What is a Crypto Wallet?
To put it simply, cryptocurrency wallets are similar to bank accounts, but without the intermediary. Crypto wallets are similar to bank accounts in that they allow you to manage your currency funds.
Crypto transactions occur on a blockchain utilising public and private keys. These keys can be thought of as the crypto equivalent of a bank account number and internet banking login information. The former is something you can share with others in exchange for money in your account. Your private key, on the other hand, is more akin to the key to your secret safe. The private key allows you to access your cryptocurrency funds, which are always stored on a blockchain.
As you set up a personal cryptocurrency wallet, it will create your public and private keys and interact with blockchains to display the amount of cryptocurrencies you own. You can think of the crypto wallet as a link between you and your crypto funds, which are stored on the blockchain. You can also use cryptocurrency wallets to buy, sell, store, and spend cryptocurrencies.
Hot vs Cold (Software vs Hardware) Wallets
When researching crypto wallets, you may have come across many different terms, such as soft wallets, hard wallets, hot wallets, cold wallets, online wallets, Trezor, and Ledger. What does it all mean? To put it simply, there are two primary types of crypto wallets: hot wallets and cold wallets.
Hot wallets are crypto wallets that are connected to the internet. Desktop, mobile, and online wallets are all examples of software or soft wallets.
Cold wallets are crypto wallets that come in a physical form and are not connected to the internet, which makes them more secure. Cold wallets are also known as hardware or hard wallets, which look and work similarly to a USB flash drive.
Hot Wallets Explained
If we classify hot wallets based on guardianship, there are 2 types of hot wallets: custodial and non-custodial. If we classify wallets by direct internet connection , there are online wallets and desktop/mobile wallets. Let’s dive into these 4 wallet types.
Custodial (Exchange-Based) Wallets
If you’ve ever registered with a cryptocurrency exchange such as Coinspot, Binance, or Crypto.com, you already have a custodial wallet. A custodial, or exchange-based wallet, is integrated within the platform or app used to purchase cryptocurrency and requires no additional setup.
A custodial wallet is extremely user-friendly because your exchange has “custody” of your wallet, requiring less responsibility from your end in terms of password storage and security management.
Custodial wallets are an excellent option for investors that need quick access to their digital assets for purchase and sale. If you usually reorganise your crypto portfolio, selling some Bitcoin in the morning and buying some ETH in the evening, then a custodial wallet is probably the best solution for you.
Non-custodial wallets, on the other hand, are typically in the form of a completely independent app or programme, implying that the wallet has some additional built-in security measures.
When you sign up for a non-custodial wallet, you will be prompted to create a “seed phrase,” which is a 12- to 24-word sequence generated randomly. A seed phrase is sometimes referred to as your “keys.” While a non-custodial wallet is safer because no third party can block you from accessing your crypto assets, if you lose your seed phrase, you also lose your crypto.
For a lot of people, their first crypto wallet is an online wallet that the cryptocurrency exchange provides them when they make their first purchase. For example, if you sign up with CoinSpot, the best crypto exchange for investors in Australia, and buy $500 of Bitcoin, your Bitcoin will be stored in an online wallet on the CoinSpot exchange. You can sell it, hold it or transfer it to a different wallet. Since you are using an online wallet, your account may be compromised if someone hacks into your account. Fortunately, CoinSpot has never reported any data breaches ever since it first entered the crypto market in 2013.
One of the advantages of using online wallets is that you can easily access them anytime and anywhere as long as you have an internet connection. You won’t have to worry about your device crashing or being stolen. Many online wallets will require identity verification as part of the setup process.
Easy access as long as you have an internet connection
Most cryptocurrency exchanges provide free and automatic setup
Quickly trade cryptocurrency directly from your online wallet
Not compromised if your phone/computer is broken or stolen
Exposure to external threats and risks of losing money if your crypto exchange is hacked.
Verification of identity is required.
Desktop/ Mobile Wallets
Mobile wallets and desktop wallets are very similar. They are free applications that can be downloaded onto your phone and are not directly linked to the internet, making them safer than online wallets. They are the most convenient option because you always have your mobile device with you, allowing you to access your crypto wherever you are. You can also use them to scan QR codes of wallet addresses for easy transfer.
However, just like desktop wallets, you must ensure that your phone is free of malware and viruses, or else your crypto wallet may be compromised. Furthermore, because you carry your phone with you, you must take extra precautions to ensure that it is not lost, stolen, or broken.
If you use a mobile wallet, you must have a backup option, as it is all too easy to lose or break your phone. When you set up your mobile wallet, you’ll be provided with a recovery seed phrase, which is typically 12 randomly generated words. If you lose your phone or it stops working, you can regain access to your wallet by downloading the wallet software to a new phone and restoring it using the 12-word recovery seed phrase in the correct order.
Because there is no direct connection to the internet, it is more secure than online wallets.
It is free and simple to use.
Convenient access to funds, with the ability to send and receive cryptocurrency by scanning QR codes
Recovery seed if your phone is lost or broken
Crypto is at risk if you have malware or viruses
Your phone can be stolen or lost
Not as secure as desktop wallets, as your phone is easier to steal than your computer
CoinSpot Wallet vs Trust Wallet: A Detailed Comparison
CoinSpot Wallet – Online wallet – Best Custodial (Exchange-Based) Crypto Wallets
CoinSpot is Australia’s most secure and audited cryptocurrency exchange, with online wallets built into the platform. Users of the CoinSpot online wallet will be able to store, as well as buy and sell, over 350 different coins/tokens. It is simple to use, and you can even swap cryptocurrency in your wallet for another. For instance, if you have some Dogecoin (DOGE) and wish to exchange it for Solana (SOL), you may easily do so directly from your CoinSpot wallet.
