As the name suggests, exchange wallets are generated for you when you sign up to an exchange and are almost always custodial (unless you are using a DEX). You can access them from a web browser and—or in some cases—a dedicated mobile app.
For example, if you sign up to CoinSpot and buy 1 BTC, CoinSpot will generate a Bitcoin wallet for you and fill it with the recently purchased 1 BTC. As a custodial wallet, CoinSpot possess control of the private keys and thus technically control the 1 BTC you have purchased. You have a user agreement with CoinSpot, and they provide you with the functionality to send that 1 BTC from their exchange wallet to a wallet under your control but at no time do you have control of the private keys for the exchange wallet itself.
Some users might keep a small amount of cryptocurrency on an exchange so they can enter a trade in a timely manner, but most users prefer to transfer cryptocurrency to wallets that they themselves control the private keys for. Once you learn how to trade, send and store cryptocurrencies, it’s advised that you also withdraw your cryptocurrency to a wallet you control the private keys for.
Common exchange wallets include CoinSpot, Coinbase, Binance and Independent Reserve.
Web wallets are similar to exchange wallets in that they can be accessed through the web browsers without the need to download any software. The ability to access control of your cryptocurrency via a web browser enables greater accessibility at the expense of lower levels of security.
Some classify exchange wallets as web wallets, but there are differences between each which cause us to classify them differently.
Unlike exchange wallets, most web wallets are non-custodial. As some are custodial, it’s important to identify how a web wallet provider handles your private keys before creating a wallet and storing your cryptocurrency with them. Different web wallets will handle your private keys in different ways with different security implications. For instance, MetaMask stores your private keys in your browser’s data store rather than on their own servers, whereas MyCrypto doesn’t store your private keys anywhere.
In remembering that a wallet is simply an interface between users and their private keys, it’s important to note that many web wallets work in conjunction with hardware wallets. Using both a web wallet and hardware wallet allows for private keys to be accessed and funds to be sent more securely.
Common web wallets include Blockchain.com, MyCrypto and MetaMask.
Desktop wallets are programs that you can download and install to your computer in the same way you would a typical software program like Microsoft Word or Slack.
They are generally considered more secure than web wallets because they are installed on your personal computer, rather than being accessible from any computer by logging in and inputting your seed phrase. However, because they connect online, desktop wallets are still vulnerable to malware, bugs and other viruses that may expose or jeopardise the protection of your private keys.
Similarly to web wallets, some desktop wallets can be used in conjunction with hardware wallets to deliver higher levels of security.
Common desktop wallets include Exodus, Electrum and Atomic.
Mobile wallets are arguably the most convenient and user-friendly type of wallet. They can be accessed through an app or installed directly on your smartphone.
You can easily view, send and even buy cryptocurrencies straight from your mobile wallet. This makes them particularly useful for transactional purposes such as paying for goods or services.
However, similarly to web and desktop wallets, mobile wallets aren’t the most secure type of wallet as they are almost always connected to the internet and are vulnerable to malware, bugs, viruses and other malicious attack vectors.
Common mobile wallets include Blockchain.com, MyEtherWallet, Argent and BRD Wallet.
Hardware wallets are physical devices which store and protect your private keys. Some hardware wallet providers pair their hardware solutions with dedicated desktop or mobile wallet applications, but hardware wallets can also be used in conjunction with a vast array of third-party web, desktop and mobile wallet providers.
Hardware wallets are widely considered to be the most secure type of wallet available today as these devices typically require you to physically enter a PIN on the device in order to access and control the transfer of funds significantly reducing the risk of viruses, malware or other malicious attack vectors threatening the security of your cryptocurrencies. However, it’s important to remember that no solution is fully risk-proof and hardware wallets are no exception. If there is a bug with the hardware wallet firmware itself, the physical PIN-entry functionality might be bypassed and your funds stolen.
Many people use hardware wallets to protect their long-term holdings, or any funds they consider to be substantial or valuable. Strongly consider using one if you hold a significant amount of cryptocurrencies. Some people buy multiple hardware wallets to protect the same private keys, with some even storing duplicate hardware wallets in multiple locations.
The most widely used hardware wallets are the Ledger Nano S, Ledger Nano X, Trezor One, Trezor Model T and KeepKey.