I have been requested to explain my view of the different cryptocurrency wallet types. This is my simple and straightforward answer.
In general terms, there are three main types of cryptocurrency wallets used for different purposes.
- Wallets that are part of an Exchange: Cryptocurrency Wallets can sometimes come as a part of the Cryptocurrency Exchange. Or you can merely use the Exchange to store your cryptocurrencies using the Exchange as a Wallet. The Exchange is where you buy and sell different types of cryptocurrency using another cryptocurrency or fiat, such as the US dollar. Examples of an Exchange are Bittrex or Binance. Coinbase.com is a popular Cryptocurrency Exchange that has Wallet capabilities and has a user-friendly interface. You can store Bitcoin and other cyrptocurrencies in Coinbase.com, and then send and receive from that Wallet. But generally, you do not have access to your Private keys on an Exchange. So many people do not like to keep their cryptocurrency to remain on an Exchange.
- Software Wallets: Software wallets, also called Hot Wallets, are phone apps and PC applications, like Jaxx and Coinomi, to name two popular ones. These Wallets let you hold your private keys. But, these types of wallets are connected to the Internet. So, they are a somewhat vulnerable to hackers.
- Cold Storage: Cold Storage Wallets are hardware wallets. They can look like a flash drive or some external PC storage. An example is the Ledger Nano S. These type of Wallets let you have your own private keys and are not connected to the Internet when not being used, as are the Software Wallets. These are viewed as being quite secure. Some people carry their Hardware Wallets with them, like hanging around their neck; or they are kept in a safe place, like a safe deposit box.
So, how do I personally use these different types of wallets?
I use Coinbase.com as a wallet to hold Bitcoin, but only at small amounts. This allows me easy access to the cryptocurrency if I need access to it quickly.
I use Jaxx and specialized Software Wallets to hold small amounts of cryptocurrencies or coins that cannot be stored anywhere else. These Software Wallets allow me have access to the private keys of my cryptocurrency.
I use my Ledger Nano S to store larger amounts of Bitcoin or other Nano S supported coins because it gives the best protection against hackers and other nefarious individuals.
I hope this helps. Please note that these views are my own personal views, understanding and IMHO.