Do you need a different wallet for each cryptocurrency?

wallet image

There are multiple crypto wallets out there. It can be hard, especially in the beginning when you learn about crypto, to pick the right wallet, and find the one that fits your needs. So, do you need a different wallet for each cryptocurrency?

No, you don’t need a different wallet for each cryptocurrency. Instead, there are so-called multi-wallets, where a user is able to manage multiple cryptocurrencies in one wallet.

However, small cryptocurrencies are most of the time not included in a multi-wallet. In addition to that, different multi wallets offer different currencies, and therefore, you have to choose a multi-wallet based on the coins you want to hold.

Most of the time, multi-wallets have only the basic functions implemented: Deposit and withdrawing coins or tokens. Therefore, if a crypto project offers a special feature like staking or voting, most multi-wallets won’t have the functionality to use these features. However, most of the multi-wallets have other useful features. For example, the direct exchange of coins or tokens in the multi-wallet. These wallets often use third-party services like ShapeShift to trade coins directly. This feature in a multi-wallet is more user-friendly, because most of the tasks, such as inserting the right addresses, handles the software itself.

Another great advantage of multi-wallets is backups. If an investor wants to backup all his cryptocurrency wallets, he would need a backup of each crypto wallet. However, if all cryptocurrencies are managed in one wallet, you only need one backup.

Tip: Only choose a crypto wallet that lets you backup your ‘phrase’ or ‘seed’. It is important that you have control over your private key because it is the access to your funds. If the wallet provider manages your private keys, he has full control over your assets. Furthermore, a multi-wallet usually expands his support of cryptocurrencies to stay competitive against other multi-wallet providers.

Normal crypto wallet vs. Multi-wallet

A normal wallet has to be synchronized with the other nodes to work. Therefore, the computer (node) needs a lot of storage to store the blockchain. In addition to that, depending on the size of the blockchain, it could take a long time to download the blockchain from the network. Multi-wallets usually link to a server that has already the whole blockchain download. These kinds of wallets are also called light wallets. A user would not be able to use a multi-wallet if the servers are on maintenance or not available.

However, if he has access to the private key, he could download the traditional wallet, sync it up with the network, and use the private key to recover his funds. Multi-wallets can also be used on mobile phones because they don’t need that much storage. They only reference to a server if they want to know if they received a transaction or want to withdraw funds.

Staking in Multi-wallets

Staking is similar to mining. However, instead of computer power, the balance of a wallet is used to find a new block. If a new block is found, the finder receives a certain amount of coins. Staking is a feature that investors would not be able to use if they use a multi-wallet.

To participate in the network, you need a node that has a blockchain that is fully synced up. If you use a multi-wallet, you just have a light wallet. A light wallet is not a full node. To use the staking feature, a node is required. Therefore, an investor would need to download the wallet for a staking coin and sync it up with the network to use the staking feature.

Multi-wallets are designed in such a way, that users could easily manage a bunch of cryptocurrencies. They can help an investor to have a quick overview of his crypto portfolio and how his portfolio has performed in the past.

Cold staking in multi-wallets

If a crypto project supports cold staking, you can stake from a multi-wallet. The staking pool provider FireStake supports cold staking.

The concept of cold staking works as followed. You transfer the rights for staking to another node. It works by sending your funds to a specific cold staking address generated by a node. The benefit is that you are still in control over your coins, but you never have to set up a node or maintain it because you delegated your funds to the staking node of FireStake.

Bugs

A light wallet has the risk to have vulnerabilities. Every software does. However, if you use a light wallet, you add an additional layer of risk to the process.

Why?

In the usual process, you would download the wallet and interact with the blockchain through the wallet. However, if you use a light wallet, you communicate with a node and that node interacts with the blockchain. It’s one additional software piece that could have vulnerabilities.

Should I use a multi-wallet for my cryptocurrencies?

It depends on your strategy. If you want to trade as many cryptocurrencies as possible on different exchanges, but you need a wallet to secure your funds then, the best fit is probably a multi-wallet that supports many coins.

If you are an investor who wants to profit from certain features like Proof of Stake, you will need a wallet or at least a project that supports cold staking. If you are an investor who wants to buy a bunch of cryptos and leave it for a couple of years, use a hardware wallet.

What kind of cryptocurrency wallet do I need?

It depends on what you want to do in the crypto space. Here are the basic guidelines for different use cases.

#1 Frequently trading

If you are a daily trader or trade on a regular basis, consider using a multi-wallet as a management tool for your funds you want to trade. The multi-wallet could be used to have an overview of your trading portfolio.

#2 Longterm investing

If you are a longterm investor, consider using hardware wallets. Hardware wallets are considered more secure in comparison with software- or multi-wallets. Hardware wallets cost a certain amount of money. However, it should be used if you have a high amount invested in a certain coin.

If you have only a small amount invested, a software (normal) wallet is probably fine for you. However, to use a software wallet, the wallet has to be synced up with the network.

#3 Combination

If you need funds daily, deposit them from your hardware wallet to your multi-wallet. Keep the other funds in your hardware wallet. This ensures that you only risk a small number of coins and even if you lose the coins from your multi-wallet, you don’t lose the coins from your hardware wallet.

Small cryptocurrencies and early adopters

Small cryptocurrencies are often not supported by multi-wallets. Therefore, a user has no choice and has to use a normal wallet. In addition to that, early adopters have most of the time the same problem too. They believe in a coin, however, multi-wallets don’t support this coin yet.

Therefore, a user could wait until a multi-wallet adds this coin to its wallet or, what most of the time happens is, he downloads the normal wallet.

Which multi-wallet should I choose?

If you want to invest in the top 10 coins, every multi-wallet is fine. Most multi-wallets support 100+ cryptocurrencies. However, some wallets don’t support a lot of tokens. Tokens are similar to cryptocurrencies. However, they don’t have their own blockchain and are based on an existing blockchain.

Therefore, if an investor wants to invest in tokens, he has to research if a multi-wallet supports these tokens. For instance, Exodus support nearly all ERC20-Tokens (Tokens on the Ethereum blockchain). Depending on the popularity of a coin, multi-wallets tend to ignore tokens at first and just support coins.

However, some great multi-wallet projects support hundreds of cryptocurrencies. You just have to plan in which tokens and coins you want to invest in and based on that, decide which multi-wallet you use.

List of good multi-wallets to research:

  • Exodus
  • Cobo multi-cryptocurrency wallet
  • Ledger Nano S
  • Ledger Blue
  • KeepKey
  • Jaxx
  • Trezor
  • Guarda

Exodus

exodus

Exodus is a multi-crypto wallet. The wallet has different features, such as direct exchange via ShapeShift or a quick overview of your crypto portfolio.

You have full control over your wallet phrase when you use Exodus. If you make your first deposit to the Exodus wallet, you can start the backup process to secure your wallet. Exodus offers over 100+ coins. In addition to that, they support a lot of Ethereum assets (ERC20-Tokens).

Download Exodus: Exodus.io

There are even more multi-wallets out there (list above), however, Exodus is a well-designed wallet.

Conclusion

A multi-wallet is a good way for investors and beginners to manage multiple coins or tokens. However, if users want to use certain features like Proof of Stake, they have to use a normal wallet. In addition to that, they have to sync the blockchain with the network. This process could take a while, even hours or days.

Maximilian Groß

I'm a software engineer. I'm the owner of FireStake.com and know the crypto space since 2016. Furthermore, I share everything I learn about crypto on this blog.

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