You probably caught the crypto fever and decided to buy a few tokens on a crypto platform. But, what’s next? Should you keep them there or transfer them to a more “safer” wallet?
You may even be wondering what crypto wallets are. So, let’s get that out of the way first.
The simple answer: crypto wallets store your private keys, allowing you full control over your crypto. Crypto wallets are akin to traditional bank accounts— with a lot more security and control. They play a crucial role in managing and effectively securing digital assets.
While crypto wallets are generally safer and allow you more control over your funds than traditional accounts, you still need due diligence to keep your assets safe.
In this piece, we look at various types of wallets. We’ll also discuss security tips to keep your crypto safe to the best of your abilities. Let’s get to it!
Types of Cryptocurrency Wallets
There are 3 major types of crypto wallets. They include software or online wallets, hardware wallets, and paper wallets. Let’s discuss them in depth:
Software Wallets
Software wallets are digital applications that grant you ease and convenience in managing your digital assets. These types of wallets are commonly known as ‘hot wallets’. This is because they can be accessed over the Internet. They facilitate quick payments, display your balance, and even allow certain additional functionalities, such as exchange integration.
So, if you’re a day trader or do lots of transactions, this type of wallet suits you best. However, as with anything connected over the internet, software wallets can be susceptible to online hacks and threats.
Hardware Wallets
Hardware wallets are physical devices designed to store digital assets offline. These USB-like devices are usually known as ‘cold wallets’ because they are not hosted on the internet. So, they are less susceptible to cyber threats. However, you need to connect them to the internet to store and withdraw your tokens.
Hardware wallets are not your go-to for everyday transactions. If you made a large crypto purchase and want to store it for a long time, hardware wallets are for you.
Paper Wallets
Paper wallets are another form of safeguarding your funds offline. They typically involve printing out your public and private keys on paper and storing them in a secure location. This form of storage is highly secure. However, extra precautions must be taken to ensure the safety and preservation of the paper. That “paper” is now worth your crypto portfolio.
Factors to Consider When Choosing a Wallet
Understanding the key differences between the types of cryptocurrency wallets is essential. But more importantly, there are several factors you should consider before picking a crypto wallet. These factors tailor your eventual choice to suit your needs and priorities. They include:
Security Features
The security of your digital holdings should remain unshaken. For investors who engage in day-to-day transactions, picking a crypto wallet that provides robust layers of security against unauthorized access will ensure your tokens are safe all the time.
User-Friendliness
User experience is crucial in picking a suitable crypto wallet to secure your digital assets. If you trade often, opting for a wallet with a user-friendly interface is important. Seamless navigation is a perk for daily transactions, so prioritize a wallet that simplifies the experience.
Compatibility and Multi-Currency Support
You must also consider if the wallet is accessible and compatible with various operating systems. For traders who use hot wallets, this ensures flexibility and convenience, enabling you to access your funds across many channels.
Trading Activities
Finally, what’s your trading schedule like? For day traders making enormous daily transactions, hot wallets provide easy accessibility and a more convenient set-up.
Cold wallets, on the other hand, may be more suitable for investors looking to hold long-term.
Securing Your Crypto Wallets —Wallet Wisdom
Some security measures may safeguard your wallet from loss or unauthorized access. These include software updates, backing up your wallets, etc.
Backup Your Wallet
You must back up your wallet often. This protects you against computer failure and provides easy recovery of your cryptocurrency holdings. When backing up your wallet, it is also important to backup across various locations, while simultaneously using a secure password to encrypt it.
Software Updates
A wallet that runs on non-updated software makes it easy prey for hackers. Therefore, always ensure your software is the latest application. This puts in place an updated security measure, significantly increasing the safety of your digital assets.
Multi-Signature
Recently, the idea of multi-signatures has gained popularity across the cryptocurrency landscape. Multi-signature involves needing two or more people to approve a transaction. This eliminates the levels of theft that may threaten a single signatory.
Also known as a shared wallet, it ensures that before your digital assets are sent or spent, the requisite permission from others having authorized access must be obtained. You can call it the human 2-FA. However, as you already know, ensure you only deal with people you trust.
Seed Phrases
These phrases are a series of randomly generated words that serve as a master password for your wallet. They allow you to recover your keys in cases of loss of your wallets on devices. They are easy to memorize and can be stored by simply writing them down and keeping such documents in a safe space.
Keeping Your Crypto Safe
Having considered the necessary factors, you can test the functionalities of various wallets. This will enable you to narrow down your choice to your preferred wallet. You can experiment by sending and receiving crypto with such wallets, noting their perks and pitfalls. In the end, you can select one that suits you best.
Above all, creating the necessary backup for your digital assets is a no-brainer. Implementing safe storage practices will prevent the irreversible loss of your digital assets.
