A cryptocurrency wallet is a tool that you can use to interact with a blockchain network. There are many types of crypto wallets that can be divided into three groups: software, hardware, and paper. This article will explain the three different types of crypto wallets to help you decide the safest place to store your wallet keys. Unlike a traditional wallet, crypto wallets don't actually store money inside. Because coins never truly leave the blockchain (they are just transferred from one address to another) wallets simply keep your keys in a safe and accessible place so you can interact with a blockchain. Software wallets are usually developed for web, iOS, Android, or desktop computer and keys are stored in centralized or decentralized databases. These are referred to as "hot wallets". Service providers typically hold and manage the private keys on your behalf, and some exchanges (like Redeeem) use variations of multi-signature technology to enhance security. Hardware wallets are physical devices that store keys on a phone, computer, tablet, or other electronic device without access to the internet, also known as "cold storage". Hardware wallets are considered one of the most secure ways to hold bitcoin (because they can't be hacked), but they're usually less user-friendly. Paper wallets are pieces of paper on which a crypto address and its private key are physically printed as a hash or QR code. This is also considered cold storage. Like hardware, paper wallets are secure from online hacks, but its a lot easier to lose a piece of paper than a website URL, and they are not very user-friendly. The most important factor to consider when choosing between software, hardware, or paper wallet is knowing who has custody over the funds and whether or not your wallet can be hacked (software), broken/stolen (hardware), or lost (paper).

Binance (June 2020)