What cryptocurrency wallets to use?

Update 15.02.2022: Price of Trezor One increased due to chip shortage. I have also added shipping cost for Switzerland.

There are several type of cryptocurrency wallet. It’s important to understand the difference and then select one or more that you will use depending on what you will do with cryptocurrencies and which level of risk you are willing to accept.

Exchange wallet

Most probably the first type of wallet which will have some coins in it, will be an exchange wallet. This is most probably the worst kind of wallet as you are usually not in possession of your wallet private key so you have absolutely no control over your coins in a direct way. You can only ask the exchange to send sell your coins or send them to an external wallet that you own and control. Most of the time everything goes fine if you are on a reputable exchange but history is full of example where thing could go more or less wrong and of course nothing is insured legally (hello MtGox, RobinHood, Binance,…). To understand why you should not keep your coins on a centralized exchange please read the rule number 1 of cryptocurrencies: Not your keys, not your coins.

This kind of wallet, while not a real cryptocurrency wallet, is linked to your account on the centralized cryptocurrency exchange. Account are usually protected by a classic login and password, where your login could be your email address, a user name or a number, depending on the exchange. Any respectable exchange should also force or at least strongly encourage, to use multi-factor authentication (MFA), see my post Password managers and authentication tools for more information about it. You will most probably not select your exchange based on how the wallet is made. I will add an article about centralized exchange soon, so stay tune.

Software wallet / hot wallet

The most common type of a real cryptocurrency wallet. It can be an desktop app (Windows, MacOS, Linux), a mobile app (Android, iOS, Linux mobile), a web-app (that run in your web browser directly and is loaded from a website or a local copy of a website downloaded locally) or a browser add-on (that is installed locally and run locally in your browser).

A software wallet is easy to use and all you to interact directly with one or more cryptocurrency blockchain from a device your own already. However as they are running on a device, like a computer or a smartphone that is used for many other tasks and that run many other software app alongside the cryptocurrency wallet, it might be targeted by virus or a hacker that could get remote or physical access to your device. I already talked about it in the rule number 3 of my cryptocurrencies introduction article.

A software wallet should be use to hold relatively small among of coin. Just what you need for some online purchase, physical purchase (if you find a shop or service that accept cryptocurrency) or to interact with some web3.0 services. Due to the low but not negligible risk of getting your device and possibly your software wallet compromise, you should not hold all your coins in a software app. Think of it like your real wallet that you carry around everywhere with some cash for daily payment. As a rule of thumb don’t hold much more value in your software wallet than what you feel comfortable to carry in cash in your wallet during a shopping session in town.

Some of these software wallet are designed to support only one type of cryptocurrency (Bitcoin or Ethereum or any other coin) or could support multiple type of coin within the same wallet. You have pros and cons for both of them but the most important is to select a software wallet that is open source and that has a good reputation within the community, so you have more chance that other user and developer inspect the source code and highlight any vulnerability or bug before you encounter it in real usage. Even so there is still no warranty that everything will be 100% safe and fine, I was locked out of my coin for several days if not weeks due to a bug in an open source multi-cryptocurrency mobile wallet until it was corrected, of course there was a way to recover the coins manually but it was difficult, with risk of bad manipulation, certainly the not the kind of user experience that anyone would expect.

I will probably write an article later to compare in detail some of the most famous software wallet that I have tried as it would be too long to do it here. I will still give some example of wallet that I know more or less reputable and that I tried at least once. Please always double check all the links I gave here from other sources, even if I double check them myself, there might be some MITM attack form your DNS or from a malicious software on your device that could change the URL to phishing ones. Find the URL from a Twitter account, from one or two search engines (and never click to an ad at the top of the result!) and if you are paranoid do the same from another device on another internet connection (mobile 4/5G, Tor, VPN,…), then check the site certificate and finally bookmark the site for future reference.

Bitcoin only wallet

Electrum is certainly the most recommended Bitcoin desktop wallet for beginner. It’s also the recommendation from Bitcoin.org for any new user.

Wallet: Bitcoin Lightning only focused on essential
Type of user: from your Grandma to lazy advanced user
OS: Android and iOS

Phoenix is a Bitcoin Lightning wallet on mobile that is open source and non-custodial. It’s made by ACINQ, one of the pioneer company in Bitcoin Lightning Network (Bitcoin layer 2 fast and cheap payment system). This wallet is Perfect for a beginner who want to start accepting and sending Bitcoin instantly for cheap on the Lightning Network. The app handle all the background job for you, it opens channels on the Lightning Network on the fly without you have to make any decision or even understand what’s going on. It’s really made to work out of the box in the most simplest way. One receive button show a QR code to be scanned by the other person and one send button open the camera to scan a QR code to pay. In the corner you have a settings menu but you don’t even have to touch anything for the app to work as intended by 95% of the users.

