Cryptocurrency Software Wallet Methodology

How We Review Cryptocurrency Software Wallets

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One of the most important things to consider before you transact in and store cryptocurrencies is that you have a suitable crypto wallet in place. To help determine the wallet that works best for you, we conducted a comprehensive review process of the top cryptocurrency software wallets. 

Our review process is built around a quantitative ratings model that weighs key factors like security, costs, privacy, usability, customer support, and features according to their importance. Our team of researchers gathered over 40 data points and conducted extensive research for each of the 19 companies we reviewed. Our team of writers, who are experts in this field, then test drove each wallet to lend their qualitative point of view. 

Our model gave preference to companies with the strongest security measures and reputations. Companies with rich features, such as supporting a large number of crypto assets, giving users the ability to sync with hardware wallets, and allowing for fee customization, also ranked highly. 

Investing in cryptocurrencies, Decentralized Finance (DeFi), and other Initial Coin Offerings (ICOs) is highly risky and speculative, and the markets can be extremely volatile. Consult with a qualified professional before making any financial decisions. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies nor can the accuracy or timeliness of the information be guaranteed.

The Review Process

In order to provide the best information to consumers looking for a cryptocurrency software wallet, we developed a comprehensive ranking methodology based on a variety of factors that are crucial in evaluating the safety and effectiveness of these products. 

By combining industry research, subject matter expertise, and consumer survey input, we developed a quantitative model that rates each company based on 6 major categories and 37 features. The scoring methodology we used was dynamic. For instance, in certain situations binary scores were either given a 0 for the worst possible score or a 1 for the best possible score. Then, in other situations where scoring was continuous, the range of the original value was rescaled so that minimum value is 0.000 and max is 1.000.

Data Collection

We collected detailed data on 19 popular cryptocurrency software wallet companies, through a process that included online data collection, as well as direct company phone and email contact across a total of 26 scoring criteria, for a total of 570 data points. In addition, we surveyed 926 potential consumers who are looking to own a crypto wallet in the future.

Based on a combination of consumer survey results and subject matter expertise, we developed the following category weights:

  • Security (28.43%)
  • Cost (12.50%)
  • Privacy and Anonymity (17.63%)
  • Usability (10.50%)
  • Customer Support (11.76%)
  • Features (19.18%)

To compare companies, the six categories and 26 features that make up our scoring rubric are as follows:

Security

  • Account Access Method (5.73%)
  • Transaction Authorization Method (4.79%)
  • Recovery Method (5.01%)
  • Reputation (5.52%)
  • Hierarchical Deterministic (3.23%)
  • Open Source Code (3.97%)

Cost and Fees

  • Device/account (one-time) Fee (2.08%)
  • Send (recurring) Fee (2.08%)
  • Receive (recurring) Fee (2.08%)
  • Can Customize Fee (6.25%)

Privacy and Anonymity

  • KYC (3.96%)
  • Transaction Anonymization Method (4.96%)
  • CoinJoin-Enabled (4.05%)
  • New Address Generated (4.66%)

Usability

  • Compatible with Hardware (4.90%)
  • Cross-platform (5.60%)

Customer Support

  • 24/7 Customer Support (7.74%)
  • Number of Support Channels (4.01%)

Features

  • Number of Currencies Supported (2.67%)
  • Fiat Funding Available (2.10%)
  • Frequency of Update (2.18%)
  • Earn Interest on Crypto Holdings (2.82%)
  • Staking Option (2.19%)
  • Can Buy Crypto (2.85%)
  • Can Sell Crypto (2.41%)
  • Can swap/exchange/convert Crypto-to-Crypto (1.95%)

Security

Software cryptocurrency wallets come in different forms. Users can either access the wallets through crypto exchanges that are used to buy coins, download a software program to a computer desktop, or even use a smartphone app. Because each of these options leave a user’s public and private keys connected to the Internet, software wallets are known as “hot wallets.” As a result, there is a higher risk of a user’s funds being hacked than with hardware wallets that provide “cold” storage of crypto assets offline. 

