What are desktop wallets?
A desktop wallet is software installed on a computer for managing cryptocurrencies. It stores private keys directly on users’ devices, allowing greater control over your own coins compared to online wallets.
Unlike hardware wallets or web-based solutions, a desktop wallet doesn’t require external storage or cloud services. Instead, transactions are managed directly through the software. Depending on the wallet, it may be necessary to download the entire blockchain or just a simplified version.
What types of desktop wallets are there?
Desktop wallets can be divided into several categories depending on how they’re structured and the functions they offer. The main distinctions involve the connection to the network, supported cryptocurrencies and security features.
Here is an overview of the main types of desktop wallets:
Hot wallets are permanently connected to the internet and allow quick transactions but are more vulnerable to theft through malware or phishing attacks.
Cold wallets, on the other hand, stay offline until needed for a transaction, offering higher security but being less convenient to use.
Full-node wallets like Bitcoin Core download the complete blockchain and validate transactions independently, which enables maximum decentralisation and security but requires a lot of storage space and computing power.
Light wallets (SPV wallets) like Electrum are more resource-efficient as they use only part of the blockchain – they’re also faster and easier to use but require a connection to external nodes.
Multi-currency wallets support several cryptocurrencies at once, making them versatile and allowing users to manage various coins in a single wallet (especially convenient for investors with a broad portfolio).
Single-currency wallets are optimised specifically for one cryptocurrency, often offering advanced features and better integration into the respective network, but they’re less flexible.
How does a desktop wallet work?
If you want to manage your digital assets independently, it helps to understand how a desktop wallet is built and functions. Only then can you assess whether this wallet type suits your needs.
This is how a wallet works:
A wallet is a digital tool for receiving, storing and sending coins and tokens.
The foundation is a key pair: a public key (wallet address) and a private key (access and signature).
The private key secures access to the digital assets.
Depending on the wallet type, either the user or a service provider manages the private key.
Access to the wallet is usually through an app, a browser or an installable programme.
When creating a wallet, a new key pair is automatically generated.
Transactions are signed using the private key.
Whoever possesses the private key controls the coins and tokens it contains.
The secure storage of the private key is crucial – especially with self-managed wallets.
With a desktop wallet, you also receive a seed phrase which you should store securely – it allows you to restore your wallet. Most desktop wallets work on Windows, macOS and Linux. During setup, you usually set a password to prevent unauthorised access. The public key acts as a receiving address, and transactions are signed with the private key. Depending on the wallet type, you either use a full copy of the blockchain (full-node) or access it via external servers (light wallet).
Use with hardware wallets
Some desktop wallets like Electrum or BitAddress offer the ability to connect with a hardware wallet such as Ledger. This keeps the private keys stored on a separate USB device, which significantly increases security. A desktop wallet combines flexibility with control but also requires a certain level of technical understanding and security awareness to manage cryptocurrencies safely.
Security and desktop wallets
The security of a desktop wallet largely depends on proper handling and the user’s protective measures. Since private keys are stored directly on the computer, there’s a risk that the wallet could be infected by malware or compromised by hackers. Nevertheless, a desktop wallet offers greater security compared to online solutions, as the keys aren’t stored on external servers.
Protective measures for secure use
To ensure the most secure use of a desktop wallet, you should observe the following:
Antivirus and firewall: an up-to-date security system prevents malware from attacking the computer
Carry out operating system updates: only use wallets for Linux, Windows or macOS on current systems to avoid vulnerabilities
Cold storage for larger amounts: those wanting to secure large amounts of cryptocurrency should use a hardware wallet like Ledger in combination with a desktop wallet
Avoid custodial wallets: a custodial wallet stores the keys centrally, meaning the user loses control over their crypto coins, as only the provider has access to the private keys and ultimately decides on coin availability
Although a desktop wallet can offer high security, the risk of theft remains, especially if the computer is infected with malware. A combination of desktop wallet and hardware wallet represents the most secure solution.
What are the pros and cons of desktop wallets?
A desktop wallet offers many advantages but also some disadvantages that you should consider before use.
Advantages of desktop wallets
Support for various operating systems: many desktop wallets are available for Linux, Windows and macOS
Combination with hardware wallets possible: wallets like Electrum allow connection with a Ledger hardware wallet, offering added security
Beginner-friendly: some wallets offer intuitive operation, so even beginners can easily manage crypto coins
Disadvantages of desktop wallets
No absolute security: without a hardware wallet, there's a risk that a hacker could access the desktop wallet
No protection in case of hardware failure: if the computer is damaged and there’s no seed backup, the cryptocurrencies are lost
Not as mobile as an online wallet: a desktop wallet can only be used from the computer, limiting flexibility
Despite the disadvantages, a desktop wallet is one of the best options for users wanting to combine security with ease of use. Especially when combined with a Ledger hardware wallet, it’s one of the most secure solutions for managing cryptocurrencies.
Possible uses of desktop wallets
Whether as secure storage or for daily use – a desktop wallet is suitable for various applications in the crypto space.
Long-term storage of cryptocurrencies
For users wanting to hold Bitcoin or other cryptocurrencies long-term, a desktop wallet with seed backup is a good choice. In combination with a hardware wallet like Ledger, it provides one of the most secure storage solutions.
Use for daily transactions
A beginner-friendly desktop wallet allows regular transactions. Wallets like Electrum offer intuitive operation suitable for both beginners and experienced users.
Management of multiple cryptocurrencies
Many wallets support not only Bitcoin but also a variety of other coins. A multi-currency desktop wallet is particularly useful for users with a diversified portfolio.
