Users need to understand that the threat to their cryptocurrency is not through the blockchain but rather through their wallet or exchange.
Information can be tracked and stored at the provider level, and this includes your private key - this can then be accessed by hackers, enabling them to steal your savings.
In this article, we cover various types of cryptocurrency wallets and how they work, so you can have a better understanding of how to keep your digital assets safe and secure.
Choosing a Cryptocurrency Wallet
Users should be very selective when choosing the wallet they use. As a general rule of thumb, you should only use cryptocurrency wallets developed by reputable companies with a proven track record. For this, you can visit one of our trusted crypto wallet guides.
However, after you’ve done that, there are many things you can do to guarantee the safety of your cryptocurrencies.
First, you can start by choosing what type of cryptocurrency wallet you would like to use, as explained in the section below. There are three main options for digital storage – software, hardware, and even paper wallets!
Types of Cryptocurrency Wallets
The competition between the different digital wallets is growing, as the number of people using cryptocurrencies is also on the rise.
One of the most popular cryptocurrency wallet types is known as a hot wallet, or software wallet. One disadvantage, however, is that hot wallets remain connected to the Internet at all times, and this is a security risk if your Internet connection is not secure.
Because of this, some cryptocurrency holders prefer to keep their digital assets in a physical wallet, known as cold storage or hardware wallets. These aren’t your traditional fiat wallets, however.
Usually, a physical wallet resembles something like a USB flash drive. These devices are not actively connected to the Internet and are only accessible after being directly connected to a computer with Internet access.
However, hot wallets remain more popular than cold storage solutions, primarily due to their convenience and friendly user interface (UI), and accessibility.
When choosing a cryptocurrency wallet, safety should be the primary factor in considering your choice.
Disclaimer: With crypto, YOU become the bank. However, unlike traditional banking, the main disadvantage is that in almost all cases, once the digital currencies leave your wallet – there is no way to return them.