“Crypto Wallets”: Are they Actually Safe?

Snapshot

• Hot Wallets
• Cold Wallet

An increase in the popularity of Bitcoin has also increased the risks associated with it. An increase in the prices of Bitcoin has also led to an increase in the number of hacking events associated with it. With many new investors being unaware of how to secure their investments, hackers are using new innovative ways to steal funds. 

Digital wallets are used to store Bitcoins. Digital wallets can be software-based or they can be hardware-based, they can either reside on a computer, desktop or could be kept on mobile devices, or they can be secured by printing private keys and addresses. 

Now the question that arises is how secure is the Wallet? It is a very important question. The answer to this question is dependent on the ways through which a user can manage his wallet. Every wallet contains a set of private keys, which provides access to the digital wallet. If the user loses his private key he will not be able to gain access to his cryptocurrency. A user can also be denied access to Bitcoin in situations where there is a system malfunction due to hacking or by losing the system on which a digital wallet is present. 

Some of the best methods that can be implied to store Bitcoin securely are provided below:

Hot Wallets

Hot Wallets are those wallets that run on internet-connected devices such as phones, computers, or tablets. Accessing hot wallets to carry out transactions can be very easy, but they are also vulnerable and prone to attacks. 

Even if a user is utilizing an exchange wallet, it is not necessary, it would be safe. In the past, there have been instances where millions of dollars have been lost to hackers from exchange wallets. These exchange wallets even don’t provide any insurance to the users for cryptocurrency stored in them.

A user must use these wallets to only hold a small amount of cryptocurrency. A wise move will be to hold your money in a checking account and only hold a small amount of money in digital wallets. 

Cold Wallet

The next wallet and probably the safest option for the storage of cryptocurrency is a cold wallet or hardware wallet. Cold wallets are not connected to the internet; therefore they stand a very less chance of being compromised. 

In this wallet, the private key and the address are stored offline and it comes with software, working in parallel, allowing users to view their portfolio without risking the private keys.  

A paper wallet is one of the safest ways through which cryptocurrency can be stored offline. In a Paper wallet, both public and private keys are printed on paper and the wallet can only be accessed through that paper. There is no other user interface of the Paper wallets other than the piece of paper and blockchain itself. 

Cold wallets are more advantageous than hot wallets as they cannot be affected by any online threats. 

Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.

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