A cryptocurrency wallet is similar to a digital bank account through which you can send, receive, and generally manage your cryptocurrencies. A cryptocurrency hardware wallet, also known as a cold wallet, is a physical wallet, and some types of it such as the Ledger Nano S are designed in the form of a USB drive.
It is worth mentioning that a cryptocurrency wallet is a type of wallet used for storing, sending, receiving, and generally monitoring digital assets, and it is usually designed in two forms: hardware and software. In fact, it is a kind of application that functions like a wallet for your digital currencies and is used similarly to the wallet in which you keep your cash. However, this does not mean that you store your cryptocurrencies in the form of coins inside the wallet; rather, you can store the private and public keys of the cryptocurrencies in it. A cryptocurrency wallet is a device or application that allows you to securely store, manage, and exchange your cryptocurrencies such as Bitcoin, Ethereum, and other digital currencies.
It is necessary to know that each cryptocurrency wallet consists of specific security and communication technologies that help provide the best type of service. A crypto wallet is a form of technology that utilizes specific security and communication components and methods for better service delivery. These components include: the Private Key, the Public Key, and the Seed Phrase. The public and private keys are among the main and essential components of any wallet.
Crypto wallets are either software or physical devices that store all the keys owners of cryptocurrencies need to access the blockchain network and manage their digital currencies. These wallets and the keys they contain, unlike wallets with physical currency, play a crucial role in storing and transferring encrypted coins. In fact, cryptocurrencies are digital assets that exist only within blockchain technology; therefore, public and private keys are provided to owners when registering the wallet as proof of ownership of the crypto and can be used as an identifier whenever owners wish to access their assets. As such, it is essential to ensure that the keys are securely stored and that cryptocurrency wallets are carefully protected and managed.
Cryptocurrency wallets are divided into three categories:
Cold or hot wallets
Hardware, software, or paper wallets
Custodial or non custodial wallets
It should be noted that you can use these wallets in various combinations. For example: a non custodial cold hardware wallet or a custodial hot software wallet. Therefore, we recommend that you become familiar with the different types of cryptocurrency wallets so that you can make the best choice based on your specific needs.
As mentioned earlier, one of the types of cryptocurrency wallets is the hot wallet, which is accessible online and allows you to have easy access to your cryptocurrencies. These types of wallets can be installed on internet connected devices such as smartphones, tablets, and personal computers. Due to their constant connection to the internet, they are referred to as hot wallets. It is worth noting that while this connection provides the advantage of quick and easy access to cryptocurrencies, it also exposes them to the risk of hacking and theft.
Desktop wallets are software programs that can be installed on computer operating systems such as Windows, Mac, and Linux, and they allow the creation of new accounts (addresses) and the execution of transactions via the internet. These wallets store users' private keys offline on their personal computers.
A mobile wallet is an electronic tool that enables you to store, manage funds, and conduct financial transactions through mobile devices. Using a mobile wallet, you can make electronic payments and also shop online in stores.
A web wallet means you can use it for all your needs without having to install a specific application or software. You only need access to a browser (such as Chrome, Firefox, etc.), which is available on all computers, smartphones, and other devices, and an internet connection.
Cold or hardware wallets are physical devices specifically designed for storing cryptocurrencies. Their security level is higher than wallets on personal computers or smartphones, primarily because these wallets are not connected to the internet, which significantly reduces the risk of attacks from malicious actors.
As the name suggests, a paper wallet is a piece of paper on which information related to the private key and how to use it is written. It is used to manage digital assets and any other valuable asset such as money, gold, or securities. This type of wallet can be generated through online tools and printed on paper, offering high security.
Another type of cryptocurrency wallet is the multi signature wallet, which requires multiple signatures instead of just one to carry out a transaction. These signatures are associated with different private keys, and a specific number of keys must sign the transaction for it to be validated. The way this wallet functions remains the same regardless of the number of signers, and each member of the multi signature wallet has the opportunity to initiate a transaction using their own private key. However, until the other participants sign it, the transaction remains in a “pending” state.
Another type of cryptocurrency wallet is the decentralized wallet, which is built on the blockchain and used for storing digital currencies. It offers high security, allows users to retain control over their private keys, and enables complete control over assets without the need for intermediaries or central authorities. It also supports anonymous transactions and allows users to connect to decentralized applications (DApps).
It is worth mentioning that in an exchange wallet, your private keys are also stored on the exchange's servers. In other words, you trust a third party whether an individual or a company to securely keep your assets or transfer them to another address when needed.
It should be noted that a cold wallet is more secure than a hot wallet, as a hot wallet is constantly connected to the internet, whereas a cold wallet only requires internet access at the time of transactions. Although hot wallets are free, the server must have access to the user's private key. Cold wallets, on the other hand, can be used offline, which makes them a more secure option for storing digital assets.
