need to be extra careful about losing your smartphone, though, because there’s a risk that anyone who has access to your device might also have access to your funds. Choosing an app that allows you to back up your wallet with a 12- or 24-word passphrase is a good idea.
Easy to use, convenient, quick access from any computer, usually free to use
Online wallets (most often provided by exchanges but sometimes offered by third parties) are connected to the Internet and are generally the easiest to set up and use. Most only require an email address and a password to create an account, and web wallets are usually designed to provide a simple and straightforward user experience.
The biggest advantages to online wallets are that they can’t be lost and that they’re accessible from any computer with an Internet connection.
However, being online is unfortunately also their biggest disadvantage. Because some platforms maintain the wallets of thousands of users, they can become hot targets for hackers.
It’s also important to check whether the wallet you choose lets you retain complete control of your private keys or whether they’re owned by the wallet provider.
Generally considered to be the most secure option, offline storage, easy to set up and use
Most expensive option, inconvenient if you want quick access to your funds
Hardware wallets add another layer of security by keeping your private key on a USB stick or specially designed piece of hardware. They allow the user to plug the USB stick into any computer, log in, transact and unplug – so while transactions are carried out online, your private key is stored offline and protected against the risk of hacking. As a result, hardware wallets are widely considered to offer the most secure storage option.
The biggest disadvantage of hardware wallets is that they’ll cost you. Prices vary depending on the model you choose, but they generally cost upwards of $150. You also need to keep the device safe, but if you do lose your hardware wallet, the device itself is PIN-protected and there are usually other protective measures in place to help you recover your funds.
Secure, your wallet isn’t exposed to malware or hackers, free to set up
Can be damaged, lost or stolen, confusing for beginners
Paper wallets take the concept of entirely offline keys used for hardware wallets to the next logical step: simply print out your public and private keys and use that piece of paper as your wallet.
As secure as they are, paper wallets are also complex and quite confusing for beginners. They’re typically only used by advanced users who want a high level of security.
To transfer money to a paper wallet, you use a software wallet (any of the above mentioned) to send money to the public key printed on the sheet of paper. Most often, this is printed as a QR code for easy scanning.
To transfer money from the paper wallet to someone else, you would first need to transfer money to a software wallet (by manually entering the private key into the software), and then transfer money from the software wallet to the recipient as usual.
Popular paper wallets: Bitaddress.org, WalletGenerator.net
Hot wallets vs cold wallets
As you’re researching and comparing a range of wallets, you’ll probably come across the terms “hot wallet” and “cold wallet”, or perhaps the concept of “cold storage”.
So, what does temperature have to do with crypto storage?
Hot. A wallet is hot when it’s connected to the Internet. Nothing on the Internet is 100% secure, so funds kept in a hot wallet are always at a slight risk of theft or loss from software bugs or hackers.
Cold. A wallet is cold when it’s safely offline and can’t be deliberately or accidentally compromised over the Internet.
Holding on an exchange vs in a wallet
If you don’t want to go through the added step of setting up a crypto wallet, it’s possible to store your cryptocurrency in the wallet attached to the exchange you purchased from. This is a quick and convenient solution, providing fast access to your crypto whenever you need it, but it’s not recommended for a couple of reasons.
You don’t control the private key to your exchange wallet. Instead, it’s controlled by the exchange, which effectively means that you don’t fully own your cryptocurrency.
Exchanges are a popular target for hackers and thieves. There have been many well-publicised incidences of exchange customers falling victim to hackers as well as examples of fraud perpetrated by dodgy exchange operators.
With this in mind, the safest solution is moving your coins into a secure wallet that lets you retain control of your private key.
How to choose a cryptocurrency wallet
Now that you know all about the different types of wallets available, it’s time to find one that’s right for you. To do that, you’ll need to consider your needs and compare a range of wallets based on several key factors, including the following:
The type of wallet you want. This factor comes down to personal preference. For example, if security is your number-one priority, you’ll probably want to compare hardware wallets. But if your main goal is being able to quickly and conveniently access your coins, a mobile or web wallet may be your preferred choice.