This entire section accounts for 28.43% of the total weighted score in our evaluation.

Account Access Method

While examining the means by which each wallet can be accessed, we considered whether or not multiple forms of authentication (MFA) are required to access user accounts.

Wallets requiring MFA received a score of 1, while those lacking multiple forms of authentication received a score of 0. This score makes up 5.73% of our overall star ratings.

Transaction Authorization Method

We also examined the security-related step(s) required to authorize transactions while sending from each wallet. 

Wallets with multisig authorization received a score of 1, while those with no multisig requirements received a score of 0. These scores make up 4.97% of our overall star ratings.

Recovery Method

The recovery phrase is a crucial element for the security of a crypto wallet. In the event you lose access to your account for any reason, a seed phrase becomes a crucial element for the recovery and security of your wallet. 

For wallets that provide a seed phase to help users recover their accounts, a score of 1 is awarded, while wallets offering no seed phrase receive a score of 0. This score makes up 5.01% of our overall star ratings.

Reputation

Just like any industry where the security of assets is the number one focus, when it comes to cryptocurrency wallets, reputation counts. That’s why our team of researchers dug deep to examine the number of security breaches, hacks, etc. that each company we reviewed may have sufferd based on news articles in the past 5 years.

We scored this item on a continuous scale of 0.000 to 1.000, as opposed to a binary scale of 0/1. We then applied inverse scoring, so that companies with a large number of security breaches received a low score and companies with the fewest breaches received a high score. This score makes up 5.52% of our overall star ratings.

Hierarchical Deterministic

Hierarchical deterministic wallets offer an extra layer of defense when it comes to preventing your wallet from being hacked. For this reason, hierarchical deterministic wallets were given a score of 1 in our model, while wallets without hierarchical deterministic procedures received a score of 0. This score makes up 3.23% of our overall star ratings.

Open Source Code

Open source wallets operate with programming code that is available for peer review. Through community engagement, trust, and permissive licensing, open source wallets welcome programmers to examine and make edits to code in an effort to fix bugs and make other enhancements. In short, open source wallets offer a higher degree of transparency.  

We gave wallets with reviewable and open code a score of 1, while wallets without open source code received a score of 0. This score makes up 3.97% of our overall star ratings.

Features

Paragraph BoDuring your quest to find the cryptocurrency software wallet that’s right for you, you’ll want to make sure that the wallet you choose has the features you need.

This entire section accounts for 19.18% of the total weighted score in our evaluation.

Number of Currencies Supported

For experienced cryptocurrency enthusiasts, the number of supported currencies can be of tremendous importance. At the same time, those just starting out or using cryptocurrency less frequently may not require access to a wide range of digital assets.

For wallets offering support for two or more cryptocurrencies, a score of 1 was awarded, while single-asset wallets received a score of 0. This score makes up 2.67% of our overall star ratings.

Fiat Funding Available

Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat funding of cryptocurrency wallets include methods like wire and bank wire transfers, ACH, Apple Pay, Google Pay, credit cards, and debit cards.

While reviewing the availability of funding methods, we gave wallets with available fiat funding methods a score of 1, while wallets lacking any fiat funding method received a score of 0. This score makes up 2.10% of our overall star ratings.

Frequency of Update

As part of our modeling process, we also considered how frequently updates were made to each wallet. 

We gave wallets with the most frequent update and repair schedules a score of 1, while wallets with less frequent updates received a score of 0.50, and wallets with undisclosed update schedules were scored at 0. This score makes up 2.18% of our overall star ratings.

Earn Interest on Crypto Holdings

Like a traditional bank account, a customer’s ability to earn interest on holdings is a key feature of some cryptocurrency wallets. 