It is important to understand that paying attention to security factors and choosing secure cryptocurrency wallets protects your assets and prevents any kind of disruption, theft of digital currencies, or unauthorized access. For this reason, cold wallets are considered highly secure options because private keys are stored on the device and, due to the lack of internet connection, they are an excellent choice for asset storage. Hot wallets also offer good features but are weaker in terms of security. Keep in mind that having a regular backup system and the ability to recover data in case of wallet loss are among the essential factors for information security. Additionally, wallets that are regularly updated and well supported have higher levels of security.
If you are a trader or investor, you have likely stored your Bitcoin, Ethereum, and other cryptocurrencies across various wallets and exchanges. You also know that keeping track of all these platforms due to login information and security measures is difficult and time consuming. To solve this problem, you can use Trust Wallet, which allows you to store all your different digital assets in one place and have a comprehensive overview of them. Moreover, with this wallet, you can easily send and receive various cryptocurrencies and NFTs. Trust Wallet offers high security.
Given the significant advancement of technology and modern innovations, the collection and storage of data and information have become extremely important and now hold a leading role globally. In the cryptocurrency and Bitcoin market, this issue has gained great significance, and we must protect digital currencies because, with their growing popularity, they are constantly at risk of hacking and tampering.
Therefore, it is necessary to establish stronger security layers to prevent the theft of your information. These layers should go beyond simple usernames and passwords to provide robust protection for your accounts. In other words, in the event of unauthorized access to the database, login information should not be easily accessible. By creating more and more structured security layers, potential attacks or environmental threats can be identified at various stages (first, second, and so on), preventing malicious actors from accessing data and servers.
In digital signatures, Multisign or Multi Signature functionality means that moving and spending the funds in a wallet depends on two or more signatures, which significantly increases asset security. These signatures are used across all cryptocurrency networks to validate transactions. In this system, each network address is linked to a unique code, and the set is referred to as "public and private keys." There is a one way, non reversible mathematical relationship between these keys, structured through a hash function. All network members can verify transaction signatures using the public address (or public key), ensuring that a transaction has been sent by the original sender without revealing anyone’s private key.
It is crucial to understand that the most important part of any cryptocurrency wallet is its private key, which is the only way to access the assets stored in the wallet. This means that if you forget or lose your private key, your assets will remain in the wallet forever, and you will not be able to use them. Therefore, backing up your wallet's private key is extremely important and necessary. Generally, there are three main ways to back up a cryptocurrency wallet:
Seed Phrase : A sentence consisting of 9 to 24 regular words
Private Key : A long string made up of random numbers and letters
Wallet File : A digital file that contains the private key
The best cryptocurrency wallets for Iranian users, which offer security, convenience, and accessibility, include:
SafePal Wallet
Trust Wallet
MetaMask Wallet
Keep in mind that when using a personal wallet, you have full control over your private keys, and the only risk to your funds is losing the device on which the wallet is installed. However, in an exchange wallet, the private keys are held by the exchange, and you do not have complete control over the wallet. Most people only use exchange wallets when they know they will be actively buying and selling. Storing cryptocurrency in an exchange wallet is suitable for short term purposes, and generally, few individuals prefer to keep their assets in exchange wallets for long periods. Overall, we recommend storing only the assets you plan to trade in the exchange wallet, and transferring all other assets to your personal wallet. Furthermore, if you do not intend to trade frequently and your main goal is to hold digital assets for an extended period, it is better to transfer them to a hardware or even a paper wallet.
A hardware wallet, also known as a cold wallet, is a physical device specifically designed for the secure storage of digital assets. These wallets are categorized as cold wallets and, due to storing private keys offline and not connecting to the internet, significantly reduce the risk of hacking. As a result, they offer much higher security than wallets installed on personal computers or smartphones.
In general, a cryptocurrency wallet functions like a digital bank account, allowing you to easily send, receive, and manage your cryptocurrencies. A hardware wallet enables users to store their digital assets offline and without the need for a constant internet connection. This is why some refer to hardware wallets as “cold wallets.”
Note that when using online or software wallets, the access key to your wallet is stored online, which presents the risk of the wallet's website being hacked and your digital assets being lost. However, with a hardware wallet, this risk is eliminated due to offline storage. Additionally, hardware wallets include an extra PIN code for protection against unauthorized use. Therefore, if your hardware wallet is lost or stolen, no one can access your assets without the PIN code.
A hardware wallet helps you maintain full control over the private keys to your assets and manage your digital currencies. It also eliminates the need for any online exchange or digital platform. One of the key features of hardware wallets is their offline nature, which makes hacking them nearly impossible due to the implementation of two step encryption for your assets.
