Unfortunately in 2019 fraud and theft caused more than 4 billions USD of loss in cryptocurrency, the reason is, most of the time, hackers using security flaws or errors in the cryptocurrency wallet of the targeted users.
The question about the security of these wallets is increasingly being considered to avoid too frequent incidents. Trough this article we will see how those wallets work, their differences and few tips in order to secure your crypto.
How a Cryptocurrency Wallet works ?
The wallet can be compared to a bank account, your coins are digitally stored on the blockchain, it allows you to receive bitcoins and other cryptocurrencies, store them, and then trade them to others. It's working as an interface to your crypto network, the wallets contain public keys which are visible on the blockchain network which enables other users on the network to find your wallet address in order to trade with you. And more important the private keys which allow you to access your coins, in terms of security you aren't securing directly your coins but the keys that give access to them. Private keys are used to prove ownership of a wallet address as well as sign transactions to send cryptocurrency from your wallet to others.
Different types of Wallet ?
Indeed, there is the Cold Wallet (or Hardware) and the Hot Wallet, let's start with the cold one. It is a physical electronic device, built for the sole purpose of securing your crypto. Cold wallets are great if you’re serious about security and convenient, reliable Bitcoin and crypto storage. Those wallets can keep private keys safe, fully protected even when the device is plugged into a malware-infected computer. Cryptocurrencies are digital, so cyber-criminals can target your computer’s software wallet and steal them by accessing your private key. Generating and storing private keys offline using a cold wallet makes sure that hackers have can't break into the system and steal your coins. And in case you damaged or lose your device, you have a backup code to get your coins back don't worry.
However a Hot Wallet is running on internet (so online) connected devices like a computer, mobile phone, or tablet. Private keys are secret codes. These Wallets generate private keys on an internet connected device, any hacker can access your coins because your keys are directly encrypted on internet, this is why hot wallet can’t be considered secure.
So which Wallet should you choose ?
All I can say is that is depends from your activity, if you rather save coins or invest, or maybe just exchange and trade some crypto. Cold Wallet is preferable if you want to invest a lot of money in cryptocurrencies and keep it safe, it's more secure, with multiple wallets possibility for the same coins and it's easy to backup, however it's not free (security has a price). The Hot Wallet is ideal to store small amounts of coins, spend and receive payments is quick and easy, certain hot wallets allow access to funds across multiple devices, but it is at the mercy of a person with wrong intentions. Examples of great Wallets you could use : Cold Wallet :
- Ledger Nano (X released in early 2019 for 120$ or S older for 60$)
- KeepKey (with its own SpaceShift Platform for an easy manage, 50$)
- Trezor (One small, thumb-sized device for 80$, or T most recent model 164$)
- Paper Wallet (might be obvious but paper documents are a safe way to keep your private keys not on your computer)
Hot Wallet :
- Edge (on Android or iOS, interesting app which creates automatic backups for your keys)
- BRD (allow the user control of private keys, a smart interface, and passcode support, Android only)
- Blockchain (Web Wallet both on Android and iOS)
To conclude, your wallet must correspond to what you're planning to do with your coins, be careful and aware of the risks. Hope this article has helped you !