For wallets that offer the opportunity for users to earn interest on their cryptocurrency holdings, a score of 1 was awarded, while a score of 0 was given to wallets without this capability. This score makes up 2.82% of our overall star ratings.

Staking Option

Proof-of-stake (POS) allows cryptocurrency owners to validate block transactions based on the number of coins a validator stakes. POS, created as an alternative to Proof-of-work (POW), is seen as less risky in terms of the potential for an attack on the network, and offers another way for cryptocurrency owners to earn passive income on their holdings.  

 For wallets that offer users the opportunity to earn interest on their cryptocurrency holdings through staking, a score of 1 was awarded, while a score of 0 was given to wallets without this capability. This score makes up 2.19% of our overall star ratings.

Can Buy Crypto

Wallets that provide users the means to buy cryptocurrency were given a score of 1, while wallets lacking this capability received a score of 0. This score makes up 2.85% of our overall star ratings.

Can Sell Crypto

Wallets that offer users the means to sell cryptocurrency were given a score of 1, while wallets lacking this capability received a score of 0. This score makes up 2.41% of our overall star rating.

Can swap/exchange/convert Crypto-to-Crypto

For wallets that offer users the ability to swap/exchange/convert crypto-to-crypto, a score of 1 was awarded, while a score of 0 was given to wallets without this capability. This score makes up 1.95% of our overall star ratings.

Privacy and Anonymity

KYC Standards

Know-Your-Customer (KYC) is a security standard that some cryptocurrency wallets use to help minimize instances of fraud and money laundering. Wallets that require users to follow these measures typically require that users share some personal information or even provide a copy of a government-issued photo ID.

Wallets following KYC standards received a score of 1 in our evaluation, while those not following KYC standards received a score of 0. These scores account for 3.96% of our overall star ratings. 

Transaction Anonymization Method

Wallets that allow users to transact anonymously were given a score of 1, while wallets lacking this capability received a score of 0. This score makes up 4.96% of our overall star rating.

CoinJoin-Enabled

CoinJoin is an anonymization method specific to Bitcoin transactions. It involves a multi-party Bitcoin transaction, where all participants put in and receive the same amount of Bitcoin; however, the addresses involved in the transaction are mixed in an effort to make the origin of the coins difficult to trace.

Wallets that use a CoinJoin anonymization strategy were given a score of 1, while wallets lacking this strategy received a score of 0. This score makes up 4.05% of our overall star rating.

New Address Generated

Bitcoin addresses are long strings of alphanumeric characters, similar to a bank account number, that identifies where the cryptocurrency should go. Some wallets will generate a new address with each new transaction to protect a user’s privacy, by preventing a third party from viewing all other transactions associated with an account.

Wallets that generate a new address for each transaction were given a score of one, while wallets that lack this process received a score of zero. This score makes up 4.66% of our overall star rating.

Cost and Fees

Trading and transacting in cryptocurrency has become increasingly popular since Bitcoin first debuted in 2009. While transaction fees can vary widely depending on which cryptocurrency wallet you’re using, all of the software wallets we reviewed are free to download.

This entire section accounts for 12.5% of the total weighted score in our evaluation.

Device/account (one-time) Fee

Wallets that are free to download were given a score of 1, while wallets with any costs associated with their creation received a score of 0. This score makes up 2.08% of our overall star rating.

Send (recurring) Fee

Cryptocurrency users send crypto instead of cash for a number of reasons, but primarily due to its ease of use, lack of any physical borders, and anonymity. It is industry standard, however, for all cryptocurrency owners to be charged a network/mining fee to send their assets, no matter which wallet they are using. It is important to emphasize that these fees are paid to the miner for processing crypto transactions and securing the respective network, and do not go to the wallet company.

For this reason, wallets that only charge network fees were given a score of 1, while wallets that charge additional fees received a score of 0. This score makes up 2.08% of our overall star rating.