To answer this question, it is necessary to evaluate these two types of wallets in terms of security and ease of use. From a security perspective, cold wallets are superior. It is crucial for cryptocurrency wallets to have strong security measures. As mentioned, cold wallets are not connected to the internet, making them less vulnerable to online hacking or theft. While most hot wallets have internal security features such as seed phrases to keep your funds safe, they are not comparable to the full offline security provided by cold wallets.
In terms of accessibility and ease of use, hot wallets are more convenient. Cold wallets operate offline and require an additional step connecting to the internet for accessing or transferring cryptocurrencies, while hot wallets are already connected. This makes hot wallets much easier to use for routine and everyday transactions.
Another difference is that hot wallets can be accessed from multiple devices. Therefore, if you lose access, you can simply enter your recovery phrase on another device and regain control of your wallet. In contrast, with hardware wallets, if you lose the device, you will either need to purchase another hardware wallet or find a compatible software wallet to enter your recovery phrase.
As previously mentioned, using a hardware wallet is the most secure method for storing digital assets. One of the most important advantages of this wallet is that it keeps your private keys offline, which offers strong protection against digital threats and theft. Below are other key advantages of hardware wallets:
Although a hardware wallet is one of the safest ways to store cryptocurrencies, it certainly has some disadvantages, which are outlined below:
These wallets store the user's private key information on a physical device, usually in the form of a USB drive, which can be connected to a computer to carry out transactions. Below are the top cold hardware wallets available:
As mentioned earlier, cold wallets are a type of hardware device, and Ledger Blue is one of the most popular examples. Compared to other wallets produced by the Ledger company, this wallet has a significantly larger display and is almost the size of a mobile phone. Its power is supplied by an internal battery, allowing for approximately four hours of continuous usage.
The Ledger Nano S is also a hardware wallet that supports a wide range of cryptocurrencies. Among its most popular features are its combination of high security and user friendly operation. This digital wallet has a display that is easy to read and use, and users can confirm transactions through the buttons located above the screen.
The Ledger Nano S can be connected to any computer via a standard micro USB cable, meaning it is compatible with most computers, laptops, and tablets. According to the Ledger website, the Nano S supports over 23 different cryptocurrencies, including Ethereum, Bitcoin, Litecoin, Dash, and Zcash, as well as many tokens. This makes it an ideal choice for users and investors who deal with multiple cryptocurrencies.
The Ledger Nano X is a hardware wallet that provides enhanced control and security over your digital currencies. Released after the Nano S, it comes with additional features such as Bluetooth and a larger display, and it is more expensive than the Nano S. The Nano X can connect to iOS devices, whereas the Nano S can only connect through computers, laptops, or Android devices. The screen on the Nano X is slightly larger and has higher resolution compared to the Ledger Nano S. Finally, it should be noted that the Nano X is heavier than the Nano S.
This efficient wallet does not have an internal battery and must be connected to your device via USB for any use. The Trezor One is designed in dimensions of 6×30×66 mm and weighs 12 grams. It features a 120 MHz ARM CPU and an OLED display with a resolution of 128×64 pixels. It is compatible with Windows 10 and above, macOS 10.11 and above, Linux, and Android; however, it does not support iOS yet. The Trezor One hardware wallet supports over a thousand digital currencies, including Bitcoin, Cardano, Tether, Ethereum, Uniswap, Ripple, Chainlink, and more.
The Model T hardware wallet looks quite similar to the Trezor One. The main difference is the addition of a color touchscreen and the removal of physical buttons. It is also worth noting that the firmware of the Model T is more advanced in terms of security and can even be used on malware infected devices, though this is not recommended. This wallet is designed and manufactured with dimensions of 6.4 × 3.9 × 1.0 cm and weighs 22 grams. The color display has a resolution of 240×240 pixels. This wallet also lacks a battery and operates through a direct connection to a computer, phone, or power source. It supports a wide range of cryptocurrencies, including Ripple and Stellar Lumens, which were not supported in the previous model. Currently, it supports more than one thousand digital currencies, including Stellar Lumens, Ethereum Classic, Dash, Litecoin, Ripple, Bitcoin, Ethereum, and more.
The KeepKey hardware wallet is designed to securely store more than 40 digital currencies, including Bitcoin, Ethereum, Litecoin, Dash, and others. It connects to a computer via USB and allows you to manage your digital assets. The KeepKey wallet features an OLED screen for displaying addresses, balances, and other details, as well as buttons for transaction approval and security management. This wallet uses technologies based on BIP32, BIP39, and BIP44 to generate and store private keys, enhancing its security against unauthorized access and hacking attempts.
