Wow! Emerged in 2009, Bitcoin – the very first cryptocurrency – was meant to be the groundbreaking instrument to change the way we perceive money. And it really did: even though at the beginning no one believed it was possible, Bitcoin revolutionized the world. Thus, currently, a plethora of various services is already open for accepting payments in crypto. At the same time, a considerable number of companies are on the way to adopting virtual currencies.
You may be a newbie in this hustle and bustle around Bitcoin and digital currencies, or master perfectly how to buy, sell, or trade crypto, be an expert in technical analysis, or even mine crypto. Meanwhile, not everyone is good at keeping coins safe. Thus, we decided to dwell on the crypto wallets and how to assure security of crypto assets you keep there.
What are digital wallets?
Digital wallets are specially elaborated secure storage for keeping virtual money. Electronic storage contains the public and private keys required to purchase Bitcoin, Ethereum, or another cryptocurrency, as well as digital signatures proving the integrity of the payment processes. Digital currency exchanges may provide virtual wallets in the form of an app, a program, or a service.
To trade or spend cryptocurrency, it’s necessary to possess your private key to have the possibility to unlock your digital wallet.
Storages that allow you to keep tokens can be classified into two groups: hot and cold.
Hot wallet: everything you should find out
Hot wallet refers to virtual storage where you can keep your crypto assets. As a rule, they are linked to the Internet. In particular, they might be connected to a special program. In the majority of cases, these resources are free.
As a matter of fact, good internet availability is mandatory for using the hot wallet. Generally, hot wallets include:
By far, the most common way to set up a digital wallet and to buy Ethereum is a cryptocurrency platform like CEX.IO. The desktop and mobile web browsers can be used to reach them.
Additionally, although web wallets are secure, they do not grant you access to your private keys. In the best-case scenario, they are a transitory repository space for transferring cryptos from one place to another.
From the name alone, you might guess that mobile wallets run on your device. QR-code quick payment applications are designed specifically for Android and iOS-devices owners. Although, mobile wallets are important to take all possible measures to secure your personal information. Make sure you use a strong password, enable transaction notifications, and avoid using public WiFi.
Digital currency is usually stored on desktop account holders that are installed on PCs. When it comes to hot wallets, desktop wallets are considered one of the safest solutions.
Cold (hardware) wallet: what are the peculiarities?
A cold wallet holds encryption keys on a piece of hardware. The majority of them are portable, so you can take them anywhere. Generally, cold wallets are designed as USB flash drives. When it comes to strong points, they are assumed to be more secure than the hot ones. Some are, however, quite pricey (starting from $100). You can only store a limited number of virtual assets with them (as a rule, they work with major cryptos like Bitcoin, Ripple, DOGE, etc.).
For the most part, paper wallets are considered cold wallets. Public and private keys are typically printed on paper in a “paper wallet”. In some instances, it refers to a piece of software that generates a set of keys with corresponding digital files. It’s clear that paper wallets grant you some measure of security. The funds in your paper wallet can either be imported into a software client or transferred by scanning its QR code.
Paper wallets are typically available for keeping cryptocurrencies of your choice through the project’s website or community.
However, it could be risky to keep assets on your paper wallets. You can easily damage, burn, copy, and take pictures of them.
Bear in mind that keeping electronic copies of your paper wallet on your PC is not a good idea. It is recommended that you always store the private key of your paper wallet offline.
What cryptocurrency wallet can I rely on?
We’ve prepared a few tips to help you choose a secure digital wallet. If you opt for the hot wallet, you need to be vigilant when downloading the app or program since you may unintentionally download malware. To stay safe:
- Always read reviews of other users.
- Check the comments.
- Install antivirus software.
- Make sure that your mobile is password protected (touch/face ID, graphical password).
- Stay notified with payment notifications.
How can I keep my crypto wallet secure?
When you already have a crypto wallet, the question of how to make it safe arises. Here are some pieces of advice that may come in handy.
Making a backup
Make sure you periodically and early backup your wallet. Digital wallets may only be recoverable if a history of regular backups has been created prior to the failure of the computer. Store the wallet.dat backup at multiple secure places (such as on a USB, on a hard drive, and on CD). In addition, protect the archive with a strong password.
It has recently become popular to use multi-signature. In fact, it involves the approval of a number of individuals before a transaction is accomplished. Having multiple controllers or servers to carry out transactions (i.e., sending crypto to an address or withdrawing it) limits the possibility of theft. Each member of the group is allowed to transact, and whenever one wishes to spend or send bitcoins, they need approval from other members of the group.
Proceeding with software updates
It is vital that your software is up-to-date. Not updating the bitcoin software on an old wallet can make it a soft target for hackers. Wallet software that has been updated will have a better security system, thereby increasing the safety of virtual assets you keep.