Receive (recurring) Fee

Conversely, it is not industry standard for cryptocurrency users to be charged network/mining fees when they are on the receiving end of a transaction. However, there are some wallets that will still apply a fee to this service. 

Therefore, wallets that do not charge fees for receiving cryptocurrency were given a score of 1, while wallets that charge additional fees received a score of 0. This score makes up 2.08% of our overall star rating.

Can Customize Fee

Several wallets on the market today allow you to set custom transaction fees. 

For wallets that allow users to customize the fees they want to pay, a score of 1 was awarded, while a score of 0 was given to wallets without this capability. This score makes up 6.25% of our overall star ratings.

Customer Support

Being able to access customer support is critical for users of cryptocurrency wallets, in the event of a problem or should any account-related questions arise. 

This entire section accounts for 11.76% of the total weighted score in our evaluation.

24/7 Customer Support

For wallets offering 24/7 customer support, a score of 1 was awarded, while a score of 0 was given to wallets without this capability. This score makes up 7.74% of our overall star ratings.

Number of Support Channels

For this important category, we examined each company to see if they offer support via the following key channels:

  • Help page
  • Chat
  • Ticket system
  • Email
  • Phone

For this feature, each wallet is given a fractional score that is constructed by totaling the number of different support channels available to users and dividing that number by the 5 possible channels. For example, the Electrum, Mycelium, and Wasabi wallets all scored 0.20 in this category because they only offer support via two of the five possible channels. This score makes up 4.01% of our overall star ratings.

Usability

Compatibility with Hardware

Because cryptocurrency software wallets (“hot” storage) are always connected to the internet, they leave users’ funds more susceptible to hacking. For this reason we scored software wallets that offer compatibility with more secure hardware wallets (“cold” storage) a score of 1, while wallets that lack this capability received a score of 0. This score makes up 4.90% of our overall star rating.

Cross-Platform

An important feature for many cryptocurrency users, particularly those who trade and transact in cryptocurrencies on a regular basis, is their ability to access their wallet from more than one user interface (UI), such as desktop, web, and mobile.

Platforms that allow users to access their wallet from all three user interfaces were given a score of 1, while wallets offering access via any two received a score of 0.67, and wallets with just one UI access point received a score of 0.33. This score makes up 5.60% of our overall star rating.

Shopping for a Cryptocurrency Software Wallet

When looking for the right cryptocurrency wallet to fit your needs, it’s wise to shop around and look at the different features and levels of security that are available throughout the industry. We evaluated 19 top companies to help you find the best software wallet for your needs, and our reviews are designed to answer your questions so you can make an informed decision.

Cryptocurrency wallets, also known as “blockchain wallets,” serve a lot of purposes beyond just HODLing digital assets. These wallets can also store digital collectibles like NFTs that you might want to buy, sell, and trade. They also allow users to transfer digital assets to other users and to other wallets a user may own, and they allow users to send and receive digital payments between individuals, crypto exchanges, or digital marketplaces.

Because of the complexity of digital money, it’s no surprise that we made security  the most important factor when reviewing these companies. In addition, our reviews go deep into the other key factors you’ll need to consider when shopping around for a software wallet, such as cost, privacy and anonymity, usability, customer support, and features. As is always the case with our reviews, advertisers and partners do not influence our picks.

Michael Sacchitello
Senior Investing and Trading Platforms Editor for Investopedia and The Balance
Main Bio Pic
Hannah Kang
Research Manager, Performance Marketing
Hannah Kang

Hannah has been conducting research for over a decade, with a recent focus on providing data-driven recommendations from synthesizing quantitative data with qualitative data on services and products across finance, health, and lifestyle. 

Prior to joining the Performance Marketing team as a Research Associate, Hannah conducted research for Fortune 500 companies and multinational biotech companies including Pfizer, Johnson & Johnson, and Takeda. Her experience leading rigorous studies for FDA reviews shaped her standard of research integrity which guides her work at Performance Marketing.

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