The Coldcard Mk3 wallet is designed with dimensions of 9 × 52 × 88 mm and weighs 29 grams. At first glance, it resembles a small calculator with twelve black buttons. It has a small OLED display measuring 64 × 128 pixels at the top, along with a microSD card slot on the back and a USB port on the top. This wallet does not have an internal battery and draws power from a micro USB cable connected to a computer. Unlike many other wallets, it does not support altcoins and is designed exclusively for Bitcoin storage.
Coldcard Mk3 supports valuable features such as Secure Element technology, Duress PIN, Brick Me PIN (self destruct), Login Countdown (incorrect password limit), and more features that have attracted considerable attention from users.
The BitBox02 hardware wallet features a simple and shock resistant polycarbonate body, designed with dimensions of 9.6 × 25.4 × 54.5 mm and weighing 12 grams. It resembles a small USB flash drive and connects to your laptop or personal computer via a USB C port. It also supports Android OS, Windows 7, 10, and 11, macOS and above, and Linux. The device has a 64 × 128 pixel touchscreen, and its touch sensors function well.
The BitBox02 hardware wallet comes in two versions: MultiCurrency and Bitcoin Only. While both use the same hardware, their software differs. The MultiCurrency version supports a wide range of cryptocurrencies, while the Bitcoin Only version is specifically designed to support Bitcoin.
It is important to note that the method of using each hardware wallet may vary, but the setup process is generally similar:
If you are involved in the world of cryptocurrencies whether you're a beginner or a professional you need a digital wallet. Proper capital management is only possible through selecting the right wallet. Therefore, you must have sufficient knowledge of wallet types and be aware of their features and functionality, as a lack of understanding can lead to the loss of your assets. Below, we explain how to choose and properly use a wallet.
To select a suitable hardware wallet, you should consider several important factors, which we outline below:
Although usage instructions may vary slightly, the general steps for using a cold wallet are similar. The following outlines those steps:
It is worth noting that regardless of geographical location, the criteria for choosing a cryptocurrency wallet are generally the same for everyone and include factors such as security, ease of use, support for a variety of cryptocurrencies, and the credibility of the wallet provider. However, there are specific considerations that Iranian users must keep in mind.
Custodial (centralized) wallets and exchange based wallets may not be suitable options for Iranian users due to international sanctions. These wallets are at risk of being blocked or having assets frozen, which can result in users losing access to their digital assets.
Therefore, non custodial (decentralized) wallets where users have full control over their private keys are safer and more reliable options for Iranian users. These wallets allow users to manage their cryptocurrencies without relying on third parties and significantly reduce the risk of asset freezing or seizure.
It’s important to understand that custodial wallets come with the drawback of potentially having your funds blocked due to Know Your Customer (KYC) regulations. If these wallets are hacked, your funds could be stolen. Custodial systems are not risk free and, like any other third party, custodians may act fraudulently.
For instance, if a custodian such as an offline wallet is hacked or compromised, users might not be able to recover their assets. However, if a custodial wallet with strong security measures is chosen, users can typically access their assets reliably, which according to some solves one of the blockchain’s common criticisms.
Examples of Custodial Wallets:
When a wallet or exchange is said to be custodial, it means it holds users’ private keys and coins, thus having control over the assets. In such cases, users do not have full control over their assets and must trust a third party. Examples of custodial services include Binance, Coinbase, Freewallet, Cryptopay, Bitfinex, and Bitstamp.
Examples of Non Custodial Wallets:
Is It Possible to Store Multiple Cryptocurrencies in One Wallet?
Some wallets such as Trust Wallet allow users to store and manage a wide range of digital currencies like Bitcoin, Ethereum, and others in one place.
What If You Have Bitcoin and Litecoin?
Some people mistakenly believe that a Bitcoin wallet actually contains the Bitcoin itself. But this is not true. A physical wallet in the real world holds your cash, while a digital wallet does not store your Litecoin or Bitcoin directly. It cannot, because unlike cash, Bitcoin does not exist in physical form.
When we say, for example, “I have 3 Bitcoins,” it means that we can look up the Bitcoin blockchain (which is public), search for our address (generated by the Bitcoin wallet), and see that 3 Bitcoins are associated with that address. Many of Litecoin’s features are similar to Bitcoin.
Are All Types of Cryptocurrency Wallets Secure?
Most individuals active in the cryptocurrency market look for a secure and trustworthy environment to store their digital assets. Several factors influence the choice of a secure and efficient crypto wallet, including your trading strategy, budget, purpose, and geographical location.
In general, wallets are categorized into software and hardware types. Hardware wallets tend to offer greater security, as they store users' assets offline.
