Almost all cryptocurrency users have undoubtedly pondered how crypto wallets operate. The idea is straightforward, and the phrase "crypto wallets" speaks for itself. However, what if we told you that technically, crypto wallets don't truly hold crypto?
Bitcoin and Ethereum are examples of cryptocurrencies frequently targeted by cybercriminals seeking profit through deceit -and numerous tactics to achieve it, as we are about to learn-, because of their increasing popularity. With their rising popularity, online wallets are a target for hackers. The majority of a user's Bitcoin should be kept in offline or physical wallets, with only a tiny portion remaining in the online wallet.
Investors should spend some time comparing the many kinds of cryptocurrency wallets that are currently on the market. Users of a number of crypto platforms may keep their money in their platform functionality, akin to a digital crypto wallet. Which are their differences and what should you take into consideration? How to keep your assets safe in crypto? Let’s find out!
How To Pick The Right Cryptocurrency Wallet
If you're interested in investing in crypto, then you'll need to pick a wallet to store your coins, so it's important to do your research before making a decision. Here are some things to keep in mind when choosing a cryptocurrency wallet:
- First and foremost, you need to choose a wallet that supports the coins you want to use. This means that the wallet needs to have been designed specifically for those coins.
- Secondly, consider security and privacy concerns. Make sure that the wallets you choose are secure and private by encrypting your data.
- Finally, consider convenience when selecting a wallet. Some wallets are more user friendly than others, so make sure that one is right for you before downloading it.
Best Practices For Keeping Your Cryptocurrency Safe
We can explore some safe tips to protect your cryptocurrency:
- Two secure passwords is elementary:
Considering the popularity that crypto products and services have accomplished in the last few years, you should never use the same password for many accounts. Using tried-and-true security measures is the quickest and most straightforward approach to protect your wallet. We suggest limiting your vulnerability by creating distinct, strong passwords for each, enabling two-factor authentication, and changing your passwords often. This procedure may be automated and made more efficient by using a reliable password manager, such as Lastpass, Onepassword and more. It is essential to keep up a password vault manager whether utilizing one or multiple cryptocurrency platforms in order to prevent password loss.
- Use dependable Bitcoin wallets, exchanges, brokerages, and mobile apps:
Investors should thoroughly examine the security aspects of each platform before picking which ones to employ to comprehend how the data will be safeguarded. When holding crypto assets, trustworthy entities should use air-gapped gadgets that are usually offline, SSL/TLS encryption, and multifactor authentication, among other best security measures. Using many cryptocurrency platforms can make users safer, provided they use unique, challenging passwords for each one. Additionally, multi-signature technology can add an extra layer of security to your wallet by requiring multiple people to approve transactions before they are processed.
- Avoid being a victim of mobile phishing:
It is important to be aware of the different types of scams that are targeting cryptocurrency holders. The most used tool to hold and trade crypto is a smartphone app. Malicious hackers are driven to approach investors with smartphone phishing attacks in case of theft of your login details when the price of these commodities rises. On a smartphone, these social manipulation assaults can originate from anywhere, including SMS, social networks, third-party text messaging, or email, pretending to be crypto institutions -wallets and exchanges- and asking for your passwords. This scam involves criminals creating fake websites that look like they are associated with legitimate wallets. The criminals then lure users into entering their private keys into the fake wallets, which allows the criminals to steal the user’s cryptocurrencies. We recommend being careful and not facilitating your personal keys to anyone, no matter what.
- Be mindful of how transactions are made using your wallet:
Apply the fundamentals of “cyber resilience” to your checkbook to keep the assets safe in crypto. Every cryptocurrency wallet is only a piece of information and code, but one that is valuable to both you and other people. Know the procedures for utilizing it in transactions, check that any systems or networks you use for those transactions are secure, and put practical safeguards in place. Attacks on computers are orchestrated. They gain ground and grow before going after the main target (your wallet). Your comprehension of the cyber protections used on your wallet determines how effective they are.