Despite this simplicity, Phoenix is still a non-custodial wallet, meaning you are in full control of your Bitcoin at any time and more advance users can even set a custom Electrum server, which mean you can use it with your own Bitcoin node or select any public Bitcoin node of your wish, whenever it’s on clearnet or on Tor like Umbrel node (see here). On-chain incoming or outgoing payment are handled by ACINQ via a swap service but this should be transparent for the user. Of course this come with a cost, channel creation cost your 1% fee min. 3000sats (about 1.35CHF at the time of writing) but this can be seen more or less as a one time fee as you can make many payment without the need for the app to reopen another one. Then as you use ACINQ node for your payments, you pay them some (much smaller) fee to use the channels they created for you between your mobile node and their node and all other channel fee from their node to your destination (like with any Lightning wallet).

Wallet: Bitcoin Lightning only with third party services
Type of user: Beginner and small business merchant
OS: Android and iOS

Breez is another open source non-custodial easy to use Bitcoin Lightning wallet. Like Phoenix it will handle Lightning channels creation on the fly for a fee so it’s really easy to use for a beginner. The real plus of the wallet is the Point of sale app. Targeted for small business that are willing to accept Bitcoin, you have a keypad to enter price to charge in any currency and in one click it generate an invoice in the form of a QR code that the customer can scan and pay in one confirmation click. This feature allows the merchant to list articles to be able to just add them to a cart and checkout, the list can be imported in CSV.
The wallet also offer third party services for example to buy your first Bitcoin with a card, buy gift card with Bitcoin or send and receive SMS with a random mobile number from any country. The app also include some Podcasts that are listed on Lightning Network and allow to send tips to the creator (this is a feature borrowed from the Sphinx Chat app).
For advanced users you can select a custom Bitcoin node (but not on Tor apparently) and backup your wallet and channels with optionally an encryption key (in the form of a seed) to Google Drive or your own server like the excellent Nextcloud.

Wallet: Bitcoin on-chain and Lightning
Type of user: Intermediate to advanced
OS: Android

Simple Bitcoin Wallet (SBW) is an open source android wallet available on F-Droid that support Bitcoin Lightning Network. It’s quite easy to use in a clean and clear interface. It supports Tor natively to increase privacy (without having to run Orbot as a virtual VPN all the time) and if you run a private Bitcoin node in Tor only (.onion address) you can use your own Electrum server as well. This wallet is mostly targeted to slightly advanced users that want to manage the channels opening by themself. However it offers, and it’s quite rare, private hosted channel support from a third party provider to allow you to receive incoming payment over the Lightning Network without having to pay for an incoming channel or setting one up using your own node that you manager on another machine. The downside is that you have to trust the channel provider with as much as you received until you send it somewhere else, of course this option is totally optional and the hosted channel can be removed anytime.

Wallet: Bitcoin on-chain with privacy focus
Type of user: Advanced
OS: Android

Samourai Wallet is one of the most advanced wallet for users that are looking to have maximum privacy while using Bitcoin. Ideally if you are looking for full control and less reliance on third party, you should also run your own Bitcoin full node with the Samourai server called Dojo. You can do this quite easily with an Umbrel node running on Raspberry Pi 4 (see here). Advanced features allows you to work fully offline, minimize metadata of your transaction (Stonewall), get paid and pay without sharing a public address (PayNym), send your Bitcoin to multiple address before reaching the final destination (Richochet) and the app signature, the ultimate Bitcoin anonymized tool, Whirpool, that will mix your Bitcoin with other Bitcoin users to (try to) break any possible link between any of your previous address that might be linked to your real life identity (for example if your receive Bitcoin from a centralized exchange that have your full identity). This feature use the CoinJoin protocol to achieve that and Samourai with it’s Whirpool feature has the reputation to have one of the best implementation of CoinJoin (i.e. with less risk to get de-anonymized, but zero-risk never exist so stay safe).

Multi-cryptocurrencies wallet

Wallet: multi cryptocurrency and with CeDi and DeFi integration
Type of user: Beginner to intermediate
OS: Android, iOS, desktop Windows, MacOS and Linux

Coinomi is since a long time my favorite open source multi-coin mobile wallet. With a single seed (master recovery pass phrase) you will generate an infinite number of wallet address for a huge list of supported coin. Bitcoin, Ethereum, all Ethereum ERC-20 token, Monero, Litecoin, Dash and many many more. It supports the WalletConnect protocol that allow you to connect with the scan of a QR code your Ethereum wallet to a Web3.0 service, like a decentralized exchange, DeFi platform, a metaverse game, a NFT marketplace, a name service or many other web3.0 app. WalletConnect is an alternative to Metamask for connecting your wallet to DeFi apps, with less dependency on third party like the Infura API.
This wallet is a good start if you want to be able to accept many cryptocurrency in a few minutes but it might not offer all the options of a wallet dedicated to a single cryptocurrency. It also lack support for Bitcoin Lightning at the moment.

