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Popular Hot Wallets

Discover the most popular and user-friendly cryptocurrency hot wallets.
These are ideal for everyday use and some could work well for long term holdings.
Hot wallets are software applications that can be installed on computers, smartphones, or tablets. They allow quick and convenient transactions but are vulnerable to online threats. They come in various forms:
In essence they all do the same job, but have one major difference: Hot wallets are either custodial or non-custodial (a.k.a. self-custodial). 

Custodial Wallets

Custodial wallets, also known as hosted wallets, are a type of crypto wallet where a third-party service provider holds and manages the private keys on behalf of the user. They typically offer simple interfaces, making it easy for users to access and manage their cryptocurrencies without dealing with the technical complexities of self-custody. Centralised exchange platforms all fall into this category. The problem with exchange wallets is that they are very frequently targeted by hackers. I have been tracking the biggest hacks on exchanges that have led to theft of users' assets and I catalogued over 100 entries in the last few years. You can refer to this page to find out more about that. With that in mind, I would strongly recommend that you do not hold your crypto on such platforms for too long. Self-custody is the way to go, so waste no time. This guide will help you make the right choice, so keep going. These are some of the most popular custodial wallet providers:

Custodial Wallets Quick List

  • eToro: Social Trading Platform
  • Uphold Multi-Asset Wallet 
  • Huobi Exchange 
  • OKEx Exchange 
  • Bitfinex Exchange 
  • CoinEx Exchange
  • KuCoin Exchange
  • Bitget Exchange
  • Bybit Exchange
  • BYDFI Exchange
Custodial wallets often operate using an account-based model, where users have an account with the service provider. This makes them very convenient and appealing for beginners. It was thanks to Coinbase back in 2015 that I was able to buy my first bitcoin, so they serve a good purpose.
However, the companies that run the software are ultimately the owners of your private keys, so if they choose to freeze your funds, they can (and will) do so. The wallet providers may have regulatory obligations, depending on the jurisdiction in which they operate. They may need to implement Know Your Customer (KYC) procedures and other compliance measures to ensure legal and regulatory requirements are met. I stopped using Coinbase a long time ago, after many reports from users about frozen accounts by Coinbase and very slow and unresponsive customer service.
This defeats the purpose of crypto to begin with, because true ownership and self-custody is the core of the crypto phenomenon.

Non-Custodial Wallets

Non-custodial wallets, also known as self-custody wallets, are digital wallets that provide users with complete control and ownership of their cryptocurrency assets by allowing them to manage their private keys independently. These can be both hot and cold wallets. Hot non-custodial wallets are web wallets, mobile wallets, desktop wallets and web3 wallets. 
Some of the key characteristics of non-custodial wallets are:
  1. Providing control of your Private Keys, thus they give you full ownership and control over your funds.
  2. Enhanced Security (as prioritise user privacy and security).
  3. Responsibility and Self-Sufficiency: users bear the responsibility of managing their own security, backups, and private keys, including safeguarding the wallet’s seed phrase, ensuring regular backups, and adhering to best practices for wallet security.
  4. Flexibility and Interoperability: they enable interacting with different decentralised applications (DApps).
  5. Trustless Nature: they operate on the principle of trustlessness, which means users do not need to rely on a third-party service provider to secure their funds. Instead, the security and control of assets are placed directly in the hands of the wallet owner.
Non-custodial wallets empower individuals to maintain ownership, control, and privacy over their digital assets. However, it's important to note that with great control comes great responsibility. Users must be diligent in protecting their private keys and seeds/backups, implementing strong security measures, and staying informed about potential risks and best practices to ensure the safety of their funds.

Web3 / Non-Custodial Wallets Quick List

Explore Web3 Wallets in More Detail

Hot Wallets Pros & Cons

PROS

  1. Convenience: easily accessible on various devices, including smartphones, tablets, and computers, allowing users to manage their cryptocurrencies anytime and anywhere with an internet connection.
  2. User-Friendly: intuitive user interfaces and simple setup processes, making them user-friendly, especially for first-time crypto users.
  3. Integration with Exchanges: Many hot wallets integrate with cryptocurrency exchanges, allowing users to directly trade and swap cryptocurrencies within the wallet interface.
  4. Customer Support: Hot wallets typically offer customer support since they are controlled by companies, (but even so, some can be poorly managed.)

CONS

  1. Security Risks: hot wallets are connected to the internet, making them more susceptible to security risks such as hacking, malware, and phishing attacks.
  2. Third-Party Reliance: custodial wallets entrust entities with the security and protection of funds.
  3. Privacy Concerns: custodial wallets nowadays require users to disclose personal information during the registration or verification process, which can raise privacy concerns for those seeking anonymity.
  4. Network Dependency: Hot wallets require an internet connection to function properly. If the network experiences issues or downtime, it may temporarily limit access to the wallet and disrupt transaction capabilities.
  5. Censorship: many custodial hot wallets (i.e. Coinbase, Swan, Bitpanda) are heavily regulated and may freeze customers' funds for various reasons. One example is if the user has received stained coins (also known as “tainted”,) which are associated with illicit activities or have been used with coinmixing services. 

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