Ease of use. Sending, receiving and storing cryptocurrency can be complicated and confusing, particularly for beginners. It’s essential that any wallet you choose suits your tech knowledge and level of crypto experience. So while crypto novices might focus on finding a wallet that is simple to set up and use, experienced holders might look for more advanced features, for example an in-wallet exchange and multisignature transactions.
Security features. Find out what security features the wallet includes, such as 2-factor authentication and multisig functionality. Will your private key be stored online or offline? Has the wallet ever suffered any security breaches?
Other features. Check what other features the wallet includes, such as the ability to exchange between currencies within your wallet or providing easy access to live fiat exchange rates or other market information.
Supported cryptocurrencies. Are you looking for a wallet that stores just one crypto, like bitcoin, or are you in the market for a multi-currency wallet? Make sure the wallet you choose is actually compatible with the cryptocurrencies you need to store, and remember that some coins and tokens can only be held in an official wallet.
The team behind the wallet. Next, see what sort of information you can find out about the people behind the wallet. How long have they been in business? What qualifications do they have? Are they continually working to upgrade and improve the wallet?
Cost. While most crypto wallets are free to use, choosing a hardware wallet means you’ll have to be willing to part with some cash. Consider the upfront price and shipping costs when making your decision. Some wallets will also charge a fee for every transaction you carry out, so check the fine print to find out whether this is the case.
Reputation. What level of community trust does the wallet have? Check out a range of independent online reviews to gauge how other users rate the wallet and whether they would recommend it.
To send funds from your wallet, you’ll need a wallet address (the recipient’s public key). These addresses are given in one of three ways:
A long alphanumeric string (numbers and letters)
A QR code (for smartphone wallets)
A URL-like web link (clickable – opens your wallet automatically)
Once you have this address, you will need to do the following:
Log in to your wallet.
Click on “Send”.
Enter the recipient’s wallet address. Please note that you can generally only send and receive like-coins – for example, you can only send bitcoin to bitcoin or Ethereum to Ethereum. You can’t send bitcoin to an Ethereum wallet address.
Specify the amount (and possibly the currency) you want to transfer.
Check any transaction fees that apply, making sure you have enough coins in your wallet to pay the fees.
Review the details of the transaction to make sure you’ve correctly entered all the information.
Click on “Send”.
Please note that the exact process will vary depending on the type and brand of wallet you choose. For example, hardware wallet users will typically need to connect their wallet device, enter a PIN or password and manually verify the transaction on the device itself.
How to receive cryptocurrency in your wallet
Receiving coins is even easier than sending them. However, wallets vary greatly in the way this is done: some will provide you with a fixed public address, some will give you a new address for every transaction and others will provide a combination of the two.
Log in to your wallet.
Click on “Receive” link.
Copy the public wallet address provided.
Send your address to the person who will be sending you a payment.
Wait for the funds to arrive in your wallet.
Holding funds in your crypto wallet
If you want to hold onto your crypto, there’s typically not much you need to do once the funds have arrived in your wallet. You can log into your wallet whenever required to check your balances. Some currencies may allow you to earn interest on your coins by “staking” your holdings (you may need to follow specific instructions in your wallet to do this).
Other than that, the main thing you need to focus on is maintaining a high level of security at all times.
How to keep your wallet safe
Wallet security is a crucial consideration for any crypto owner, so keep these tips in mind to ensure you keep your funds as safe as possible:
Research before you choose. Don’t just choose the first bitcoin wallet you come across. Thoroughly research the security features and development team behind a range of wallets before making your final decision.
Enable 2-factor authentication. This is a simple security feature available on an increasing number of wallets. It’s simple to use and provides an extra layer of protection for your wallet.
Pick your password carefully. Don’t be lazy when choosing a password. Make sure all usernames, PINs and passwords related to your crypto wallet are as strong as possible.
Consider a multisignature wallet. Multisig wallets require more than one private key to authorise a transaction, which means another user or users will need to sign each transaction before it can be sent. Though this means it’ll take a little longer to send funds, you may find that the extra peace of mind is well worth the minor hassle.
