Investing in cryptocurrency and starting to trade can be a risk worth taking. The value of cryptocurrencies continues to rise, particularly top cryptos, like Bitcoin, Ethereum, and Ripple. With this increase in market value, a lot of people are starting to trade cryptos. But with a deregulated currency such as this, how will you keep your assets secure?
The simple solution to keeping your crypto assets safe and sound is to invest in a crypto wallet. In this article, we will guide you in learning the different types of wallets and how to use a crypto wallet.
What Is A Crypto Wallet?
Transactions that involve cryptocurrencies are said to be safer than those involving fiat currencies. This is due to the blockchain technology that is being used with cryptos. The use of this technology means that all transactions done with cryptocurrencies are recorded in a digital ledger.
Now, where will you store all the cryptocurrencies that you have acquired? This is where a cryptocurrency wallet comes in. A crypto wallet is where you will store all your crypto assets. Just like any regular wallet that contains cash, credit cards, and identification, a crypto wallet does just that with your cryptocurrencies.
There are three types of cryptocurrency wallets. First is the software wallet, next is the hardware wallet, and lastly, the paper wallet.
Even though blockchain technology is being secured through cryptography, there is no stopping professional hackers to try and hack through an individual’s digital wallet. Thus, many serious traders and investors prefer to go with a hardware wallet for more security. For those traders who have yet to find the right software or hardware wallet for them, paper wallets are preferred.
Software wallets can also be called hot wallets because they are connected to the internet. Most crypto exchanges already provide a wallet for each user on their platform, and most traders use this when starting out.
On the other hand, cold wallets include hardware and paper wallets. These wallets are used offline and are more secure than hot wallets. Continue reading to find some more details on each type of wallet and how to use a crypto wallet.
A software wallet makes use of software to store your cryptocurrency assets. Most crypto exchanges already provide a wallet for each user. However, these wallets usually come with a limit, meaning you will need to invest in a stronger wallet once you reach a certain amount of crypto assets.
All software wallets have a PIN or password that is needed to gain access to your cryptocurrencies. Without these details, you will not be able to trade your crypto assets or access them at all.
Software wallets can be accessed through web browsers, desktop apps, or mobile apps. Some exchanges offer a service to manage your keys. Though this may seem handy for beginners, it is not recommended. Remember, these private keys will allow anyone holding them to access your cryptocurrencies.
Although a lot of software wallets are hot wallets, using a downloadable desktop application can be considered a cold wallet. However, since you access the software on the same computer that you use to go online, you may encounter malware or viruses that attempt to access your keys that are stored in the wallet.
To properly use a software wallet, make sure that you choose a strong PIN and password. These wallets are relatively easy to set up, just follow the instructions on the software that you have downloaded. To avoid unauthorized transactions, you must never share sensitive information such as your PIN with anyone. It is also best to invest in a good quality software wallet for more security.
A hardware wallet, from the name itself, stores the keys to your crypto assets in a physical wallet. This means that you will be able to keep your cryptocurrencies much safer because they are stored offline. These wallets usually take the form of a small device that can be plugged into your computer, much like a USB flash drive or an external hard drive.
Since cryptocurrencies are traded through online exchanges, there is a chance that these assets will be targeted and stolen by expert hackers. Even though these cryptocurrencies are protected by cryptography and blockchain technology, hackers can still steal your coins once they gain access to your digital wallet.
A hardware wallet also has security features including a PIN and a password. You must never share this information with anyone. Additionally, you must never store this information on your computer or mobile phone. Remember, what makes a hardware wallet secure is that it stores the keys to your crypto assets offline.
So, even if there is a small possibility of a digital wallet being hacked, it is better to be safe than sorry. After all, there are now a lot of viruses, phishing sites, and malware that can attack your computer and access your digital wallet. One surefire way to make sure that your crypto assets are safe is to store them in a hardware wallet.
Lastly, paper wallets store your crypto assets in – you guessed it – paper. Instead of using software or hardware, your private keys are printed on a piece of paper. These are usually QR codes that you can scan to gain access to your cryptos.
The best way to use a paper wallet is to acquire one that can generate new QR codes even while you are offline. This way, there is a smaller risk of malware attacking your private keys.
Although a paper wallet does seem safer, you shouldn’t go all out on this type of wallet. Once you lose your QR codes, you could lose your crypto assets as well. Another common problem encountered with paper wallets is the inability to transfer partial funds. With this type of wallet, it is all or nothing. Learn more about crypto wallets here!
Learning how to invest and trade cryptocurrencies is just one part of the crypto world. Securing your crypto assets and learning how to use a crypto wallet is a fundamental skill that you must master to keep all your cryptos secure.
Using crypto wallets is relatively easy to learn and sending and receiving cryptocurrencies can be a breeze. If you make sure to keep your private keys safe, you will be able to experience the joys of investing and trading with little to worry about. Just make sure that you also back-up your keys in a safe place offline so you will always have access to your crypto assets.