Cryptocurrencies are on a gradual pace in getting widespread acceptance from most parts of the world. Many cryptocurrencies hit the industry over the years amidst critics who expected them to last less than a year. However, they have thrived under the competitive crypto market. For instance, Bitcoin was trading below $1 when it emerged in 2009 and has recorded a price uptrend over the years. The Bitcoin trend is witnessed in 2017 when the coin hit an all-time high of $20,000. Currently, Bitcoin is trading at $56,800 as of this writing.
As the crypto industry experienced these price patterns, the number of security-related risks such as threats from hackers went up. Taking into account that several crypto investors are pretty new in the industry and not aware of how to protect their crypto assets, some hackers are devising ways to rip off their assets. The hackers’ target traders account, especially by redirecting funds being transacted from one digital wallet to another. To get a better insight, let’s dive deeper.
When you have a lot of cash in hand, you seek a physical account like a bank account to hold the assets. The same case applies to cryptocurrencies, but they are stored in digital wallets, ranging from web wallets to hardware wallets.
In essence, these digital wallets can exist on your smartphone, your pc, or you can safeguard them by writing down the wallet addresses and private keys on a piece of paper. However, if you’re wondering about the safety of these digital wallets, you’re not alone. A digital wallet comes with a private key that you will use to access your crypto assets.
One of the worst security-related threats you can encounter is misplacing your private key or someone else getting access to it. If you lose your private key, without a doubt, you will lose your crypto assets.
There are other factors, such as hacking, that pose a threat to your wallet. The following are ways on how you can hold your digital coins.
Many analysts term hot wallets as online wallets since they function effectively on smartphones, computers, or other devices. However, hot wallets are prone to risks because they offer private keys within these devices.
Although hot wallets may appear effective when transacting and accessing your cryptocurrencies, they are prone to security-related risks. More to say that if you don’t employ the correct security protocols when utilizing hot wallets, hackers may get an opportunity to attack your assets. In addition, hot wallets are intended to hold and transact a limited volume of digital coins. Still, you need a reliable and regulated trading platform such as the Bitcoin Evolution to trade cryptocurrencies like Bitcoin and Ethereum.
However, holding your crypto assets within an exchange wallet is much different than keeping them within your wallet. One of the reasons is because exchange wallets are offered via the underlying exchange and only serve as custodial accounts. Another factor is that the trader using the exchange wallet does not own the private key for the digital coin.
Therefore, when your account or the exchange wallet is at risk from cyber threats, you may lose your assets. Moreover, it’s considered a wise move to hold a smaller percentage of your digital coins within an exchange wallet or hot wallet and the other portion within your wallet termed as cold wallets.
Another suitable and reliable method for storing your cryptocurrencies is within a cold wallet. What makes cold wallets appear trustworthy and much safer is because they are not connected to the internet, which reduces the risks of encountering cyber threats.
Cold wallets, also termed hardware wallets or offline wallets, comes with many benefits for crypto traders. They help traders hold the private keys or wallet addresses without internet connectivity, which enables traders to avoid various risk factors when accessing their crypto investments.
A paper wallet is considered one of the safe methods for holding a digital coin offline. Also, a paper wallet is a type of cold wallet that you can access through the underlying sites. For the most part, a paper wallet creates private keys, including public keys, which you can print on physical paper.
Thus, it’s much easier to transact your digital coins within the cold wallets using the private key recorded on the physical paper. Still, to boost security, several crypto traders may file these paper wallets and keep them at their preferred local banks or within a secure place in their residence.
How do digital wallets work?
Any digital wallet can occur as a mobile-based app or through your computer device. To a large extent, the mobile-based app wallet is renowned by the masses based on factors such as mobility and flexibility.
Although there are many digital wallets, it’s easy to own one as all you have to do is download and install it on your mobile device. However, conduct extensive research before determining your preferred digital wallet as the industry is encircled by risk factors such as fraud.
Is it safe to use a digital wallet?
The issue about the safety of your info is a significant concern for any beginner and experienced traders. Although there are risk factors in the sector, mobile-based wallets are deemed safe by many crypto traders. On the merits side, many analysts claim that they are much secure compared to holding your account details, including other essential data within a physical wallet.
A secure mobile-based digital wallet is considered to have robust security protocols such as encrypting trader’s data, which reduces the risk levels when transacting payments from one wallet address to another. Also, this security feature helps to safeguard your data if cyber threats undermine your preferred exchange.
The question about the safety of any digital wallet is considered a significant subject matter for all traders. However, there are factors such as the number of active users, previous exchange data you should consider before settling on any digital wallet.