It doesn’t matter if you’ve just started dabbling in Bitcoin or have been trading altcoins for years; keeping your digital assets safe should be your number one priority.
The right crypto wallet must, of course, protect your coins from hackers. But it should also make it easier to access and use them when you need to.
However, with so many options on the market, it can be difficult to know which wallet to choose. That is why we have put together this guide to walk you through the different types that are available.
In it, we’ll also explain what key security features to look for, and why it is important to find something that offers you safety and convenience.
Understanding the Different Types of Crypto Wallets
Currently, some 31% of Australians own some form of crypto. All of them require wallets to store their investments.
The top crypto wallet options for Aussie investors include a mix of hardware, software, and mobile solutions. So, the best choice for you will depend on how often you trade, what coins you hold, and how much security you want.
The different types of wallets include:
Hot wallets
These are connected to the internet. They include mobile crypto wallet apps, desktop software wallets, and web-based exchange wallets.
The great thing about these types of wallets is that they are convenient for frequent traders. However, they can be more vulnerable to hacking.
Cold storage crypto wallets
These types of wallets are kept offline. They include hardware wallets and paper wallets, and are considered more secure because they are not exposed to online threats.
Hardware wallet vs software wallet
This is one of the biggest decisions you’ll make. Hardware wallets like Ledger or Trezor store your private keys offline. In contrast, software wallets run on your phone or computer.
Key Security Features to Look For
When choosing a wallet, the main thing you need to consider is how secure it is. Here are some features to check before you decide:
- Private key security: You should have full control over your private keys, as they are the gateway to your crypto.
- Two-factor authentication for crypto: Adds an extra layer of protection by requiring a code from your phone or an authentication app.
- Backup and recovery: Your wallet should offer a secure way to restore your funds if your device is lost or damaged.
- Encryption: Ensures your wallet’s data is protected from unauthorised access.
If a wallet does not make these features clear, exercise caution. It might not be the safest option.
Balancing Security with Accessibility
While choosing a wallet that offers maximum security is essential, you also need to think about how you will access your funds.
If you’re a long-term investor, cold storage might suit you best. A hardware wallet kept in a safe place should give you peace of mind that it won’t be compromised.
That said, if you’re a frequent trader, a mobile crypto wallet app might be more practical. These allow you to buy, sell, and transfer coins on the go. Just make sure the app you choose is reputable and updated on a regular basis.
Multi-Currency Support and Compatibility
If you hold more than just Bitcoin, look for a multi-currency crypto wallet. This lets you store and manage different cryptocurrencies in one place.
You might find this especially helpful if you plan to expand your portfolio over time. However, you should check that the wallet integrates easily with Australian exchanges because this can make deposits and withdrawals faster and more convenient.
Australian Regulations and Local Providers
When storing digital assets, it’s worth being aware of Australian cryptocurrency regulations. While the government does not ban personal wallets, it does require exchanges to register with AUSTRAC and follow anti-money laundering rules.
Using a wallet from a trusted provider that complies with these standards can provide you with an extra layer of protection. Indeed, some Australian exchanges even offer their own wallets, which can be a good choice if you value local support and integration.
Choosing Between Hardware and Software
If you’re still unsure whether a hardware wallet vs software wallet is right for you, it is worth considering your habits and the level of risk you are prepared to take.
- Hardware wallets are best for larger amounts of crypto that you plan to hold long-term. While they cost money upfront, they provide strong, secure Bitcoin storage and support for other coins.
- Software wallets are free or low-cost and better suited for smaller amounts or active trading. They are more accessible but require extra care with security settings.
Many investors use a combination of both. For example, you could store most of your funds in cold storage and keep a smaller amount in a hot wallet for everyday use.
Backup and Recovery Matters
If your wallet does not have a backup and recovery process, then it puts your funds at risk. For this reason, it is worth looking for options that provide a recovery seed phrase. This is usually a list of 12 to 24 words you write down and store in a safe place.
If your device fails or you lose your hardware wallet, this phrase will let you restore your coins. It is essential that you NEVER share it with anyone and always keep it offline.
Staying Safe Beyond the Wallet
A secure wallet is just the first step you should take in protecting your assets. But there are several other things you should do.
For instance, always avoid clicking on suspicious links or downloading unverified software. You should also keep your devices updated with the latest security patches and use strong, unique passwords for your wallets and exchange accounts.
It is important to remember that crypto transactions cannot be reversed. So, once funds are sent, they are gone. This is why it is vital to take security seriously from the start, to protect yourself and your investment.
