9. Wallets, your own bank.
Being your own bank has many advantages. However, the main disadvantage is that you are totally responsible for the funds stored. That’s why anyone with Bitcoins or any other cryptocurrency needs to know the basic rules of security storage.
There are different types of wallets: there are digital wallets (on the internet / on the mobile phone / computer), hardware wallets, and paper wallets. The “perfect” wallet will be different for each person, since the needs of each user are different.
The different types of wallets simply represent the various ways in which a person can protect their private key. The two main types of wallets, hot and cold, refer to the level of Internet connectivity of a wallet. Physical wallets and paper wallets are not actively connected to the Internet and are considered cold storage. A hot wallet is a wallet connected to the internet, which is easy and quick to use, but is also vulnerable to cyber-attacks.
If you have more than $ 10,000 in cryptocurrencies probably the least recommended is that you have them saved in a program downloaded for the PC or your cell phone, but it is advisable to buy a Hardware Wallet and store that device in a safe with the seed words to be able to use it later when they require it.
What type of Wallet would be best for me?
Why are you using Cryptocurrencies? Investment or savings?
If your answer is savings, then a crypto wallet of hardware or physics will keep your coins safe. Otherwise, a software type wallet will send and receive crypto very well. Best of all, the software portfolios are free.
Each portfolio has pros and cons, and the various bitcoin portfolios are built to solve various problems. Some portfolios may be oriented towards security, while others may be more focused on privacy.
In general terms, it would be recommended to get a Hardware wallet even if your main objective is day trading.
How a wallet Works
Let’s start by contradicting a little the definition of wallet, since cryptocurrencies or tokens are stored in your private key and not in the wallet, the private key is a code of multiple characters 100% sure that only you can know, and a public key alongside a public code that is responsible for indicating the amount of cryptocurrencies or tokens that your private key or wallet has.
The wallet also acts as a ledger for your transactions.
The ownership of your private key gives you full control over your cryptocurrencies associated with their corresponding public keys, so it is extremely important that only you know your private keys.
Paper Wallets
Before the other types of wallets existed, Paper Wallets were the major security system used to store Bitcoin. Basically, a Paper Wallet is a printed document with the address of Bitcoin and the QR. It contains the basic information to send and receive Bitcoins.
The great advantage of this is that, since the wallet is printed on paper, it is impossible for hackers to access a device and try to steal it, as there is no digital copy.
The disadvantage of paper comes with the characteristics of it. The paper can break, it can get wet, burn or wear out over time, and the information eventually gets lost.
Digital Wallets
You may not have heard the term digital wallet. But people have been talking about it for some years now as the next generation in payment technology.
The digital wallet is a system that allows you to receive money, store it and make payments using a computer or mobile device. These wallets can also work with cryptocurrencies (bitcoin, ethereum, etc). When working with cryptocurrencies it is necessary to use encrypted keys and addresses.
Digital wallets are the most used, easiest and least safe. This type of wallet stores the private key of the users in a server controlled by a company, that is, the client does not know and does not have the private key, therefore, the person responsible for keeping it secure and saving it is the company that offers the service.
The great advantage of online wallets is the ease of use and accessibility from anywhere as they allow payments and transfers to be made quickly. They are ideal to have a small amount and be able to operate with agility and comfort, but not to deposit all the savings there.
Why are digital wallets good?
- The easiest way to store small amounts of bitcoin.
- Convenient; making and receiving payments is simple and fast.
- Some digitalwallets allow access to funds through multiple devices.
Why are digital wallets bad?
- They are not safe for the safe storage of large quantities of bitcoins.
- They are riskier normally, ALWAYS have to check that the wallet it’s downloading from the official page. Never trust programs, software or wallets that promise you profits that are not reflected in the project’s whitepaper or its official website.
Hardware Wallets
Physical wallets, also known as Hardware wallets store the necessary private keys to be able to transact with your Cryptocurrencies. Its use is very simple for new users as well as for people already experienced with transactions and the operation of Bitcoin payments.
This technology has been developed to facilitate the transfer and increase the security to users in relation to cryptocurrencies, since these have been hacked previously. For the reasons mentioned, large investors have been in charge of dedicating large sums of money to the research and development of these devices.
These kinds of wallets extremely reliable and have the ability to take your cryptocurrencies where you need them, because they are portable. They also provide the necessary security, since they are designed with software that protects the files from malware, spyware, or others, so that when introducing the equipment is not vulnerable to the virus species.
Why are hardware wallets good?
- The simplest option to store cryptocurrencies safely.
- Easy to recover and secure.
- Less margin of error; installation is easy even for users with less technical knowledge.
Why are hardware wallets bad?
- They aren’t free.
Examples of Hardware Wallets
· Ledger Nano
· Keepkey
· Trezor
· Ledger Blue
· Ledger Nano S (Amazon)
KeepKey
KeepKey was launched in September 2015 and was the second bitcoin hardware portfolio to offer a screen. Its larger screen provides some additional security features that Nano S and Trezor lack.
Trezor
Trezor is the Cold Portfolio device offered by SatoshiLabs, a company created at the end of 2013 and established in Prague, capital of the Czech Republic. Trezor offers complete security for all your operations through a device that provides an isolated environment for offline transactions.
The name of the device has origins in Europe, since “trezor” is translated into “vault” in most Slavic languages, including Czech. Being a kind of “vault” for its private key, Trezor claims to use a number of clever tricks to maintain security even on compromised and insecure machines.
Ledger Blue
This Ledger device has a cost that is around 800 USD, the equipment can be found on Amazon. The cost of Ledger Blue is extremely expensive compared to other cryptocurrency storage equipment, due to the wide variety of useful options it has, and the technology it has.
Ledger Nano S
Ledger Nano S is a Bitcoin, Ethereum and Altcoins hardware wallet, based on robust safety features for storing cryptographic assets and securing digital payments. It connects to any computer (USB) and embeds a secure OLED display to double-check and confirm each transaction with a single tap on its side buttons.
The Ledger Nano S is the most economical of the hardware-type bitcoin wallets with a screen, costing about 90$. Ledger, one of Bitcoin’s best-known security companies, launched the device in August 2016.
The reason why this wallet is popular is because of its low cost (90$) compared to its competitors. It is smaller than Keepkey, which makes it more comfortable to transport.
Can I keep my cryptocurrencies in an exchange?
Of course, you can, but you should not.
When you register in an exchange you get an automatic addresses for each cryptocurrency that supports the exchange, this does not mean that you have a wallet but an address of the exchange wallet associated with your funds that are within that exchange.
The exchanges behave similar to the banks, they provide you with “number of accounts” or addresses but the money is not in your pocket, safe or in your house, but that money or those cryptocurrencies are the property of the bank or the exchange.
One last thing to keep in mind when it comes to crypto portfolios is that there is a difference between a portfolio and a bank. Some crypto users see Coinbase as a wallet, but as we were saying, companies like this operate much more like banks.
It is simply important to remember that anyone who controls private keys controls the cryptocurrencies attached to those keys.
It is very difficult to keep one and the details that settle the balance by one type or another of wallet, in the end the decision is based on integrations with other applications, wallets or support to several cryptocurrencies, but it will probably be one of the most important that we will have to take in our stay in the world of cryptocurrencies, so do not take it lightly.
