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Decentralized cryptocurrencies have made their way into financial conversations across the globe since Bitcoin was first released as open-source software in 2009. A crypto-wallet can be software existing on your cellular/ mobile device or a physical external database that protects your crypto assets; they can be hot or cold. This article will break down the differences between these two classifications of crypto-wallets and evaluate the best offerings in the market today for crypto owners.

Types Of Crypto Wallets: Hot (Software) And Cold (Hardware)

Essentially, there are two types of crypto wallets that investors should be aware of: hot and cold wallets. Hot wallets are software-based and provide storage online, on the other hand, cold wallets are external devices that provide offline storage. If you’re looking to store your cryptocurrencies, either option can work, but one option can provide better benefits than the other depending on your needs. 

Hot (Software) Wallets

Hot wallets are accessed with a wireless internet connection. They are often accessible via a mobile app or through your desktop browser. This makes the hot wallets considerably more user-friendly as it makes it significantly easier to buy and trade cryptocurrencies while storing your crypto in a hot wallet. Similarly, hot wallets facilitate exchanges faster than cold wallets. 

However, one of the major drawbacks to hot wallets is their security system. Hot wallets are considered to be less secure than cold wallets because it is connected to the internet, which makes them more susceptible to hackers and malicious malware. 

Pros

  • Easily Accessible – Hot wallets can be accessed anywhere so long as you have an internet connection and a device to connect to the internet. 
  • Easier To Recover Account – Hot Wallets can be linked with public and private keys. Public keys are, of course, held publicly and therefore cannot be lost, whereas private keys are confidential between two individuals and do run the risk of becoming lost therefore rendering the system void.

Cons

  • Less Security – Hot wallets are considered to be less secure than cold wallets (primarily due to the fact they are connected to the internet). 
BitBuy

Cold (Hardware) Wallets

Cold wallets store your crypto offline and require a wired connection (e.g. plugging your computer into an ethernet cable or using a USB stick). With cold wallets, you can actively trade your crypto when your USB is connected to your computer. This makes it incredibly difficult for hackers to gain access. If you plan on holding onto your coins long-term, cold wallets can be a more ideal option. 

However, there are some drawbacks to cold wallets as well. Due to the added security, trading and transfer times often take a longer time than hot wallets. Moreover, if you lose your USB key or paper wallet, there’s no way to recover your assets. 

Pros 

  • High Security – As mentioned, hacking into a cold wallet is almost impossible unless the owner falls for some phishing attack. 

Cons

  • Hard To Recover – A type of cold wallet available is a paper wallet which entails keeping your keys and codes on a physical piece of paper, however, if you lose this piece of paper you will find yourself in a large pickle as you will completely lose access to your crypto assets.
  • Slow Transactions – In general, trading crypto with cold wallets take longer. 

The Best Crypto Wallets Available In Canada

Below, we will be discussing the best options for crypto-wallets in Canada, their unique features, and what sort of trader they are suited to.

CostWallet Type
Bitbuy Built-In Wallet$0Hot (Software) Wallet
The Ledger Nano X $150Cold (Hardware) Wallet
The Ledger Nano S$75Cold (Hardware) Wallet
CoinomiFreeHot (Software) Wallet
Trezor Model T$210 – $240Cold (Hardware) Wallet
ElectrumFreeHot (Software) Wallet
(with cold storage capabilities)
KeepKey$39 CADCold (Hardware) Wallet
BitBuy

Bitbuy Built-In Wallet

Bitbuy is a cryptocurrency platform that is owned and operated in Canada. While its main function is to provide users with a platform to buy and sell different crypto, it also offers a built-in wallet to store your crypto. When you create an account with Bitbuy users will automatically have access to this built-in wallet. Moreover, due to their partnership with Knox;  Bitcoin custody provider, Bitbuy is able to offer its users an offline vault to store their crypto holdings.

  • Bitbuy Wallet Address – A user’s Bitbuy wallet address changes periodically to ensure the security of their holdings.
  • Mobile App – The Bitbuy wallet can be accessed via desktop or through their mobile app.

Ledger

The Ledger Nano X and/or The Ledger Nano S

The Nano S and Nano X are among the most popular wallets for crypto users. They are both cold wallets that resemble a USB stick and offer offline storage. Both models support over 1,100 coin types including major cryptocurrencies like Bitcoin, Ethereum and XRP.  However, the Nano X supports far more crypto apps which are often preferred by crypto users with diversified holdings.

  • Nano X – The Nano X is of higher cost due to its increased storage capabilities, battery life, and compatibility with iOS and Android (the Nano S only supports Android).
  • Nano S – The Nano S is suited to individuals who are beginning to invest in crypto but are not willing to take on the risk of a hot wallet; it has a simplified start-up and is very user-friendly.

Both options are considered to be the most trusted cold crypto wallets available, which is why they are included on this list. The Nano S and X both have automatic timeout following periods of inactivity and a sleek design.

