What are the best digital wallets for cryptocurrency?

The term "wallet" is a bit of a misnomer, as a cryptocurrency wallet doesn't actually store funds.

Instead, each wallet stores one or more private cryptographic keys, which are required to access cryptocurrency funds that live in many fragments on a decentralized online ledger known as the blockchain. It's absolutely vital to keep your private keys safe, and losing your key can often mean losing your hard-earned cryptocurrency.

The simplest way to divide your Bitcoin wallet options is between hardware (cold storage) and software (hot storage).

At the most secure end is what's called "cold storage." Digital wallets that store keys offline on a physical medium like a USB drive are called cold storage wallets because they're not linked to the internet. A user retains full control over when and where the wallet is accessed, and all of the assets are stored offline, making it harder for hackers to steal from. But if you need to access your wallet quickly or on the move, it's not the most convenient option.

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To keep it simple, hot wallets are connected to the internet, while cold wallets are not. Choosing the best Bitcoin wallet for you basically boils down to a continuum with security on one end and ease of use on the other.

So, if you're interested in crypto wallets, here's a breakdown of your options:

• Hardware wallets: Keys are stored in a small physical device that you connect to a computer or smartphone for transactions.
• Software wallets: Apps that you download to your mobile device or computer.
• Online wallets: Browser-based wallets that allow you to interact with them like a website.

Hardware Wallets: Ledger and Trezor

Hardware wallets are physical devices about the size of a keychain fob that store your private keys and can be kept separate from your desktop computer. Most importantly, even when you do connect one to your computer to make a cryptocurrency transaction, any malware that might be on that desktop doesn't have access to the wallet.

The best cold storage wallets on the market are Ledger and Trezor.

According to Adam Lowe, chief innovation officer at CompoSecure, "when users evaluate hardware wallets, they should look for best in class security as well as ease of use. If it looks too complicated to use, you will either stop using it or worse, lose access to your crypto."

Ledger and Trezor wallets have become popular because of the user experience they offer, which includes support for many different cryptocurrencies and a solid physical look and feel. Trezor brought the first cold wallets to market back in 2013, and today, its wallets remain very popular thanks to security measures featuring multi-factor authentication and an easy to use touchscreen.

Software Wallets: Electrum and BRD

Here's where security begins to give way to ease of use.

A Bitcoin wallet on a computer that you use to browse the web is less secure than a hardware wallet because it's susceptible to getting infected with malware that specializes in looking for cryptocurrency wallets. Then again, Pavel Matveev, CEO at Wirex, says that while hardware wallets are incredibly secure because they require physical access, "online wallets are kept secure using next-generation blockchain technology and encryption techniques, making them virtually impossible to hack."

That doesn't mean it never happens, but one way to help prevent thievery is picking a non-custodial wallet instead of a custodial wallet. A non-custodial wallet means you own and possess the private, cryptographic key to your digital wallet. Meanwhile, according to Dov Marmor, chief operating officer at Railsbank, with custodial wallets, "a trusted third party holds your private key and keeps the assets safe on your behalf."

Online Wallet: Guarda

Online wallets are the easiest cryptocurrency wallets to use, making them very popular. But there's a glaring downside to them that new cryptocurrency traders should be aware of: they are hackable. According to Lowe, "exchanges have been hacked for over $1 billion to date, with more unreported hacks suspected."

In the case of custodial wallets, once you give up your private key, you lose your ability to control your cryptocurrency to another party. This is why Caleb Chen, content marketing manager at Private Internet Access, recommends staying away from web-based wallets that don't allow users to store their own private keys.

For a non-custodial wallet in which users control their own keys, Guarda offers a web-based multicurrency wallet that supports multiple popular coins and tokens. It also allows users to import and export private keys to and from other services, back up a wallet with a secure encryption algorithm and purchase cryptocurrencies with fiat currency.