Choosing a cryptocurrency wallet is one of the most important decisions you can make as this determines the level of security and accessibility users can expect. Ensuring that you choose a crypto wallet that is right for you whilst ensuring that it is secure enough is highly advisable. You should also research different trading scams to know what to look out for, reducing your chances of falling for one.
Types Of Cryptocurrency Wallets
- Hardware Wallets: Hardware wallets are physical devices the cryptocurrency owner can carry around. These devices are specifically designed to store cryptocurrency, they have an extra emphasis on security as opposed to conventional data storage devices such as USB storage devices. When setting up a hardware wallet for the first time the user is prompted to set up a passphrase/password where they can lock their cryptocurrency behind security measures, ensuring that if the cryptocurrency wallet falls into the wrong hands the unauthorised user would find it incredibly difficult if not impossible to access the cryptocurrency on the wallet.
- Software Wallets: Software cryptocurrency wallets are applications that are installed on computers and mobile devices. They allow users to access information about their cryptocurrency. Additionally, they store the cryptocurrency key locally on the device for additional security.
- Online Wallets: Users can access online wallets on internet-based browsers. These cryptocurrency wallets are often favoured by beginners, due to the fact that anybody can sign up for an online cryptocurrency wallet on any internet-connected device. Online wallets store users’ cryptocurrency and security keys online; whilst allowing users the ability to access their cryptocurrency from any internet connected device, this can be convenient but can also pose security risks. Online cryptocurrency wallets are susceptible to hacking attempts as the data is stored online. If you are hacked you should consider contacting a fraud recovery specialist to maximise your chances of getting your money back.
- Paper Wallets: Paper cryptocurrency wallets are paper copies of both private and public keys, they are considered the most secure type of cryptocurrency wallets as long as they are not lost or damaged. As a consequence of being paper copies, they are the most inconvenient way to store cryptocurrency.
Security
- Private Key Security: Private keys help ensure wallet security, in order to access the cryptocurrency wallet the user must input a passcode; without this passcode, the cryptocurrency wallet is useless and cannot be accessed. Some private key wallets may have a 3rd party online support option, which allows users who have forgotten their passphrase an opportunity to get their crypto wallet back; private key wallets that have 3rd party functionality are still vulnerable to cyber-attacks. However, private key wallets that are exclusively offline are more secure than ones that are connected to the internet.
- Two-Factor Authentication (2FA): Two-factor authentication provides enhanced security by requiring an extra security step in order to access the cryptocurrency wallet. When logging into an account that requires two-factor authentication users will be sent a code to their mobile device, either through SMS, email or to a mobile application. They will then have to input the code to log into the account. Due to the fact that the code is sent to a legitimate form of communication to the owner of the crypto wallet, it prevents unauthorised users from accessing the wallets, only allowing those with access to the 2FA authentication access.
Conclusion
Ensuring that you protect your cryptocurrency is of utmost importance to most crypto users, you should spend time researching each method to get the most out of crypto for you.