The trademark characteristic of digital currencies is their virtuality. Cryptocurrencies don’t have physical embodiment like other fiat/traditional currencies. These can’t be attained as coin, gold, fancy bead, or paper. Cryptocurrency is no such physical asset that needs to be secured in bank or in a locker at home.
However, similar to valuable things, digital currency too needs to be secured. The virtual currency that possess a digital entity needs internet for making transactions. In spite of ethereal nature, the cryptocurrency is less susceptible to loss.
Default Wallets of Exchanges are Risky
Beginners purchase digital currency from exchanges like BitFlyer and Coinbase, and then leave their earnings in ‘custodial’ wallets of those websites. However, similar to any online entity, cryptocurrency exchanges are susceptible to hacking and making billion dollars transactions on each day, they set a new targets. In the year 2014, Mt. Gox lost 750,000 Bitcoins of the customers. In December 2017, NiceHash has lost around $60 million and recently Binance depicted the risks of leaving your earnings in the online wallet of exchange.
Hot Vs Cold Storage Wallets
When you have got numerous digital currencies or you are planning to secure them for a large investment later, then you should secure your cryptocurrencies in cold storage wallets. These wallets doesn’t require internet or USB drive and these are secured on the computer, known as hardware wallet.
However, dedicate a computer for the storage of digital currency or using a hardware wallet is not a viable option for everybody. Therefore, popular devices like Ledger and Trezor costs around $75 to $100 and add a complexity to each transaction. On the contrary, software wallets are mostly free and accessed; however they are less secure.
Types of Software Wallets
The primary function of cryptocurrency wallet is store private and public keys that you will need to make a transaction. Apart from this, wallets also offer features like swapping and integrated currency. Mainly, there are various types of software wallets, such as mobile, online, and desktop. Each type of software wallet offer a great combination of security and convenience.
Mobile Wallets – Mobile application wallets are enhanced for retail transactions means for paying some stuff with a cryptocurrency, such as Bitcoin. However, owing to the encrypted keys that are stored in the phone, there is a risk of losing coins in case you misplace your phone or device.
Online Wallets – These are the wallets that are hosted on the website. Owing to their accessibility from internet, these wallets are a way more convenient option. However, the negative part is website owner has your private keys and simply there is no way that can break them from getting your coins.
Desktop Wallets – These wallets are basically the software installed on the computer. Desktop wallets provide you control over your digital assets; however, if the wallet is connected to internet, it remains susceptible. So, your computer’s remote takeover at the time when you don’t have access to the internet or failure of hard drive might be a tragedy.
When selecting a software, paper wallet, or hardware in order to secure private keys and passwords, there are plenty of things that you could opt for in order to keep your cryptocurrencies safer. Following are a few things that you need to take care of to secure your crypto savings –
- Be conscious with an online service when your device is connected to internet
- Use a strong password to encrypt your wallet
- Make a backup on a regular basis and secure them at various locations
- Utilize multi-signature security that helps in maintaining control on your cryptocurrencies even if you lose your device
- Write down, generate, or hide the mnemonic seed of your wallet – you can use all these words in order to restore wallet in case of hardware failure.
A Few Reliable Software Wallets
Here are a few renowned software wallets that you can consider after looking at their different features.
It is an online wallet that can easily be installed on Mac, Linux, or Windows by adding an extension on Chrome. Else, you can download as app on Apple phone or Android.
It is a software wallet that is great for crypto beginners. This wallet is famous for its responsive client support, refined interface, and user documentation.
MetaMask is a wallet that is super easy to use and supports ERC20 tokens and a digital currency that is built on ETH platform. This online wallet could be utilized for sending, receiving, and storing private keys and ETH tokens.
It is among the primary mobile wallets. Since day one, Mycelium has created a strong reputation as user-friendly and secure wallet that secures Bitcoin. Similar to credible wallet, this wallet helps in generating 12 ‘seed words’ that help in restoring the wallet in case you misplace your private keys.
Overall, do a proper research prior installing or utilizing any wallet technology – be it investing or trading cryptocurrency.