How Crypto Wallets Are Taking the World by Storm
If you possess cryptocurrency then a crypto wallet is the best security you can offer them. Hot and cold wallets are the two most dominant players in the market for storing cryptocurrency. The best cold wallets guarantee the highest safety and security. They are different from traditional wallets that are used to keep cards, coins, and paper money. They are also called hardware wallets and leave no stone unturned to ensure the safety of the crypto tokens. These storage types are not connected to the internet and the funds can only be accessed by connecting them to a computer. Because these wallets are offline, hackers will not be able to gain unauthorised access to these devices and tamper with the data.
Why Crypto Wallets Are In Demand?
The general rule of using crypto wallets is that they should be used only when the holder has ‘considerable’ cryptocurrency. These wallets are usually not necessary for storing cryptocurrency. If you possess $100 worth of cryptocurrency then the cost of the crypto wallet would be around $100. If you are someone who wants to transact cryptocurrencies on a regular basis, hard wallets wouldn’t make much sense, but if you prefer holding them for the long term, keeping them safe is paramount, and this is where a hardware wallet comes into the picture.
Can Crypto Wallets Be Hacked?
Crypto wallets offer safety and security because they are offline and the designers of these storage devices do all they can to make them as secure as they can. However, despite them not being connected to the internet, they are not completely out of harm’s way. Hackers have evolved and are finding new ways to get illegal access to files. One of the most common ways in which hackers and other negative elements can gatecrash into the system is by gaining physical access to the device and tampering with it. Sounds worrying, right? Well, if you pick one that comes with anti-tamper features, you can mitigate the risks significantly.
One of the ways hackers can gain access to password-protected items is by phishing scams. This entails hoodwinking people into giving up their bank details, in this case, private keys by faking emails from popular websites like Coinbase or Bitfinex. If they fall for it, their cryptocurrency would be in serious jeopardy. There have also been cases of customers buying fake hardware wallets. These wallets have malware in them and allow hackers to empty your account without you noticing. Therefore, a lot of stress is laid on checking the storage device before buying and giving the private keys.
How Can They Be Kept Safe?
- Do Not Divulge Private Keys: Private keys should be fiercely protected and even if they have to be given to someone, their email address and other credentials have to be verified. This is an utmost necessity and under no circumstances should be taken lightly. Some of them have additional measures to keep the cryptocurrency safe.
- Keeps Wallet Seed Phrase Safe: The seed phrase of crypto wallets has to be verified and kept out of harm at all times. A steel wallet or a safe would be an ideal place to keep them safe. The holder of the cryptocurrency should be the only person to know the phrase and the location of the same. They are advised not to memorize it and keep it in a written format. The phrase should not be taken lightly and definitely, should not be kept haphazardly.
- Multiple Sign Wallets: Multi-signature wallets are also called multisign wallets and they require more than one set of private keys to confirm a transaction. Having more than one set of private keys ensures extra security if one set gets compromised, the other set(s) can come to the rescue. The higher the sets of private keys the stronger the security of the cryptocurrency.
- 25th Passphrase: This is similar to adding a word to the 25-word passphrase. The final word will not be saved on the device and can be used to give an added level of protection to the crypto wallet.
How Do These Wallets Work?
When cryptocurrency is bought, the transaction is recorded on a blockchain. The blockchain is where all the transactions are recorded. In case the blockchain is public, it can be accessed as long as the holder is connected to the internet. A decentralized network of computers generally hosts blockchains which means that it is being controlled by several entities. To access the public and private keys, the storage is connected via USB or bluetooth depending on the type of wallet the holder has. The funds can be accessed using the mobile or desktop application of crypto wallets.
If the question is the storage of cryptocurrency, then crypto wallets will give the most value for the money. Both types of wallets have their upsides. The best hot wallets involve no transition between offline and online to make a transaction. The best cold wallets guarantee heightened security and involves physical possession of the storage system. The security can also be enhanced using passwords and more than one at that.