Cryptocurrency Wallets: Getting Started, and How to Choose the Right Wallet
To learn how to buy cryptocurrencies and get started making money off cryptocurrency, you can check out our previous article to find out more about the top crypto exchanges.
However, even the top crypto exchanges aren’t safe from hackers and thieves. With the rise in popularity of cryptocurrencies, we are seeing more and more incidents of crypto exchange hacks.
The Bitcoin exchange Youbit recently declared bankruptcy after what it said was a ‘debilitating hack and theft’.
Continuing to store your cryptocurrencies on a cryptocurrency exchange after you’ve purchased them is very dangerous, and should always be avoided.
Instead, you should store them in a crypto wallet.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is where you store your private and public keys.
Cryptocurrency wallets interact with the blockchain in order to enable users to send and receive digital currencies and monitor their balance.
A digital wallet is also required in order to use Bitcoin, Ethereum, or any other cryptocurrency.
What Kind of Cryptocurrency Wallets Are There?
There are many different types of cryptocurrency wallets. These include:
- Desktop Wallets - These are installed directly onto a computer, and will only be accessible from this specific computer. For this reason, they offer one of the highest levels of security. However, they also have some significant drawbacks. For example, if your computer is hacked or gets a virus that renders it inaccessible, you are likely to lose all of your cryptocurrency.
- Mobile Wallets - These are installed on your phone. They are a popular option as they can be accessed from anywhere.
- Online Wallets - These run via the cloud. Unlike desktop wallets, they can be accessed from any location by any computing device.
However, they are considered to be significantly less secure than desktop wallets. This is because they are stored online, meaning they are controlled by a third party. This gives you more limited control and makes your wallet more susceptible to attacks by hackers.
- Paper Wallets - These are simple to use, and also provide a relatively high level of security. A ‘paper wallet’ is often simply a printout of your private and public keys that are generated by a secure piece of software. You can then transfer cryptocurrency from the exchange to the public address shown on your paper wallet. To withdraw currency, you simply need to transfer it from your paper wallet back to your software wallet in a process referred to as ‘sweeping’. It can be done manually, or by scanning the QR code on your paper wallet.
- Hardware Wallets - This involves storing your private keys on a hardware device - a USB, for example. This offline storage method is offers increased security over online storage, and transactions are just as simple. To withdraw your cryptocurrency, just plug in your device to a device with internet access, enter your PIN, and send your currency.
Which is the Best Option?
Storing your cryptocurrencies in a wallet hosted on a web server is a riskier option than storing them offline. This is because online wallets have a much larger range of potential vulnerabilities.
With the rise of cryptocurrencies, we have witnessed a significant rise in cryptocurrency-related hacks.
The most common vulnerability is a flaw in the wallet platform that is exploited by hackers who are trying to steal your funds.
Offline wallets are inherently more secure as they are not connected to an online network. As a result, they don’t rely on a third-party for security, and cannot be hacked.
However, it is important that you follow precautions when using any type of wallet - either online or offline. Remember, if you lose your private key you will lose all of your money, no matter what kind of wallet you are using.
How Can I Increase the Security of My Cryptocurrency Wallet?
There is a wide range of different cryptocurrency wallets to choose from. Which one you decide to go with depends largely on how you wish to use it.
Some of the most popular cryptocurrency wallets include:
- Bread Wallet - A popular Bitcoin wallet that can be downloaded from the App Store and Google Play. It makes sending Bitcoins very straightforward and offers a standalone client, meaning users are in full control of their own funds at all times. Its simplicity makes it very beginner-friendly, and it is free to use. However, it lacks some features and doesn’t have a web or desktop interface.
- Copay - Popular due to its user-friendly interface available on desktop, mobile, and online. It is also a multi-signature wallet, so is a good option for business partners who want to have shared access to funds. The main downside to this wallet is that it is reported to be slow and responsive at times, and has limited user support.
- Green Address - This is another user-friendly Bitcoin wallet that is popular amongst beginners as a result of its simplicity. It is accessible via desktop, or online, or with mobile, and has apps available for Chrome, iOS, and Android. It also features multi-signature addresses that make it a good option for business partners who wish to share funds and includes two-factor authentications for enhanced security. The main downside to this wallet is that Green Address is required to approve all payments, meaning that you do not have full control over your spending.
What Are the Top Cryptocurrency Wallets?
Recently, some crypto-backed debit cards have been removed from the Visa network after Visa claimed that the issuer in Europe violated their operating regulations.
This has caused huge problems for many crypto debit card holders and has caused many transactions to be declined, rendering many people unable to access their funds.
WaveCrest is the company at the brunt of this crackdown. Unfortunately, this company provided its services to a number of different crypto card companies that have been designed to convert peoples’ cryptocurrencies into fiat cash, including Bitwala, Cryptopay, Wirex, and TenX. As a result, cards provided by these companies are now invalid.
Always Be Cautious When Choosing a Wallet
It is important to note that there is an increasing influx of software being advertised as a wallet that is actually malware trying to take advantage of inexperienced users who are willing to download unofficial software.
Before you choose to use a specific wallet, always do your research to make sure it comes from a reliable source.
Finally, it is vital that you never share your password or private key with anyone, and that you never use it for anything other than accessing your wallet.
Even sending and receiving coins will not require you to share these details. Transferring coins will simply require your public wallet address - known as your ‘public key’.