There are different types of crypto wallets, so it is difficult to say which ones are the best.
The best thing to do is to differentiate between the different types and mention for each of them which ones are the most widely used.
In fact, there are different types to meet different market needs, as not everyone has the same needs.
The different types of crypto wallets and the best ones
Crypto wallets can be divided into two categories: custodial and non-custodial.
The non-custodial ones are the original ones, i.e. those whose private keys are exclusively in the possession of the user.
The first crypto wallet that ever existed was Bitcoin’s original software, v0.1, which only allowed BTC to be held and also acted as a node and mining software. It was, of course, a non-custodial wallet.
However, non-custodial wallets do not satisfy all needs, because there are at least two needs that they cannot satisfy.
The first is, trivially, the delegation of responsibility.
Since crypto wallets are basically used to protect and use private keys, in the case of non-custodial wallets, the responsibility for keeping private keys is in the hands of the user alone.
There are users who do not want to take this responsibility and prefer to delegate it to someone they trust. Although this also means denying the trustless nature of cryptocurrencies, it is a strong market need, so much so that custodial wallets are now the ones most people use.
Moreover, if you need to give your cryptocurrencies to a third party who needs to use them, it is much more convenient to entrust them to a custodian, as the alternative is to use decentralised smart contracts that, for example, cannot interact directly with fiat currencies.
Cold and hot wallets
A special sub-category of non-custodial wallets are hardware wallets, i.e. those that store private keys on an external device that is usually kept disconnected from the network.
These are the most secure wallets, not only because they store the keys offline, but also because these keys are stored inside the device in a way that is inaccessible to anyone. For the same reason, however, they are slightly less convenient to use.
Wallets that store private keys offline are called cold wallets, and they are arguably the most secure because they make it impossible to access the keys themselves from the outside via the Internet while they are offline.
Wallets that are connected to a network are called hot wallets and are less secure.
Multi-chain wallets
Another distinction that needs to be made concerns the blockchains that crypto wallets are compatible with.
For example, Bitcoin v0.1 was only compatible with BTC, and even today the client used to run Bitcoin nodes is only compatible with its blockchain.
Many crypto wallets, on the other hand, are multi-chain, but you have to be careful because there is not one that is compatible with all the blockchains in the world.
So when you decide to use a crypto wallet, you have to ask yourself which blockchain you want to use, and you almost always end up using several, depending on which blockchain you want to operate on.
However, there are many that support many blockchains, such as the custodial blockchains of exchanges.
Multi-service wallets
The main function of a crypto wallet is to store private keys and allow the user to use them.
However, there are many wallets, including non-custodial ones, that also provide other services.
For example, some allow staking, for those blockchains based on proof-of-stake.
Others allow crypto-to-crypto exchange, and some even allow fiat currency trading.
This is also why multiple wallets are often used, depending on the specific needs of individual users.
Even when it comes to simply using private keys to make transactions, there are differences between wallets, as some offer transaction anonymisation and others do not.
The KYC
In theory, another distinction could be made between wallets with KYC and those without.
However, all truly decentralised non-custodial wallets do not have KYC, partly because identity verification can only be done by an authorised third party.
There are non-custodial wallets with KYC, but they are not fully decentralised.
There are also rare cases of custodial wallets without KYC, but these are increasingly rare because they are de facto illegal in many countries. Those offering crypto services as non-custodial wallets are only required to do so after verifying the identity of the users in many countries.
So in general, all custodial wallets have KYC and the vast majority of non-custodial wallets have KYC.
The Best Non-Custodial Crypto Wallets
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