Cryptocurrency is a secure currency and payment that runs on a blockchain, which is a public ledger. It’s decentralised and adopts high levels of encryption. To access the blockchain network, you need to have an access key to unlock the encryption. When changes are made to the blockchain, they are viewable by everyone on the network. Therefore, cryptocurrency is near impossible to duplicate or steal. Although this sounds great, there is one vulnerability that’s independent of the blockchain. Once you’ve got your cryptocurrency, you need to store it securely. If anyone steals your password, computer, or other storage devices, they will have access to your entire investment. Luckily, there are steps you can take to ensure your cryptocurrency remains secure – continue reading to find out how.
What Are Crypto Wallets?
A crypto wallet is exactly as it sounds – a digital wallet designed to store your keys, receive digital currency, transfer currencies, and monitor any activity across your blockchains. Having a crypto wallet is essential for managing your investments and keeping everything secure. However, there are plenty of different wallets out there, which fall under the following categories:
- Hot wallets. These wallets are connected to the internet, allowing for 24/7 access. They include cloud, software, mobile, and other exchanges.
- Cold wallets. These wallets are connected to the internet but are stored offline. You can access them any time, but funds cannot be transferred out. Cold wallets include paper, hardware, USB, and any other data storage system.
Typically, people will use a combination of hot and cold wallets. Cold wallets are perfect for playing the long game. Hot wallets lend themselves well to regular trading. Below, we will outline the four types of cryptocurrency wallets before offering general advice on keeping your assets safe.
Cloud wallets store your crypto online and are therefore classified as hot. Typically, you can access your wallet at any time and from any device. Usually, your cloud wallet will be custodial, which means that you don’t have access to your keys. Therefore, you are relying on a third-party business to keep your crypto safe.
Let’s take a look at Paxful, which offers peer-to-peer crypto trading and hosts over six million BitGo wallets. Although you won’t have access to your keys, your wallet will be secured with 2FA and ground-breaking blockchain analytics. If you’re a beginner, we suggest using this wallet. What’s better is that you get a BTC wallet when you sign up.
Paper wallets, as you may have guessed, fall under cold storage. Usually, with a paper wallet, you will receive a physical printout containing your private and public keys. However, the term can also point to the software used to create a set of keys and print them. Although your funds are stored online, your keys exist offline, which offers a higher level of security. All you need to do to access your crypto is scan a QR code or run them through software. Generating a paper wallet is pretty straightforward, but you will find guides online corresponding to your chosen currency. For example, if you wish to invest in Ethereum, you follow this YouTube tutorial.
Paper wallets are more secure than their hot wallet alternatives. However, they come with their own set of flaws. Given the nature of paper, your keys can easily be destroyed or misplaced. Further, if you’re not careful, anyone may copy your keys and access your crypto. Remember, if you lose your keys, you lose your crypto.
Hardware wallets are debatably the most secure wallets on the market. Instead of storing your keys on software, you will store them on an external storage device. There are plenty of options out there and many of them integrate well with online crypto-stores. If you’re looking for quality hardware storage, we suggest investing in a Trezor or Ledger wallet. When you start your wallet, you will need to keep it safe to avoid theft.
At times, whether you lose your hardware wallet or it’s stolen, you may lose access to your crypto. For best practices, you should invest in CRYPTOTAG, a titanium casing containing your seed phrase (used to regain control).
Software wallets are another example of a hot wallet. As the name suggests, your crypto will be stored on software downloaded to your chosen device. They offer reasonable levels of protection but are susceptible to theft through malware. If you are using a software wallet, you need to ensure you trust anyone with access to your device and install a high-quality security suite.
Smart Theft Prevention Measures
Although the blockchain that cryptocurrency runs on is secure, there are security issues concerned with the end-user. As discussed above, you will need to choose the correct crypto wallet for your investment. However, your wallet may be secure, but you can still lose your crypto if you’re not careful. Follow this general advice for keeping safe:
- Use 2FA for your crypto wallet.
- Separate your funds between hot and cold storage.
- Be wary of phishing sites out there to trick you.
- Only access crypto over a secure connection. Never use public Wi-Fi.
- Only use HTTPS websites, which prove authentication. You can use HTTPS Everywhere for peace of mind.
- Be secure but keep it simple. You can overcomplicate crypto security and end up losing access to your accounts.
- If your IP address is static, ensure that only you have access to your funds.
There are plenty of things you can do to look after your cryptocurrency, but you need to be aware that you will always be susceptible to theft no matter what you do. Unfortunately, this is the price we pay for the digital age.
To Sum it Up
When you invest in cryptocurrency, you will need to store it in a crypto wallet. Four different types of wallets fall under two categories. Hot wallets are stored online, giving you 24-hour access. Cold wallets store your keys offline. Typically, a hardware wallet is the most secure wallet you can use. Regardless of your storage method, remember that your money isn’t yours if you don’t have the key.