- Recognize the various techniques and procedures for protecting your digital cash:
People trying to broaden their investment but also lacking the technical expertise are becoming more and more interested in investing in owning and trading cryptocurrencies. The ownership of protecting your money rests "nearly entirely on the user" because no central bank or governing body oversees any of the digital assets. There is really little chance of regaining such losses. Secret key security, restoration seed protection, and crypto miners antimalware are the three most crucial elements to understand.
- Don't divulge your secret key:
The cryptographic keys are used to confirm that the holder of the crypto wallet being used is the individual who receives or sends the digital currencies. Using cold storage is the most secure method for keeping your private key. In essence, cold storage entails printing off your key and erasing any electronic references to it. Using a seed, a collection of randomly generated phrases that a user can use is a semi-safe way to retrieve your private key. The seed sentence should only be typed, printed, and kept in a secure location on the paper. Maintaining this word digitally is particularly hazardous, given how easy attackers may gain access to end-user computers and other electronic storage apps.
- Refrain from utilizing provider-hosted wallets:
BTC, ETH, USDT, USDC, BUSD and more crypto can also be stored in wallets maintained on your computer, laptop or in provider-hosted wallets. We suggest being careful with the wallets housed by companies, as users enable them to keep their personal key on their servers, which are entirely outside their control. This has been the most popular option, as it takes the least amount of technical work and, as stated before, crypto is becoming more popular every time. This implies putting your secret key in danger of a number of things, such as a hack of the provider's server, the service going out of business, or even a governmental or other legal organization seizing control of the infrastructure. The famous phrase “not your keys, not your coins” comes into play here, referring to keeping your assets in an exchange. Use a digital wallet, a USB-based gadget that encrypts and keeps your private key together with all other necessary information. They may occasionally be decrypted physically, which is far safer than other ways.
There are, also, some other things to consider:
For busy traders, cold wallets have certain disadvantages:
A physical digital device that safely holds cryptocurrency assets must be purchased in order to use a cold wallet, which is completely offline and needs either jotting down the secret code on a sheet of parchment that only the user has privy to.
However, traders might have a hard time when trying to move cash consistently between being an exchanger and the cold crypto wallet, finding this process tedious and also incurring withdrawal costs. Peace of mind, knowing that just you got access to funds is one of the advantages of a cold wallet.
Trading using hot wallets is more convenient, but there is a possibility of bigger losses:
Individual investors could use hot wallets, a type of storage that is always online and allows for more quick access, trading, and purchasing of other cryptocurrencies. Safety is the trade-off, and giving the platform access to both your internal and external address security puts you at risk. In the past, successful exchange hacks have led to the loss of substantial sums of money. This situation should only be taken into account for professional traders, but the sum of funds they require access to should be reviewed frequently. Large exchanges will always be a target for hackers, especially as more ordinary investors enter the market. Whether such a platform is decentralized or centralized, without suitable storage mechanisms put in place by the investor individually, they are inclined to be at risk from possible attacks.
Investing in crypto wallets is a very wise move and will surely change your mindset in the way you manage your assets and feel the owner of your money. However, if you're just getting started with investing and feel overrun by all the alternatives, we always recommend doing your own research about the possibilities, alternatives and platforms that the crypto world has to offer. Make your decision based on your needs and which is your medium and long term goal for your finances. Also, be careful with the existing dangers of scams out there; even people with experience in trading and holding crypto have fallen into these frauds. If you are planning to start a business in the crypto and blockchain ecosystem and don’t know where to start, contact Rather Labs now and we can guide you through the whole process, leading a team of developers to plan, develop and deploy your project from scratch.
About Rather Labs.
Rather Labs is a Blockchain Technical partner who provides the blockchain expertise along with the partner intensity founders need.
Rather Labs is committed to work alongside our clients as a technical partner, providing insights, technical design, engineering team management, recommendations, maintenance and technology projection.
The company is led by co-founders which have been involved in blockchain projects in finance, real state, gaming, and other industries for years.