Best DeFi Crypto Wallets: List of Top Software & Hardware Wallets

  • January 24, 2023
  • 2 Min Read

Our Top Crypto Wallet Picks January 2023

Top Software & DeFi Wallets

Top Hardware Crypto Wallets

  • Ledger: Best for mobile app wallet access
  • Trezor: Best for desktop app wallet access
  • What’s a Crypto Wallet?

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    A crypto wallet is just what it sounds like: a place to store your cryptocurrency. Unlike a physical wallet, though, you won’t open a bi-fold to see your funds stored in one place.

    Rather, a cryptocurrency wallet holds private keys, which are long strings of letters and numbers that represent the cryptocurrency that you own on that token’s network. These private keys let you send and receive crypto, and also let you transfer cryptocurrency amongst wallets.

    Crypto wallets are secured with a seed phrase, which are generally 12 to 24 random words that you have to memorize if you want to regain access to your cryptocurrency. You can (and should) write down your seed phrase to keep in a safe place or commit it completely to memory.

    As a rule, you should not share your seed phrase with anyone, under any circumstance — a seed phrase is a master key to your crypto and sharing it would be like giving out your bank account details.

  • Custodial vs. Non-Custodial Wallets

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    There are a few different types of wallets to choose from, including custodial and non-custodial. The difference between custodial and non-custodial wallets comes down to who controls the tokens stored in the wallet: the user or the wallet service.

    In non-custodial wallets, you have complete control over your tokens and coins, as well as the private keys that prove those tokens and coins are yours. On the flipside, a custodial wallet has a wallet-hosting service that stores the keys to your crypto for you — which means that the host has the custody.

    Custodial wallets are a popular choice because they don’t require much maintenance or legwork from the user, but you do have to find a reputable, trusted wallet in order to safely store your keys. If you choose the wrong wallet or platform, your crypto could be at risk of theft or counterparty action.

    However, with non-custodial wallets, you are responsible for the safety and security of your funds. That means it requires more work on your part to ensure that you are connecting your wallet to an exchange or dApp for trading. You then have to ensure that you’re disconnected when you’re done trading.

  • Cold Storage vs. Hot Storage Wallets

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    There are also the options of cold and hot storage wallets. So what’s the difference between cold storage and hot storage? The main difference is whether or not the wallet is connected to the Internet.

    In cold storage — which is the safest and more secure of the two types — the wallet is completely unconnected from the Internet, and requires the user to plug in a USB device or similar to access tokens. Hardware wallets and some software wallets use cold storage — and are generally non-custodial — so they are seen as a more secure form of crypto wallets.

    With hot storage wallets, the wallet is always "connected" to the Internet. Exchange wallets use hot storage, since someone needs to log in to the exchange platform with an internet connection in order to view, manage, and trade their funds. Since hot storage requires the internet, hot storage wallets are more susceptible to hacks and counter-party action.

Different Types of Crypto Wallets, Explained

Just like there are different types of wallets that you can use to store and carry cards and cash, there are different crypto wallet formats available for people to choose from.

  • Exchange/Online Wallet

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    Exchange wallets are a very common type of wallet and are best suited for beginner investors. Typically, you set up an exchange wallet when you create an account on a crypto exchange like Crypto.com, Binance, or any other popular platform. With this wallet, you can deposit money from your bank account and then use it to buy cryptocurrency available on the exchange, which is then stored in your wallet on the exchange.

    Because it uses hot storage, its security features are relatively light compared to more advanced options, like hardware wallets. That’s because exchange wallets are subject to the cybersecurity of the exchange on which they are hosted. However, this type of crypto wallet is often the easiest to set up and access for beginners.

    Pros

    • They are simple and free to set up and manage, so beginners can easily step into the world of cryptocurrency.
    • Exchange wallets make it easier to trade cryptocurrency on your chosen exchange.

    Cons

    • These wallets are custodial, so your keys and coins are kept by the exchange.
    • These wallets require an internet connection in order to gain access. Without one, it’s difficult to access your crypto privately and securely.

Quick Sip

Many exchanges, such as Gemini and Coinbase keep the majority of coins and tokens in cold storage. However, this safety precaution won’t help if the exchange becomes insolvent or halts withdrawals. Withdraw to your own wallet whenever possible.

  • Hardware Wallet

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    Hardware wallets, like the ones Trezor and Ledger produce, are physical drives that utilize cold storage to hold the private keys for your cryptocurrency. They’re a custodial type of wallet, and are best for intermediate to advanced crypto investors, but beginners could benefit from them, as well.

    They may look like small handheld devices or everyday flash drives, but are secured with a PIN code needed to access the information, as well as an optional passphrase. But the PIN code and passphrase aren’t the only safety measures in place for these wallets.

    If a sophisticated hacker was able to access a hardware wallet, they would also need the seed phrase to get access to your cryptocurrency. Since your seed phrase is only known by you, it would be extremely unlikely that the hacker could guess or hack it.