While online hot wallets are not as secure as cold wallets, CoinSpot is the most reputable exchange that has received ISO 27001 certification and has never been hacked since its inception in 2013.
When you make a purchase, the coins are automatically allocated to the corresponding wallet in your CoinSpot account.
The Wallets page allows you to view all wallets or just the wallets you are holding coins.
Figure 1. Is CoinSpot a Wallet? – (Source: CoinSpot)
The Wallets page will also show the balance of each wallet, the current price, 24hr % change and the Approximate AUD value.
You can also hide wallets with a zero balance by selecting ‘Hide Zero Balance’.
Figure 2. Is CoinSpot a Wallet? – (Wallets Page – Hide Zero Balance)
According to many CoinSpot reviews from users, sending and receiving funds to and from your CoinSpot is a breeze, thanks to its simple wallet features.
The most secure and trusted online wallet in Australia
Buy, sell, and trade cryptocurrency directly from your online wallet.
Over 350+ cryptocurrencies are supported.
You can swap any of your coins for another cryptocurrency.
Trust Wallet is open-source and user-friendly. The private key is stored on your phone rather than on servers, and you can create your wallet anonymously without providing any personal information.
You may use Trust Wallet to safely store your cryptocurrency, purchase, sell, and swap directly from the wallet. Staking and lending are also available. Additionally, you may use Trust Wallet to participate in blockchain-based games and store your NFTs.
However, Trust Wallet is not compatible with any hardware wallets and does not have a desktop version.
Supports around 160,000 coins
Open source code
Buy, sell, swap, stake and lend crypto within the wallet
CoinSpot is currently a member of the Australian Digital Commerce Association (ADCA). It is also committed to complying with all KYC (know your customer) as well as AML (anti-money laundering) regulations.
CoinSpot has not reported any data breaches since its inception in 2013, which is truly remarkable given that many other exchanges are frequently the most appealing targets for hackers. It has never been subjected to major hacks that resulted in the loss of data or customer assets.
Most customer data is stored in a secure offline location, while information stored online is encrypted.
Other extra security measures include 2-factor authentication, SSL encryption and mandatory verification of all customers that use fiat currency.
Two-factor authentication is a security measure designed to keep hackers out of your account even if your password has been hacked. Outsiders will not be able to access your account even if your password has been compromised.
Each time you log into your account with Two-Factor Authentication, or 2FA, you will be sent a 6-digit authentication code via email or phone number.
The codes are impossible to predict because they are refreshed every 30 seconds.
Phone Verification Phrase
Coinspot’s phone verification phrase allows you to enter any phrase you want. If you ever need help logging into your account, you can use this phrase to verify your identity.
This is an excellent feature if you want to prevent unauthorised access to your CoinSpot account. By specifying the time span between when you log in and when you expect to log in to CoinSpot the next time, you are keeping unauthorised people from remaining logged in to your account.
The anti-phishing phrase’s goal is to detect a fake or phishing website when you log in to your CoinSpot account. Users can enter any phrase they want, and it will show up every time they sign in using 2FA.
By providing this anti-phishing phrase, CoinSpot is helping their customers reduce the risks of interacting with fake websites that are attempting to steal their data.
With Coinspot’s geo-lock login features, users can limit logins to Australia-based IP addresses only. Doing so will reduce or prevent the chances of foreign hacks.
Disable withdrawals can be used to prevent people from withdrawing AUD or cryptocurrency from their accounts.
If you need to allow withdrawals in the future, you can reach out to CoinSpot’s support team for more information.
Trust Wallet conducts frequent audits to protect their users’ funds. They also implement several other security measures, such as pin code scanning and fingerprint scanning, to provide an additional layer of protection. Users can manually activate these safeguards based on their business requirements.
Trust Wallet users can store their private keys on their computers instead of the Trust Wallet servers. If you choose this method, you are solely responsible for the security of your private keys.
If you are worried about forgetting your private keys, you could export them to a secure folder on your mobile device or desktop computer. Users’ wallets can also be locked with a six-digit password. When you log out of your wallets, they will operate as cold storage offline wallets, keeping your assets safe and secure from third-party access. Passwords will be required every time you access your account.
Moreover, users can use facial recognition as an additional layer of security or to change their passwords. Other safety measures include recovery words or recovery phrases. If you want to be extra careful, you can also change how your wallets auto-lock.
CoinSpot users can easily access their online wallet as long as they have an internet connection. No matter if you choose to use their mobile or desktop versions, CoinSpot makes sure every transaction is processed within minutes.
Other than a top-notch security system, ease of use is another factor that sets CoinSpot apart from many of their competitors. Instead of requiring a long and difficult-to-remember seed phrase, CoinSpot allows users to sign into their accounts with an email address and password. If you ever forget your password, you can easily reset it by verifying your personal information. This way, your crypto is always safe in your online wallet.
One thing we don’t like about Trust Wallet is that users are unable to access their online wallets on their desktops, which can be a major deal-breaker for those preferring trading with a large screen. Moreover, Trust Wallet requires users to remember a seed phrase in order to log into their accounts. You have to be extremely cautious so as not to lose your seed phrase and consequently lose your crypto.
If you are still wondering which online wallet you should choose, our top choice will always be CoinSpot. It has constantly ranked as the best exchange in Australia, earning recognition from reputable organisations as the most secure platform for Aussie investors. We are deeply impressed by how CoinSpot implements several layers of security to protect their users’ data. Moreover, CoinSpot wallet can be accessed through both mobile phones and personal computers, bringing smooth and convenient trading experiences for its customers.