In one of our recent posts, we talked about how to protect your crypto assets as a crypto user from hacks. Decentralized and individual wallets are not exempted from attacks and this was evident in the recent attack on Cryptopia exchange.
This article is written as a result of millions of dollars of Crypto asset been transferred from an exchange wallet, in other to guide again lost of such fund on other upcoming exchanges or online wallet.
For better understanding of a choice wallet, the concept Crypto wallet needs to be reviewed.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin, Ethereum and other altcoins. Just like physical wallet stores currency, the main purpose of cryptocurrency wallet is to store digital money. Whether you are storing your crypto asset gotten from ICO or STO, it is important to choose wisely and prevent avoidable loss of funds.
A cryptocurrency wallet creates public key and saves the private key for every cryptocurrency and provide the balance to the user. It may also refer to client software used to manage those keys and to make transactions on blockchain.
Types of Wallet
Different types of cryptocurrency wallets simply provides various ways to secure the private key. Depending on the type of storage of private key, they can be divided into two major categories –
Hot Wallet – These wallets are actively connected to internet and hence easy to trade but are vulnerable to cyber-attacks. e.g. Web wallet, Exchange wallet, Desktop wallet, Mobile wallet. Since most wallets are mobile compatible, easy to use interface and supports Bitcoin and Ethereum, ERC-20 tokens and many others, it is important to use a wallet that you have total control of the private keys or seed words. e.g. Enjin, ImToken, Trust Wallet, MetaMask and many more.
Cold Storage Wallet – Here the private key is not connected to the internet all the time, hence not so vulnerable to hacking, but, it is owner’s responsibility to physically secure the private key. e.g. Paper wallet and Hardware wallet. Hardware wallets are sometimes expensive to purchase compared to hot wallets whereby all you need to do is to download, install and operate.
Cold wallet is there for highly recommended to store assets rather than using an hot wallet which is highly prone to attack from hackers though hot wallets are portable.
Remember, whatever type of wallet you use, your private key is your power.
What is your experience or opinion about using hot or cold wallets.