Update your antivirus protection. Make sure your PC, laptop, smartphone or tablet has the latest antivirus and anti-malware software installed. Make sure to also set up a secure firewall on your computer and that you never install software from companies you don’t trust.
Glossary: 2-factor authentication
Used by the most secure and trustworthy wallets, 2-factor authentication requires a regular username and password combination and another authentication method.
This is often a PIN code that is sent to your smartphone as an SMS, may expire after a set amount of time and is different every time you log in. This means that an attacker needs to know your username and password as well as be in possession of your phone.
Some wallets also require the use of a secondary app installed on your smartphone that generates these PIN codes for you, again adding another layer of security.
Update your wallet software. Take care to also update your wallet software regularly so that you always have the latest security upgrades and protections installed.
Make a backup. Ensure that you have a wallet backup stored in a safe place so you can recover your crypto funds if something goes wrong, for example if you lose your smartphone.
Check the address. When sending or receiving funds, make sure you’re using the correct wallet address. Similarly, if using an online wallet, make sure it is secure (i.e. check that its URL starts with “https://”)
Don’t use public Wi-Fi. Never access your wallet over a public Wi-Fi network.
Split your holdings. Consider splitting your crypto coins up between online and offline storage. For example, you can keep a small portion of your funds in online storage for quick and convenient access, and store the bulk of your holdings offline for extra security.
Private key protection. Remember – you can’t access your coins without your private key, so don’t disclose it to anyone. Also check whether the wallet you choose allows you to retain full control of your private keys, or whether you’ll have to surrender ownership to a third party such as an exchange.
There’s no such thing as a one-size-fits-all “best cryptocurrency wallet”. The right wallet for you will be one that matches your needs, so if security is your number-one concern, you’ll probably end up choosing a different wallet to someone who wants fast and easy access to their coins.
The key thing to remember is to do your research and compare a range of wallets. Start with our range of crypto wallet reviews to get an idea of what’s available and the key features you need to consider.
Not really. While most wallets aren’t linked to your identity, cryptocurrency transactions are stored permanently on the blockchain and could potentially be traced back to you.
If anonymity is important to you, you may want to consider transacting with a privacy-focused coin such as Monero.
Many wallets don’t charge any fees but some do, so check the fine print closely. Keep in mind that if you choose a hardware wallet, you’ll need to pay money upfront to buy it.
You should also be aware that sending a cryptocurrency transaction from your wallet usually attracts a small network fee, which varies depending on the currency being sent. This fee is not charged or received by the wallet provider and instead applies to all transactions that take place on a coin’s network.
This depends on the cryptocurrencies you own and the wallet you choose. Some wallets only allow you to store one particular cryptocurrency, while multi-currency wallets can support any number of digital currencies.
Check the wallet provider’s list of supported coins and tokens for more information.
There’s no simple answer to this question as the right wallet for you depends on your personal needs. To help narrow down the choices, ask yourself a few key questions:
Which crypto(s) do I want to store?
Do I want a wallet I can use for everyday purchases and payments or one I can use to buy and hold crypto for the long term?
How do I want to access my wallet?
How important is wallet security and what security features do I want?
Your answers should help you decide on the type of wallet that’s best for you.
Check out the popular wallets listed in our XRP wallets guide to help you find an XRP wallet that suits your needs.
No, you can’t send bitcoin to an Ethereum wallet or Ethereum to a bitcoin wallet. Different cryptocurrencies have different address types, so it’s important to double-check that you’re sending funds to the correct address before submitting a transaction. Funds sent to the wrong address generally cannot be recovered.
Some wallets require you to run a full node, which means you’ll need to download the entire blockchain to your computer. This is not only time-consuming but can also be a drain on your system’s memory and processing power.
Light clients only synchronise essential information and fetch additional data from the network when required. This allows you to transact on a cryptocurrency’s blockchain without downloading an entire copy of that blockchain. Most mobile wallets are light clients, while desktop light clients can also be downloaded.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
Tim Falk is a freelance writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.