When selecting a cryptocurrency wallet, exchange, or payment processor, several variables to consider. Here are a few crucial points to consider, with a particular emphasis on wallets:
- Software vs. Hardware Wallets
- The Reputation of The Company
- Technology being used
- Number of Cryptocurrencies
- Liquidity Risks
- DApp and DEX integration
- Quality of Customer Service
Software vs. Hardware Wallets
Software and hardware wallets are the two primary types of crypto wallets. Hardware wallets are tangible devices, whereas software wallets are virtual.
You must have a connection to the internet to utilize a software wallet because your private keys are stored there. On the other hand, Hardware wallets use “cold storage” to keep your private keys offline. So, which is the best option?
Hardware wallets nearly always win out when it comes to security. Because you store your private keys offline, cybercriminals won’t be able to access your wallet through the internet and hence won’t be able to access it remotely.
This type of wallet is also resistant to system failures, server crashes, and other technical glitches that could lead to the loss of your private keys.
On the other hand, software wallets cannot keep your private keys as securely as this. On the other hand, many software wallets continue to use many levels of protection and backup procedures to keep your cryptocurrency safe.
Furthermore, software wallets are far less expensive to use than hardware wallets.
A hardware wallet can cost more than a hundred dollars upfront, and some newer ones can cost considerably more.
Therefore, if you have a strict budget and want to keep your crypto safe, there are plenty of trusted software wallets to choose from.
The Reputation of The Company
Consider how long the company has been around, who runs it, how secure their servers are, who controls your private keys if they’re insured, and if they’ve had any previous concerns with insider hacking of bitcoin losses due to poor data management or malfunctioning software.
One of those reputable companies is CEX.IO, with the company’s origins starting all the way back in 2013.
Open source wallets let third parties review their whole code, ensuring that it will be publicly publicized; traditionally, cryptocurrency consumers have felt less secure when using wallets with proprietary code since they can’t see what’s going on behind the scenes.
Many new wallets are problematic and not yet ready for widespread adoption.
You’ll also want to know where your private key is kept — do you have it, or does it reside on their server? The second option is riskier than the first. And, of course, do they use 2-factor authentication?
On top of that, some cryptocurrency users are hell-bent on maintaining their privacy; if this is you, read their FAQ to see if your preferred wallet is compatible with the TOR Network.
Number Of Cryptocurrencies
Many wallets and exchanges will allow you to operate with a variety of cryptocurrencies from the comfort of your own home. We recommend familiarizing yourself with which cryptocurrencies an exchange supports before verifying your account or opening a new wallet.
Certain wallets are designed just for a single cryptocurrency, while some exchanges will only accept mainstream cryptocurrencies. Mycelium, for example, is a powerful Bitcoin-only wallet, but Coinomi is a popular multi-coin mobile wallet.
Another element that can influence your ability to make a trade quickly when trading volume is high is funding or cash flow liquidity risk. On Investopedia, you can learn more about liquidity risk, and on Coinmarketcap.com, you can get thorough information about exchanges.
DApp and DEX integration
Exchange integration is a feature that many cryptocurrency wallets provide. Connecting your crypto wallet to a decentralized exchange is the first step.
Other DApps, such as Aave or UMA, can be linked to your wallet in the same way. Connecting your crypto wallet to such sites allows you to quickly transfer funds, purchase, sell, and stake crypto.
Before you choose a crypto wallet, do some research to see if it supports DApps and DEXs and whether you can connect your other platforms to the wallet you’re considering. This could be the deciding factor in the wallet you choose.
Quality of Customer Service
When the market value of a cryptocurrency can fluctuate dramatically, the quickness with which any platform’s customer support response is critical – and this is especially true for cryptocurrency exchanges. When completing your research, always include the search term “customer service” in your search for any exchange, trading tool, or wallet.
Before you jump into utilizing any wallet you’ve seen praised online, make sure it’s the one that works best for you. The aforementioned characteristics have a big impact on your entire crypto wallet experience. So, to avoid future inconvenience or annoyance, make sure your potential candidate checks all the necessary boxes.