Type of user: Beginner to intermediate
OS: Android, iOS

Bridge wallet is a mobile wallet created by the Swiss cryptocurrency (soon to be?) bank MtPelerin. This wallet is really well made and offer native support for several blockchain all in one: Bitcoin, Ethereum, Ethereum layer 2 (Arbitrum, Optimism, Polygon, Avalanche, Fantom), Binance Smart Chain, Tezos and xDai. They are adding new chain so fast that I’l probably be out of date by the time your read this. It’s of course linked natively to the service of MtPelerin that allow you to buy from a bank account several cryptocurrency. However I would only recommend to use this buy/sell service with a low amount as it allows to exchange up to 500CHF per year for free but then there is a quite important 1% fee on all exchange rate and you are getting the current exchange rate with any limit buy/sell possible (see exchange section). But it could also be a good point of entry to test with a small amount in the first place, just plan to use an actual exchange later when you will need to buy or sell more. To be able to buy and sell cryptocurrencies from and to fiat in a bank account, you need to do a KYC check (Know your customer) like all centralized exchange but you can of course use the wallet only to receive, swap and send coin without any verification needed.
Overall it’s the easiest way to get coin and tokens directly on the most common blockchain in the DeFi space.

Web-app wallet

MyEtherWallet and MyCrypto are two very similar Ethereum web wallet (the second is a fork of the first, long story). This was one of my first Ethereum wallet as it’s a Swiss-army-knife of wallet, with many tool and function to help you learn and solve issue with Ethereum. They were also among the first wallet supporting the usage of Ethereum from a hardware wallet (see below).

Browser add-on wallet

Metmask is most probably the most famous Ethereum wallet as of today. It support Ethereum mainnet of course as well as all test net and more interestingly most layer 2 chains like Arbitrum, Optimism and even different blockchains like Polygon. Metamask is the easiest way to interact with Web3.0 app online and often the only option for many new network and service. It also support some hardware wallet for more security (see below). It might have some privacy concern by how it give access to your wallet information while connecting to a service, so do your research about it in this regard but I read that the team is working to improve that in the future. Beside that it’s a powerful and easy to use tool, you should definitely have at least one Metamask wallet or connect a hardware wallet to it if you start experimenting with Web3.0.

Hardware wallet

As soon as you start being serious about cryptocurrency, you should get a hardware wallet. They are physical cryptocurrency wallets in a form of a small device with a screen that store you private key completely offline, that’s why they are also called “Cold wallet”. You connect them to a computer or smartphone only to sign the transaction you want to transmit on the network. Your private key never leave the hardware wallet, they cannot be copied by any device physically connected to it and they allow you to review on it’s small screen the real destination address to be used in the transaction. So even if your computer or smartphone is completely corrupted and infected with a virus targeting cryptocurrency wallet, it’s impossible for the attack to sign a transaction remotely with your private key and even if the malicious software would manage to replace the destination address by one controlled by the attacked while you try to do a transaction on a blockchain, you will be able to see on the hardware wallet screen that the destination address is not matching the one you want to send you coin to.

These hardware wallets are usually extremely secure and cannot be hacked remotely and are extremely hard to hack physically if not impossible at all and always with permanent damage that will indicate it might have been compromised. They are on the same principle as most software wallet, using a seed passphrase and locked with a PIN. At the initial setup, the device will generate a new seed and you can define the PIN you want. Be careful, these device are NEVER delivered with a seed passphrase already in the box, it happens that some hacker sell directly or intercept hardware wallets while shipping to insert a pre-generated seed passphrase and a small instruction sheet asking the user to enter the pre-generated seed on the device. It’s a scam of course as the hacker knows already the seed and will immediately stole any coins that will be send the the wallet that use this seed to generate the private keys. So be careful where you buy you hardware wallet, if possible by only from the official website or very reputable merchant and always read an follow the instructions and precaution given on the official website (and double check that you are on the official website in the first place).

There are several brand and models of hardware wallets, some have more or less ergonomic design and more or less features like the number of coins supported, hidden wallets, multi-sign backup (Shamir backup), … For the basic purpose of storing and occasionally spending coins, all of them are good at it as soon as they support the coins you are using. Usually they support at least Bitcoin, Ethereum and all ERC-20, that are token build on the Ethereum blockchain, but some support hundred of coins and blockchains. But two brands are in the market since 2014, that is a very long time in cryptocurrency history, SatoshiLabs with the Trezor and Ledger with the Nano. I would recommend starting with one of their hardware wallet if only because they are fully supported by many services and app and especially Metamask which is often needed to interact with Web3.0 app (see above).

