Crypto Wallets: Your Guide to Secure and Smart Storage

With the increasing popularity of cryptocurrencies, the security surrounding these digital assets also become a hot topic. Attackers are becoming more and more creative in designing and executing cyberattacks. This is where the concept of a ‘wallet’ in the crypto world has become crucial as a way to safely store your cryptocurrency.

Since 2009 the financial sector has been revolutionized by the introduction of Bitcoin. Afterwards, many more cryptocurrencies have been launched onto the financial market, leading to the global rise of cryptocurrencies. With the decentralized nature, and the secure and profitable way to store and transfer value, more and more people have started to utilize cryptocurrencies, and more and more sectors are integrating cryptocurrencies into their payment models.

However, with the increasing popularity of cryptocurrencies, the security surrounding these digital assets also become a hot topic. Attackers are becoming more and more creative in designing and executing cyberattacks. This is where the concept of a ‘wallet’ in the crypto world has become crucial as a way to safely store your cryptocurrency.

Introducing the crypto wallet

You can think of a wallet in the classical sense, since this helps visualizing a crypto wallet. Instead, it is just a digital tool which allows you to store and manage your cryptocurrencies. The difference from a physical wallet, in which you will keep your cash, is that a crypto wallet doesn’t have the actual currency. It holds the public and private keys which allows you to interact with the blockchain, so basically what allows you to send and receive cryptocurrency.

Public and private keys refer to the security measure level of the keys. A public key is your bank account number, which is the address which gives you access to receive funds. A private key is similar to a PIN or password, since this is what grants your access to your cryptocurrency and allows you to send it to others. The private key should never be shared with anyone.

Various types of crypto wallets

You can find various types of crypto wallets, each offering its own security features and usability. The main two categories of crypto wallets are hot wallets and cold wallets.

Hot wallets

The main feature of hot wallets is that they are connected to the internet, which makes them convenient for frequent transactions. Hot wallets can either be desktop wallets, which are software applications installed on your computer. These provide a great balance of security and convenience. Mobile wallets are apps installed on your smartphone, allowing you to manage your crypto on the go. Mobile wallets like Best Wallet are popular, since it is easy to use, and it provides you the opportunity to quickly send and receive funds. Web wallets can be accessed through a web browser, making it the most convenient type of hot wallet. However, it is also the least secure, since it solely relies on the security of the service provider’s servers.

Cold wallets

The main feature of cold wallets is that these are not connected to the internet. This makes them more secure against hacking attempts and makes them ideal for long-term storage for especially larger amounts of cryptocurrency. A hardware wallet is a physical device on which you store your private keys offline. This is considered the safest way to store cryptocurrency, since they are immune to computer viruses. Paper wallets are a physical document which contains both your private and public keys. It is a secure method against online attacks, but it is vulnerable to physical damage, or the risk of losing it or theft. Cold storage wallets are an umbrella term covering any method of storing cryptocurrency offline. This includes hardware wallets, air-gaped computers, and paper wallets.

Choosing the right wallet for you

There are many factors in play when choosing the right crypto wallet. This includes your amount of cryptocurrency, how often you execute transactions, and your level of comfort with technology. For beginners with cryptocurrency, it is recommended to start with a mobile or web wallet. Since these are user-friendly and safe, they offer a good introduction to managing crypto.

If you have managed to accumulate some assets, you should consider using either a desktop or hardware wallet. In this way you have access to a method which offers a better balance between security and accessibility. If you have large holdings and you have an intention for long-term storage, it is recommended to either use a hardware wallet, or a combination of hardware wallet and cold storage method.

Some recommended best practices to keep your crypto wallet secure

Regardless of which type of crypto wallet you choose, there are some practices you should pick up to ensure the safety of your cryptocurrency. The most important one is to ensure you always back up your wallet. Always set up your wallet with a recovery phrase, which is a series of words that you can use to recover your wallet if you lose your device, or it is damaged. You should also always make sure to use a strong password for your wallet.

Besides a strong password, you should also enable a two-factor authentication (2FA), in which you have to confirm your identity through a second device to enter your wallet. Furthermore, it is important that you keep your wallet software up to date, since developers regularly release updates to patch vulnerabilities, which is key to improving security for your wallet.