Over 68 million people use a crypto wallet to secure their cryptocurrency. This number is continuously growing with more adaptation of digital currency.
If you are new to crypto and wondering what your options are to safeguard your assets then you’ve come to the right place.
Read on for a quick overview of the different crypto wallets available.
What is a Crypto Wallet?
Buying, owning, and storing cryptocurrency is very different than fiat (government-backed currency.)
First of all, you have to buy your coins on a cryptocurrency exchange using your bank account or credit/debit card. The coins you bought are technically yours, however, you do not own the private key to those coins unless you transfer them to a personal wallet.
For example, if you buy 0x (an alt coin) and the exchange gets hacked then you have no proof or access to those coins unless the exchange can restore them to your account.
Crypto wallets allow you to safeguard your coins by giving you the rights and the responsibility to your coins as a code on the blockchain. So, the best way to store crypto is by transferring large amounts to a wallet.
Hot vs. Cold Wallets
The two main types of cryptocurrency wallets are hot and cold. Hot means that the wallet is connected to the internet or uses downloaded software, so they are less secure. A cold wallet is offline, making it an ideal but less convenient option.
Types of Hot Wallets
There are three types of hot wallets: desktop, mobile, and web wallets. All of these wallets require you to log in online and are subject to hacking as well.
Desktop wallets use a software program to download the wallet on your computer. Your private key is stored on your computer. This is considered the safest type of hot wallet.
Mobile wallets are apps on your smartphone where you can store your crypto. While they pose a higher risk, this type of wallet is for people who still want to trade or use their crypto easily.
A web wallet is the least secure hot wallet option as it connects to a website via your browser. You access your account with a password from any device.
Types of Cold Wallets
Cold wallets are more secure, but they are more difficult to use. They involve using hardware like a USB thumb drive to access your cryptocurrency. You can also use a paper wallet to store your private keys and QR codes to access your coins on the blockchain.
With hardware, you will most likely use a form of a paper wallet to write down your 24-digit code phrase. While this is the most secure process, it can also be dangerous as paper can be lost or destroyed by mistake.
Securing Different Crypto Wallets
Even though there are many different crypto wallets they all have a risk involved. This is because crypto is targeted by thieves because of its anonymity and decentralized nature (no third-party financial institutions like banks offering assurance.)
So, it is very important to keep your private keys and your access to your accounts secure. Never share passwords online and keep physical hardware locked away separate from your keys.
Continue reading our Tech News section for more updates on the crypto market.