What Is a Crypto Wallet? A TabTrader Beginner's Guide
Cryptocurrency wallets are an indispensable part of trading crypto, and one which is part of the landscape for any investor.
Whether a Bitcoin hodler or serial trader of non-fungible tokens (NFTs), those who use crypto will use some form of wallet — the standard way to store cryptoassets.
Wallets enable traders and investors to store their private keys while securely interacting with blockchain networks which host crypto tokens. A wallet is not a digital entity; rather, it is an identifier which allows its owner to transact.
Types of Crypto Wallet
Crypto wallets come in several distinct forms with different characteristics, use cases and trade-offs.
A hot wallet is so called because it is ‘live’ — it directly communicates with the blockchain via the internet, rather than being segregated.
Hot wallets provide quick and easy access to funds, and are thus ideal for trading purposes, as well as for those who regularly spend or move their cryptocurrency holdings.
Using a hot wallet means interacting with the blockchain via an interface which facilitates transactions — the public and private keys needed to actually spend crypto capital are separate from the wallet itself.
As such, the wallet merely acts as a gateway which stores information, but this, combined with being ‘always connected’, presents certain security problems which can result in loss or theft of its contents. This is often due to a lack of due diligence on the part of the owner, but hacks can also occur, with bad actors becoming notoriously adept at gaining access to poorly-protected hot wallets.
That said, hot wallets remain the go-to option for entry-level crypto traders and investors, and there are a huge number of options supporting hundreds of the most popular cryptocurrencies. Just like a hot wallet itself, these wallet providers have their pros and cons, and popularity does not always correspond to a flawless security record.
Some of the most best-known hot wallets available as of 2023 include Blockchain.com and Blockstream Green for Bitcoin, and MyEtherWallet, Electrum and Edge for Ethereum and other altcoins.
As its name suggests, a cold wallet, also known as a hardware wallet, is designed to keep cryptoassets in ‘deep freeze’ over long periods of time.
Cold wallets are not connected to the internet unless their contents are being used in a transaction, and are usually cut off from the outside world and the potential sources of theft which plague hot wallets.
Offline storage of private keys carries an element of peace of mind which makes cold wallets the standard for secure long-term crypto storage. They come in various formats and security measures to protect back-up phrases also differ depending on the individual device model.
For consumers, the ‘classic’ cold wallet is usually a small electronic device which resembles a flash drive or bank card reader. It is used to gain access to crypto funds, which can be used in transactions between wallet addresses as with a hot wallet.
Security tends to revolve around a password to control the public key addresses associated with the private key stored on the device, and a multi-word back-up seed for use to regain access to funds in the event of device loss or damage, or other threat. This back-up seed, or seed phrase, is arguably even more valuable than the wallet itself, which cannot be used on its own to make transactions.
Initially, there were only a handful of dedicated hardware wallet manufacturers, these focusing primarily on Bitcoin. As of 2023, there is a larger range, and various blockchains are catered for. The best-known names in space include Trezor, Ledger and Ellipal.
Despite placing more control of private keys in the hands of the user, hardware wallets are not immune to compromise. Recent years have seen various threats materialize, including malware, phishing attacks and fake wallet apps and updates in addition to simple loss or theft of the device itself. Loss or theft of seed phrases is an issue in itself, and cold wallet users face the task of either memorizing the seed or storing it in a suitable place.
Non-Custodial vs. Custodial Wallets
As can be seen, crypto wallets come in a variety of iterations, each with their own pros, cons and peculiarities.
A key differentiating factor to note, however, is the manner in which a given wallet handles its owner private keys — ultimately what allows them to control their funds.
This gives rise to so-called custodial and non-custodial wallets. The latter places access to private keys in the hands of the wallet owner, while the former stores private keys with a third party, often the wallet provider.