    Pros

    • Hardware wallets are more secure than exchange wallets.
    • The starting price of a hardware wallet is $77 for a Trezor and $79 for a Ledger, making them accessible for little investment cost.

    Cons

    • Users have to keep track of a physical device, and there’s a risk that it can be lost or stolen.
    • They are more expensive than using an exchange wallet.

Quick Sip

Some hardware wallets, like Trezor and Ledger, can pair with software wallets, such as MetaMask. This strategy gives you an extra layer of protection when using a hot wallet.

  • Software Wallet

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    Software wallets are similar to exchange wallets in that they mostly use hot storage. However, they aren’t hosted by an exchange and they are non-custodial. To use your software wallet to trade on an exchange, you have to connect it to the platform of your choice.

    While all digital/exchange wallets are software wallets, not all software wallets are exchange wallets. Rather, software wallets can also be hosted on a desktop or mobile app that is not connected to an exchange. Examples include MetaMask, Electrum, and Exodus. Some of them even offer crypto trading.

    Before choosing just any software wallet, though, it may be helpful to consider the kinds of cryptocurrency the wallets support. You may also want to consider how you can access the wallet and learn what exchanges it’s compatible with to make sure it can meet your needs.

    Pros

    • Software wallets are non-custodial, meaning you have complete access, control, and responsibility for your keys and tokens.
    • Most software wallets are easily accessible from a desktop or mobile device — with or without access to the internet.

    Cons

    • Software wallets that use hot storage are susceptible to security breaches.
    • Most software wallets charge fees for their services.

Which Type of Crypto Wallet Should You Choose?

The type of crypto wallet you should choose depends on your personal preference. Whether you’re new to cryptocurrency and want to start your first wallet or are getting serious with crypto investing and need more security, there’s a wallet for you.

  • Crypto Wallets For Beginner Investors

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    If you’re choosing your first crypto wallet, the easiest path may be to use a custodial, hot storage exchange wallet. These wallets typically require a know-your-customer setup in which you verify your identity with the exchange. From there, your purchased crypto is stored in the wallet on the exchange.

    This type of wallet is recommended for beginners because it takes little effort to set up, and maintenance is the exchange’s responsibility. You can transfer crypto out of the exchange wallet into other wallets if you want, since the exchange has custody of your coins.

  • Crypto Wallets For Intermediate Investors

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    Using a software wallet requires some legwork on the user’s end, but tends to be a bit safer, as not all software wallets are connected to an exchange. Wallets like MetaMask and Coinbase are non-custodial, so you are in complete control of your crypto and keys. However, they do require an internet connection to access.

    This type of wallet’s interface is typically simple, and when you are ready to trade on a crypto exchange, you can transfer the desired coins to a separate exchange wallet. The extra legwork comes from being particularly careful not to connect a software wallet to any harmful sites that may steal your funds.

    Software wallets are usually hot storage wallets, so they require an internet connection for access. However, some software wallets can use cold storage.

  • Crypto Wallets For Advanced Investors

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    Advanced crypto investors with tens of thousands or more in crypto funds may want to invest in hardware wallets with cold storage. Companies like Trezor and Ledger make hardware wallets with the highest security you can find. You can access the funds in your hardware wallet without an internet connection, too. You just simply connect it to a device, like a computer, enter your pass-codes, and then manage your crypto.

    Multi-signature wallets are hardware wallets that require multiple keys to access and are generally suited for brokers, fund managers, and instances where family members might share funds — like a trust or estate. With multi-sig wallets, everyone who needs access to the wallet has a separate, personal key, and a certain minimum number of keys must be used to access the funds.

    For example, if there are three keys for a multi-sig wallet, then two must be present to unlock it.

How to Use a Crypto Wallet

The first thing you need to know when learning how to use a crypto wallet is to always keep your seed phrase safe. Your seed phrase is assigned when you first set up a crypto wallet, and is the recovery phrase you’ll need if you can’t access your wallet. Write down your seed phrase and keep it in a safe place, such as with other important documents. Once you have your seed phrase secure, you can start using your crypto wallet.

Quick Sip

Avoid storing your seed phrase with a cloud service or on a computer connected to the internet. If someone gains access to your account or computer, your wallet is now their wallet too.

If you’re using an exchange wallet, the process is pretty straightforward. Since the wallet is connected to the exchange, you can easily trade cryptocurrency after logging in. You can also transfer cryptocurrency between wallets by copying the address to the receiving public wallet and then pasting it into the form for the sending wallet.

That process is slightly different with a software wallet. If you’re using a software wallet like MetaMask to trade crypto on a decentralized app or exchange, then you have to connect your wallet to the platform to transfer crypto in and out of the platform. Once you’re done trading, it’s important to disconnect your software wallet to prevent any susceptibility to hacks or breaches.

If you have a hardware wallet set up, you can send crypto from Coinbase and other platforms that support wallets using your hardware wallet address and vice versa. Keep in mind some platforms and wallets do charge network fees for transfers, but having cryptocurrency in a hardware wallet is an added peace of mind and layer of security.

