While the world of crypto is filled with confusing technical terms, crypto ‘wallets’ are one refreshingly easy to grasp concept. But be warned — Not all wallets are created equal!
So what is a wallet? In this article we’re going to cover five concepts:
- Wallets vs. Exchanges
- Non-Custodial vs. Custodial Wallets
- Private Keys & Public Keys
- Hot Wallets vs. Cold Wallets
- Popular Wallets & Their Crypto Compatibility
Unlike an exchange, such as Coinbase or Crypto dot com, wallets are virtual spaces where you can store your own crypto, and even leverage it on your own terms. The benefit of exchanges is that they allow you to buy and sell crypto with fiat (US dollars, or other traditional currencies), or easily trade your crypto for other cryptocurrencies available on whatever exchange you’re using. The downside is that, similar to a traditional bank or brokerage, the exchange has full control and custody over the crypto you buy on their platform. So for example, if the exchange holding your crypto were to go under (like FTX recently did), you could tragically lose your access to it.
This is why I personally keep all my longterm crypto holdings in non-custodial wallets. That way I know I have full ownership and control over my crypto, and as long as I adhere to best practices for safety and security, I don’t have to worry about losing access to my crypto!
While most wallets out there are non-custodial, there some custodial wallets (I like to call them ‘faux wallets’) that are offered by exchanges and other central platforms, and come with the same downsides: You don’t have full control or ownership of the crypto you choose to keep in them. Needless to say, I avoid Coinbase wallet, Crypto dot com’s wallet, and other wallets created by central exchanges.
You may be wondering, how do I tell the difference between a custodial and a non-custodial wallet? To make a short story even shorter, “Not your keys, not your crypto”. This is all but a cliche in crypto, and it means if you don’t have the private security key (a long sequence of letters and numbers) associated with you crypto wallet account, then you don’t have sole custody over your crypto. Instead, the company who gave you access to your wallet account has access to it, and therefore it is a custodial wallet. One rule of thumb is to never, ever share your wallet’s private keys with anyone else — it’s kind of like don’t tell anyone your bank login info and/or account & routing numbers. On the other, your public key, which is kind of like a Venmo or CashApp handle, can be shared with anyone you want to send or receive crypto from!
So now that we understand custody and wallet keys, what are hot and cold wallets? Basically a hot wallet is any software-based wallet that is able to maintain active connections to crypto websites, while a cold wallet is a hardware-based wallet can hold your crypto longterm in ‘cold storage’. For security it’s a good rule of thumb to always keep your hot wallet disconnected from these websites when you aren’t using them. This can easily be done in your wallet settings.
Last but not least, are all crypto wallets compatible with all cryptocurrencies? Much like how you can’t run Windows software on a Mac or play a PlayStation video game on a Nintendo, you can’t store crypto in a wallet that doesn’t support its network (or blockchain). Fortunately, there’s a great app called CoinMarketCap that allows you to search individual cryptocurrencies and tells you what exchanges they can be purchased on, and what wallets their compatible with.
One of my favorite non-custodial hot wallets is Metamask, and it happens to be compatible with most of the top ten cryptocurrencies (a few notable exceptions being Bitcoin and Solana). The default network on MetaMask is Ethereum, so if you want to hold any other crypto in it you will need to add the corresponding network contract address, which can be easily copy/pasted from CoinMarketCap. As for cold wallets, the two most highly recommended options (also non-custodial) come from Ledger and Trezor. While these are both central companies, they are different from exchanges in the sense that their only interest is in manufacturing hardware wallets — they don’t care about having access to the crypto you keep in them! Both Ledger and Trezor are compatible with more than 18,000 cryptocurrencies, but may need firmware installed to support different crypto networks.
Finally, a great thing about having wallets to store your crypto is that — not only do you keep it safe longterm — you can also swap it for obscure, up and coming cryptocurrencies not yet available on mainstream exchanges. Many of these can be found on DEXes (decentralized exchanges). While these DEXes are rife with scams, ponzis, and just not longterm profitable cryptocurrencies, our private students have access to a 21-Step Checklist designed to evaluate potential investments, and separate the ones that should be avoided from the future big winners. CryptoFemme also provides members access to training modules, mentorship, and live group walkthroughs to go over every process mentioned in this article, and many others not mentioned here.