Trezor One (59EUR/62CHF+19EUR of shipping – affiliate link, see disclaimer)
It’s the first hardware wallet that gain popularity in the community. It’s a good starting point and come at the lowest price tag of both brands I recommend. It has two physical button on the front and is protected by a PIN that you enter on the computer blindly while seeing the actual position of the digit on the device screen. There is a newest and more advanced version, Trezor Model T but it add mostly fancy feature (like entering the PIN on the color touch screen directly) and advance functions (Shamir backup) that you should not need when beginning in cryptocurrencies. This advanced, Model T, cost way more than the basic One (189EUR/196CHF) and I don’t think it’s worth the extra money, especially for a beginner, it’s up to you and your budget.

Ledger Nano S (69CHF+12.75CHF of shipping – affiliate link, see disclaimer)
It’s the other very popular competitor to the Trezor One. It offers very similar features with a different design. It looks much more like a USB-flash drive, so it might less attract a potential thief if it’s an important risk for your use case. The PIN code must be entered directly on the device, something that some people would find safer but it’s at the cost of ergonomic as you have to enter the PIN each time with the two little buttons on the side of the device. This was my first hardware wallet and I still use it and love it.
The brand also release a new version of their wallet, Ledger Nano X, that offer advance features (Bluetooth, more coins installed at the same time) and nicer design at exactly double the price (139CHF). Again I don’t think it’s necessary for a beginner but it’s up to you and your budget.

Paper wallet
Not my picture and not wallet, don’t send coin on it.

Finally, I have to mention a kind of piece of cryptocurrency history, the paper wallet. It’s a wallet that is generated (if possible offline on a freshly installed Linux computer or Live OS that has never been connected to internet) to be printed on a peace of paper. You have the public key with a QR code that allow you to send coin on it and the private key, possibly also with a QR code, to spend your money. Everything is printed in plain sight and you can make the design you want around it, to look like a bank note or to make the private key side covered by the back of the page that you bend back and tape with tempered proof stickers. It’s an interesting educational way to understand how Bitcoin works and to engage discussion about Bitcoin by showing it to people, maybe even to gift some Bitcoin to someone in the form of a paper wallet. But as it’s pretty difficult to generate one using the best security practice (is your printer “smart” and could have keep a copy in memory somewhere?) and it’s not compatible with the most recommended way to use a cryptocurrency wallet, by never re-using twice the same address while your seed will generate infinite of new address in your wallet as you use them. This new way to use a wallet by default increase your privacy as everything is in public on the blockchain, don’t forget. For these reason it’s strong discourage to use paper wallet anymore. If you still have some in a drawer with significant amount of coin, I would suggest to transfer it to a more secure (hardware) wallet and then keep it as a souvenir without any coin on it.

Conclusion

My recommendation would be have at least 3 type of wallet. One software wallet, one Metamask wallet and one hardware wallet that could be added later once you are more confident and have significant (in your term) amount of money in cryptocurrencies. Your first wallet would most probably be on your smartphone so you can use it on the go and benefit of the smartphone camera to scan QR codes easily, and while you are spending time to set this wallet up and manage your backup. I recommend to start with an easy to use Bitcoin Lightning wallet like Phoenix or Breez. Then if you are looking for other coin, you could add a multi-cryptocurrency wallet, like Coinomi or Bridge so you can use it with many coins in the future. Optionally you could skip the native Metamask wallet (you are forced to create one that you can backup in a password manager just in case but don’t use it for real) and directly connect your hardware wallet to Metamask to increase the security while using Web3.0 app. Note that you could also skip Metamask entirely as you have other possibility to connect your software wallet or even your hardware wallet to web3.0 app like decentralized exchange or NFT platform by using WalletConnect that allow you to connect by scanning a QR code shown on the screen.

If you like this post, want to add or correct something to it, feel free to leave a comment below.
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Disclaimer I’m not a financial advisor, nor a professional in any kind of industry link to finance, cryptocurrencies nor tax legislation. I’m just giving my personal opinion and life advise about topics that I like and experiment by myself on my free time. My articles could always have mistakes, inaccuracies or lead to misunderstanding of a more complex topic. I cannot by any mean be liable for any loss or issue you could have by following any strategy or using any app or product that I mention in my articles. Using any kind of investment product, cryptocurrencies, smart-contracts, app or tool always come with a certain risk. Before engaging your data, time and money in any activities, always do you due diligence and get informed by yourself about the implications and risks.

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