How to Choose The Best Crypto Wallet

When comparing your options for the best crypto wallet — or even the best type of crypto wallet for your experience level — here are some of the considerations to keep in mind.

  • How Many Currencies Are Supported?

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    Some crypto wallets only support holding Bitcoin or Ethereum, while others support over a hundred types of tokens and coins.

    For example, some wallets are built primarily to support ERC-20 coins, which are tokens on the Ethereum blockchain. If you want to invest in these types of tokens, it may be best to choose an Ethereum wallet to hold your assets.

    There are numerous options for multi-asset wallets, which can make it easier to hold a variety of tokens in one place. However, you'll need to look into the granular details of the wallet beforehand, or you won't know which option is best.

    If you want to easily trade multiple cryptocurrencies, then an exchange wallet would probably be your best bet. However, MetaMask supports buying and swapping a variety of cryptocurrencies and can be used with a hardware wallet.

  • Can it Hold NFTs?

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    Non-fungible tokens are an increasingly popular form of digital assets that can be held in a wallet. If you plan to trade and hold NFTs, or already do so, you may want to choose a wallet that can support those types of tokens. Coinbase and MetaMask wallets both support NFTs in their wallets.

  • Where And How Can You Use it?

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    Not all wallets are built to work with every type of exchange or hold every type of token. As such, it's important to do your homework on what wallets work with what platforms.

    In some cases, you may want to utilize multiple wallets for your assets — especially if you're interested in trading tokens that are on different blockchains and therefore require you to connect to a range of exchanges or platforms.

  • What Are The Security Features?

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    If you want the most security possible, then a hardware or multi-signature wallet is your best bet. However, if you are trading at low volumes and are a casual crypto investor, you may not need more than an exchange wallet, like the ones that Binance, and Crypto.com offer.

    Again, it depends on your comfort with security risks. Remember, your coins are in the exchange’s custody if you choose to hold your crypto in their proprietary wallet.

    However, if you prefer complete and total control of your funds, then a non-custodial software or hardware wallet is the way to go.

  • Are There Specific DeFi Wallets For DeFi Apps And Platforms?

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    If you want to use a platform like Compound for trading, then you need to connect your wallet. In turn, it's important to note that some wallets can connect to decentralized apps and some don’t.

    Before choosing a wallet, carefully consider where and how you want to do most of your trading, and determine whether it will be on a decentralized exchange or a dApp. If you're planning to utilize DeFi platforms, it will almost certainly benefit you to use a DeFi wallet over another type of wallet.

    There are plenty of DeFi wallet options to choose from. MetaMask offers wide DeFi access to users and is a wildly popular option among all types of crypto users. Coinbase Wallet is another solid option to consider, as the wallet is user-friendly and offers integration with a wide range of dApps.

    It can be helpful to narrow down your picks to the ones that work with the platforms you want and can support the tokens you're interested in. You should also make sure to do your homework on the other factors that are important to you, like whether the wallet supports NFTs or has the right security features.

    On the other hand, if you're planning to mainly use centralized crypto exchanges rather than a dApp, an exchange wallet may be a good fit.

Final Thoughts on Crypto Wallets

It’s as important to choose the best crypto wallet to safely store your funds as it is to choose the best place to safely store your money and data. While beginners can start with a simple digital or exchange wallet, experienced traders can get more security for large-volume trades and funds with cold storage, hardware wallets. Consider the different features and capabilities of each type of wallet to pick the one that best fits your crypto trading and investing habits.

Frequently Asked Questions

  • What’s the best wallet for beginners?

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    The best wallet for beginners is an exchange wallet, since they are already connected to an exchange and allow for easy trading. Furthermore, with exchange wallets, it’s easier to deposit funds and buy more crypto. There are drawbacks to using exchange wallets like coin custody and required internet, so always do your research when choosing the best wallet to store crypto


  • Do I need a wallet for crypto?

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    Yes. If you want to hold cryptocurrency at all, you need a wallet for crypto. Just like a checking account to hold your money, you will need a crypto wallet to access your tokens. However, as long as you remember your seed phrase or write it down, you can recover your coins with any wallet if they are lost.

  • What’s the safest crypto wallet?

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    The safest crypto wallet is a hardware wallet. Because they utilize cold storage, you don’t need an internet connection to access and review your funds. Furthermore, they aren’t subject to cybersecurity attacks and if a hardware wallet is lost, tokens are protected against sophisticated hackers since someone needs your seed phrase to access your funds.


Contributors

  • Avatar of Courtney Mikulski

    Courtney Mikulski specializes in cryptocurrency, personal finance, and credit cards. Her work has appeared in publications like Bankrate, The Simple Dollar, and CreditCards.com.

  • Avatar of Angelica Leicht

    Angelica specializes in crypto and personal finance content. Her work has appeared in publications such as Bankrate, Forbes, The Motley Fool, The Simple Dollar, The Houston Press, Dallas Observer, The Village Voice, and others.