What is a Crypto Wallet?

Which Types of Crypto Wallets Are Available?

You can choose from several types of crypto wallets, each with varying levels of convenience and safety.

Hardware Wallets

A hardware wallet is a physical device that generates and stores your private keys in an environment separated from an internet connection. Hardware wallets are also considered to be self-custodian wallets, meaning that you are the sole owner of your crypto, and maintain full control over your confidential keys. You decide when to use them to sign transactions and interact with the blockchain. By remaining disconnected from the internet, hardware wallets provide the highest level of security for holding crypto and minimize exposure to online threats. These physical crypto wallets are ideal for storing both large and small amounts of crypto, for daily transactions or long-term investments.

Software Wallets

A software wallet is an application (App) you install on your computer or mobile phone. Always connected to the blockchain, it allows you to send, receive, and manage your crypto assets. Software wallets are a popular choice because they are usually free to download and quick to set up. However, since they operate on internet-connected devices, they are considered online wallets, meaning your private keys are more vulnerable to hackers and various threats. To enhance security, it's essential to generate and store your keys offline using a hardware wallet, which you can then connect to your software wallet only for transactions.

Crypto Exchange Wallets

A crypto exchange wallet is provided when you create an account with an exchange, making it a convenient solution for users who frequently trade or move funds. However, the exchange then controls your wallet, managing your private keys and securing your assets, not you. This reliance on the platform means your funds are at risk if the exchange faces a security breach or any type of legal complications, which can potentially leave your assets inaccessible or under the control of a third-party. It’s the least secure option.

Key Differences
Hardware Wallets, Software Wallets & Crypto Exchanges

Crypto wallets are used to secure your digital assets. They come in various types, including hardware, software and exchange wallets. Learning and understanding the differences between them is essential for managing your crypto safely.

	Hardware Wallets	Software Wallets	Crypto Exchange Wallets
Wallet Connectivity	Can be connected to internet	Always connected to internet	Always connected to internet
Custody Type	Non-custodial	Non-custodial	Custodial
Storage of the private keys	Offline	Online	Online
Security	Your private keys remain securely within the hardware wallet, with transactions signed locally to minimize the risk of unauthorized access.	Constantly connected to the internet, making them vulnerable to cyber threats like phishing, malware, keylogging and hacking.	Your exchange account is susceptible to cyber attacks since the exchange controls your private keys, implying a risk of fund misuse or mismanagement.
Connectivity to Blockchains and Web3 dApps	Available via a hardware wallet companion app	Available via the software application	Unavailable
User interface	Can be used with a dedicated mobile and desktop companion app	Native mobile and desktop applications	Native mobile and desktop applications
Ideal use	Secure storage of large or small amounts for daily transactions or long-term investments	Storage of smaller amounts for daily use	Trading and short-term storage to limit exposure
Pricing	Between $50 and $400	Typically free	Free
Examples	Ledger Stax™, Ledger Flex™, Ledger Nano X™, Ledger Nano S Plus™	MetaMask, Trust Wallet, Phantom, Keplr	Coinbase, Binance, Kraken

The security of your crypto depends largely on the type of wallet you choose. While software and exchange wallets offer accessibility and ease of use, they are inherently exposed to online threats and third-party risks.

Software wallets offer a wise choice when paired with a hardware wallet for offline private key generation and storage, which adds an extra layer of protection to your digital portfolio.

Hardware wallets offer unmatched security by keeping your private keys offline, ensuring true self-custody and peace of mind.

For both everyday operations and long-term storage, hardware wallets remain the most reliable option, safeguarding your investments from cyber attacks, online threats and potential exchange failures. If you prioritize security and control, investing in a hardware wallet is the more secure way to protect your coins and tokens.

Crypto security made simple

Ledger crypto wallets are the safest, simplest way to secure your digital assets and peace of mind.

View Ledger wallets

Security

Staying safe in the digital realm is crucial. A trusted crypto wallet provides a secure environment for storing your private keys. When you manage your own keys, starting with the seed phrase, you become the true owner of your digital assets, eliminating reliance on third-party custodians. This approach enhances your security, gives you more control, bolsters your protection and grants you direct access to multiple blockchain networks, enabling seamless transactions and greater financial freedom.

Send & Receive

A crypto wallet enables seamless transactions and payment processes, including trading functions like spending your crypto assets online or in stores, sending and receiving cryptocurrencies like Bitcoin and Ethereum. It’s a trusted and convenient way to manage your funds while ensuring fast, efficient transfers across blockchain networks. Many wallets also offer features such as trade history tracking, multi-currency support and integration with developer tools or decentralized applications (dApps) for an enhanced user experience.

Stake

You can also stake your assets directly through your crypto wallet, earning rewards by locking your crypto to help secure the blockchain, while maintaining full ownership and control of your digital assets. With a self-custody wallet, you can start staking your holdings by exploring DeFi solutions, keeping your digital assets secure without relying on third parties.

What is the Best Way to Secure and Manage Your Crypto Wallet?

To ensure the security of your crypto wallet and digital asset portfolio, explore these three best practices.

1

Generate and Store your Seed Phrase Offline

Securing your digital assets starts by making sure your crypto wallet generates your seed phrase offline from the very beginning. When the seed phrase is shown to you, make sure to write it down, store it in a safe place, offline, far from hackers’ reach, natural disasters and thieves. You will need it to restore access to your crypto if your wallet is ever lost, stolen or damaged, or if you want to upgrade to a new wallet. Never share it with anyone.

Seed Phrase Storage Solutions

2

Use Strong Authentication to Connect your Crypto Wallet

Strong security starts with strong credentials. Always set a unique, complex password for your crypto accounts. For hardware wallets, choose a confidential and hard-to-guess PIN. For online services, combine a strong password with two-factor authentication (2FA). These simple steps add powerful layers of protection to keep your assets safe from unauthorized access.

Manage Ledger Wallet’s PIN Code

3

Monitor Your Transactions

Always monitor the transactions you sign with your crypto wallet, as signing a malicious transfer can put your funds at risk. Avoid blind signing, where you approve trades without fully understanding them. This can lead to scams or asset loss. Whenever possible, opt for clear signing, which provides full details of the transaction before you approve it.

Learn More about Clear Signing

Own a Reliable Crypto Wallet

Ledger manufactures secure hardware wallets capable of protecting your private keys in an environment isolated from your internet-connected devices, such as a smartphone or tablet. Whether you use a Ledger Stax™, Ledger Flex™, Ledger Nano X™ or Ledger Nano S Plus™, the brand’s industry-leading security model helps keep your crypto assets protected with its advanced technology features.
When you purchase a crypto wallet from Ledger, you not only get top-notch protection for your Bitcoin, Ethereum, Solana and more than 15,000 other tokens and coins, you also get access to a crypto wallet application that makes it easy to securely buy, swap, stake and use your crypto.
Get started with this secure way to manage your digital asset portfolio and enjoy the benefits of a reliable self-custody wallet today.

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