The choice between custodial and non-custodial boils down to questions of security versus user-friendliness. Custodial wallets remove the onus of private key security from the user, but involve trusting a third party’s solution instead. The third party can technically control the wallet’s funds, and security breaches which compromise a wallet provider can result in loss regardless of what the user does. This setup gave rise to a popular saying among crypto market participants — ‘not your keys, not your coins’.
On the plus side, should user error result in a password being lost, the wallet provider might be able to assist in regaining access to funds.
Non-custodial wallets provide no such protection against user error — the lack of trust comes in tandem with complete reliance on one’s own ability to store private keys and wallet access data safely.
The Importance of Security
Crypto custody goes far beyond choosing a strong password. Private keys require the utmost security, to the extent that many seasoned investors simply commit wallet passwords and backup seeds to memory.
To this end, dedicated solutions exist to increase — but crucially not perfect — the security of this sensitive data. These include everything from fireproof stainless steel capsules to Swiss vaults storing private keys.
Ultimately, however, involving as few third-party entities or devices as possible reduces the likelihood of access to crypto funds being permanently lost.
TabTrader — The All-in-One Trading App
TabTrader is the ultimate crypto trading app. It puts the world’s biggest exchanges and thousands of tokens in your pocket — whether at home or on the move, you can access and manage all your crypto trading accounts from one easy, intuitive terminal.
A portal to the entire crypto market, however, requires best-in-class security. Our users employ two-factor authentication (2FA) as standard, and can also protect their TabTrader account with a numeric PIN.
The way in which the TabTrader app connects to exchange accounts to facilitate trading poses no additional security risk. TabTrader stores API keys on encrypted servers, and a dedicated guide explains how the process works and what users can do to protect their data.
TabTrader is more than ‘just’ a trading terminal — the bespoke TabTrader Wallet on Solana offers a gateway to DeFi trading on decentralized exchanges (DEXes).
TabTrader Wallet is a decentralized non-custodial wallet — which gives its owner full control of their private keys — and enables full leverage of the Solana ecosystem. Trade on DEXes, send and receive cryptoassets and top up your wallet balance by credit or debit card using our integrated payment partner MoonPay.
What’s more, our Wallet Adapter feature allows users to integrate other third-party non-custodial wallets on the Solana blockchain when using TabTrader for Android.
In terms of security, TabTrader Wallet also supports Solana’s Saga mobile device, allowing users to manage wallets protected by Solana’s Seed Vault directly from the app. TabTrader never gets access to private keys or other sensitive data while communicating with Seed Vault for transaction signing.
For more information on the TabTrader Wallet and to get started, check out our introduction.
The Bottom Line
Choosing the right crypto wallet is a decision that traders and investors battle with as part and parcel of interacting with the market.
There is no ‘perfect’ wallet, and the trade-off between utility and security remains the major issue to grasp for beginners and experienced hodlers alike. One’s capacity to manage sensitive data storage, and in particular private keys and backup seeds, adds another dimension to the issue of crypto wallet security.
TabTrader seeks to create the perfect balance of secure features and ease-of-use in the TabTrader Wallet, giving users the best possible experience while allowing them to keep their cryptoassets safe.
To get started with TabTrader for iOS, Android and Web, download the app here.
Need to get acquainted with the technical aspects of crypto, exchanges or trading? The TabTrader Academy has the answers to all your questions.
Do I need a crypto wallet?
Trading crypto involves using some form of wallet to store funds. This could be your own standalone wallet or one managed by a third party such as an exchange. Exchange accounts can also function as an all-in-one ‘wallet’ for the tokens being traded.
What’s a good wallet for crypto?
There are a huge number of crypto wallets on the market, and which one to choose depends on an investor’s individual circumstances and requirements. We recommend not sacrificing security for the sake of convenience, and suggest always using a non-custodial solution such as TabTrader Wallet.
Are Bitcoin wallets free?
There is no need to pay in order to transact with the Bitcoin network — or any other blockchain. Free custodial wallets with a proven track record are easy to find, while investors can pay for additional security in the form of a hardware wallet or private key backup device.