There are many things to consider when using crypto. Whether holding some digital currencies to buy products online or you’re a crypto investor, keeping your assets secure is essential. Some of the most critical security factors for cryptocurrencies are digital wallets for storing them.
Two of the most popular crypto wallets are hot or cold wallets. How are they different, and what kind of functionalities do they have? How does all of that reflect the level of security they provide, and what are their most significant weaknesses?
These are some of the things we’ll discuss today so stick with us for a couple of minutes. We’ll address the absolute essentials you need to know.
Hot wallets are always connected online. They can be desktop software, mobile apps, or browser extensions. From a security perspective, software with access to the web will always have security liabilities.
Crypto wallets are often targeted because they hold valuable assets. So, it is best to use appropriate solutions like 2FA, strong passwords, dividing assets into multiple wallets, and installing a Virtual Private Network. A PC VPN can be handy for protecting all transactions, be they via normal online banks or crypto. It encrypts traffic, making it far more challenging to spy on your transactions. Furthermore, a VPN hides your IP address, which could be used to track your physical location.
You must download these wallets before you can start using them. Users must create their accounts and memorize their private keys for access.
Web wallets are the most insecure hot wallets, but all of them are open to online attacks. Hot wallets are easy to use since they are always online. In other words, users don’t have to switch between the online and offline world to make any cryptocurrency transaction.
That allows people to make crypto transactions on the go using their mobile phones. It’s super convenient and makes people lower their guards and use their devices carelessly, leading to data exposure.
Carrying a lot of funds in your hot wallet can be a considerable liability even though it’s not a traditional wallet. You can always send additional crypto to the hot wallet when needed. Some of the largest exchanges store their finances in cold wallets.
Cold wallets are physical devices that don’t go online on their own. Most can’t connect to the web, although some versions can do it manually. These wallets can come in paper, offline computers, physical bitcoins, ledgers, or other hardware.
Users get offline private keys usually stored on metal plates or paper. Cold wallets are generally safer regarding online threats because they usually never connect to the web. However, there are threats in the physical world, and anyone can steal cold wallets and their keys.
Overall, cold wallets are safer than hot wallets, but that doesn’t mean that they are entirely secure and that you shouldn’t take care of them.
In general, cold wallets provide reasonable security. Stealing assets from a cold wallet means someone will have to steal your positions physically to gain access to the wallet. At the same time, thieves will have to steal your key, passwords, and all the PINs to gain access.
Most cold wallets are hardware wallets that come in the form of USB sticks with reinforced security. Even though users must connect these wallets to computers at some point, they facilitate safe transactions.
All transaction signings happen within the wallet and are broadcast quickly via the internet. At the same time, the private keys never leave the wallet, and nobody can access your funds. However, these wallets are far less convenient because you need to connect them to devices, and transactions are much slower.
Even though a cold wallet is a better option in general, many people don’t use it because it’s not convenient. Here are some tips you can use to secure your wallets reliably.
Use both cold and hot wallets
Never put all your cryptocurrency assets in one wallet, whether hot or cold. Distribute your savings reasonably to prevent any significant loss in case of theft. In other words, add to your hot wallet how much you need for that day and keep the rest in cold storage.
Use your mobile device carefully
People often connect to unsecured public Wi-Fi networks and applications, leading to security breaches. Learn how to use your mobile device safely, update it regularly, use 2FA, install an antivirus tool, and use a VPN.
Back up regularly
Always back up your keys offline. Consider using a secondary cold storage wallet as a backup and putting your backup at a bank you can access when needed.
Use SSL-secured sites.
When you use a wallet, check the URL address in your browser. Only use sites that start with HTTPS because they have an SSL certificate.
We hope this post helps you secure your wallets properly and understand their weaknesses. In the end, take the time to find reliable wallets that offer robust security features.
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