Coinomi

Coinomi

Coinomi was founded back in 2014, making it one of the oldest multi-chain wallets to exist in the current market. There are currently millions of users globally who live by Coinomi for their crypto transactions. Coinomi provides access to over 125 blockchains, but if there is a token not included on the site, you can still add it to your wallet manually! Coinomi facilitates the storage and exchange of over 1,770 crypto assets. Other benefits include:

  • Friendly Interface – Coinomi is extremely user-friendly and offers 24/7 customer support which is perfect for new users working their way around crypto investing.
  • High Compatibility – Functions on both mobile (Android and iOS) and desktop.
  • Free – Zero transaction fees for receiving; the only fee is paid by the sender directly to miners, not Coinomi.

Although Coinomi is inexpensive and easy to use, it cannot be guaranteed as a safe wallet because it is not a regulated service. Once again, risk is a matter of personal preference. With that being said, blockchains are always encrypted to keep your funds safe and Coinomi also uses password protection amongst other things to keep your assets as secure as possible.

How to buy Dogecoin in Canada.

Trezor

Trezor Model T

The Trezor Model T was first released in 2014, making it one of the older wallets, like Coinomi.  It supports over 1,600 tokens and Exodus (a free and hot wallet) is compatible with Trezor. While it is a bit expensive compared to other wallets, they make up for it with their cutting-edge features.

  • Touch Screen – This cold wallet has a colour touch screen and was also released under an open-source license meaning users can modify the device as they please; this differentiates them from other wallets. 
  • Shamir Backup – Trezor offers a Shamir backup, which is a new layer of security the company created in 2019. It has roots in the Shamir Secret Sharing (SSS) cryptographic algorithm which was invented by Adi Shamir and first proposed in 1979.

Trezor, unfortunately, does not offer Bluetooth or mobile capabilities as the Ledger Nanos do. Though they do intend to release an app in late 2021.

Check out how you can invest in crypto using Coinberry.

Electrum (1)

Electrum

Electrum is a hot wallet for Bitcoin that has been operating since 2011 and is one of the most reputable Bitcoin wallets on the market. While its layout may be simple, they do offer advanced features such as third-party plug-ins, Multisig services and other complex options. 

  • Offer Offline Storage – Electrum offers cold storage capabilities, which means you can sign transactions from a computer that is offline and secured and then trade from a machine that does not have your keys and is connected to the internet. 
  • Mutisig Services – Electrum also supports other third-party plugins, so that you can use multiple wallets to spend your coins. 
  • Decentralized –  Electrum prides itself on trust and independence. This wallet is completely decentralized and no single entity controls the network. 
  • Security –  You can choose between a 2-factor authentication or a multi-signature wallet. 
  • Compatibility – Electrum can be used on various interfaces including mobile, desktop, iOS, and Android. 
Keepkey

KeepKey

KeepKey is an affordable cold wallet available to traders in Canada that is compatible with third parties like Coinbase (Mobile) while maintaining high levels of security with offline protection. KeepKey does not support as many cryptocurrencies as other wallets; it can only support 40 different tokens.

This wallet safeguards your private keys offline but allows you to take advantage of software wallets to conduct transactions. Other benefits include: 

  • Simple Design – This wallet is user and price-friendly and was created by the company ShapeShift which is a Swedish company known for facilitating online asset exchange. 
  • High Security – KeepKey provides users with unique, changing pins and recovery seeds to maximize security and prevent malware from affecting your assets. 
  • Asset Recovery – Each Keepkey device comes with a 12-word recovery sentence. So if you lose or break your Keepkey, you can use that sentence to recover your private keys. 

Hot or Cold Crypto Wallets: Which One Should You Choose?

While both of these types of wallets are popularly used, some traders choose to simply keep their coins in their exchange (e.g. Coinbase). Once you begin accumulating a large number of crypto assets it is recommended to switch to a wallet. This, of course, is all based on personal preference. 

  • Choose A Hot Wallet Or Exchange – If you’re comfortable with a bit of risk, go for a hot wallet or keep your assets in the exchange. 
  • Choose A Cold Wallet – If you’re someone who is holding a large amount of crypto and does not want to risk losing any of it through a cyber attack, aim for a cold wallet.

Crypto Wallet FAQs

What is a cryptocurrency?

To put it simply, cryptocurrencies are an item of value (much like money) that can be exchanged for other items of value, predominantly online. Cryptocurrencies are fabricated through blockchain technology and are encrypted to maximize security.
Bitcoin is by far the most popular cryptocurrency and is currently valued at $82,263.67 CAD. After Bitcoin, Ethereum is next up in popularity with a value of $5,953.77 CAD. A few other notable cryptocurrencies are Cardano and Tether.

Where can I buy cryptocurrencies?

Through Canadian or American exchanges. This includes Wealthsimple Crypto, Bitbuy, and Coinbase just to name a few but there are several more available.

Things To Keep In Mind

If you’re only keeping a small number of crypto assets, it’s perfectly normal to keep your coins within the exchange you’re currently using (e.g. Wealthsimple Crypto). As a rule of thumb, however, it is suggested that you should begin using a wallet once you own more crypto than you can stand to lose.

Caroline Macdonald avatar on Loans Canada
Caroline Macdonald

Caroline is a 4th year commerce student at Memorial University of Newfoundland pursuing a focus in finance. She is a member of Memorial University’s student managed investment fund and acts as a sector manager in the industrial and financial sectors. Caroline joined the Loans Canada team in 2021 and rediscovered her passion for writing and media creation. In her free time she enjoys spending time with friends and family and reading.

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