Dec 3, 2019
A Guide to Cryptocurrency Wallets
As Bitcoin and other cryptocurrencies expand, hackers see new potential for thefts. How do you keep your digital investments safe?
Many can’t get a good night’s sleep because they know their cryptocurrency might get stolen. However, storing your cryptocurrency safely is easier than it might appear at first sight.
So, you decided to take advantage of the market dump and bought Bitcoin or some other coin, and maybe even traded it on the exchange. How to save money? Now let’s look at the types of crypto wallets and their features.
First of all, wallets can work either just with one coin or with many cryptocurrencies. All the variety of such wallets can be divided into two types of storage:
- Cold. You kind of hide the money under the floorboard or lock it in a safe. Such wallets do not require constant communication with the network. Private keys and money are stored on your device or paper. Yes, it is safe, but at the same time, it is not very convenient if you need to send money urgently.
- Hot. Keeping money hot is the same as carrying banknotes and coins in your pocket. Cryptocurrency in such wallets will always be at hand in access from any device. It is good for quick sending to the exchanges or other people, but bad in terms of security, because the data, including the private key, are stored on remote servers.
Both options have a very wide variety of tools and services for Bitcoin holders, so we will examine them separately. This may be extremely useful for those who earned their first coins with cloud mining at Hashmart.io.
Desktop Bitcoin wallets
Wallets for PC are designed to be installed on a computer. At the moment, such wallets are considered as one of the most secure. The PC wallet owner can control the level of protection and manage his bitcoins himself without any intermediaries. Basically, this method of storage is preferred by advanced users and people who want to store large amounts of bitcoins for a long time.
There are two types of Bitcoin wallets for PC: full and portable. The first one requires downloading and storing all blocks, which will require a large amount of free space on your hard drive. But, despite considerable disadvantages of such way of storage, such Bitcoin clients will help to provide a decent degree of safety and anonymity.
Bitcoin Core is the most popular wallet of such type. This client was one of the first to be launched and still occupies a leading position among crypto enthusiasts. This program is constantly being improved and updated and can be installed on almost all PCs. But you should take into account that since this wallet is rather resource-intensive, you should not expect a high speed of its operation.
The portable wallets don’t require downloading and storing all the blockchain. This significantly increases the speed of their work and reduces the power requirements of your PC. Such wallets can be installed on netbooks or tablets. But it is necessary to mention, that portable wallets have a lower level of security than heavy wallets.
Electrum is the most popular portable Bitcoin client. This wallet allows you to store bitcoins in an offline mode, without requiring an Internet connection. In addition, this program allows you to restore the wallet with a special code.
Mobile Bitcoin wallets
Mobile wallet is a special application for smartphones. The main feature of such applications is that only part of the blockchain is loaded on the device. And the rest of the information is received from trusted services, which can affect the security of this method of storing bitcoins. For this reason, it is not recommended to store large amounts of money on such platforms.
But mobile wallets also have their undeniable advantage. With the help of such wallets, you can pay with bitcoins directly from your smartphone. Such payment implies displaying of the bitcoin address in the form of a QR code or appliance of the technology of contactless payment (FNC).
The most popular mobile Bitcoin wallet, Blockchain, is notable for its great functionality and simple interface. And also, GreenAddress, which is characterized by increased security due to the confirmation of the transaction not by one, but by several private keys.
Online wallets
The easiest way to store bitcoins is to create an online wallet. There are many services on the Internet that allow you to create such a wallet. The most popular are:
- Coinbase;
- Circle;
- Blockchain;
- Xapo.
And such services have wide popularity. After all, Internet wallets do not require the installation of special programs, there is no need to load blocks of data and access to them can be obtained from any device that has a connection to the network. But there are also their own pitfalls. All data are stored on the service. So, if there are failures in the work of this service, intercept passwords, you can easily lose your savings.
Hardware wallets
A hardware wallet is a special device for storing private keys in electronic form. All transactions can be performed only through it.
And such a purse does not need access to the Internet. Among the hardware wallets the most popular are:
- Trezor;
- Ledger Nano S;
- KeepKey.
Paper wallets
A paper wallet is a document containing two generated QR codes. One of these codes is a private key that can be used to spend bitcoins. And the second one is a public key, used to get coins.
You can create a paper wallet by using specialized Internet services. Such services will help to create a bitcoin address and generate QR codes. The received data should be printed on ordinary paper and stored.
Having printed out your paper wallet, you should take its safety very seriously. If someone accesses it, you may lose all your savings. In addition, if stored carelessly, the paper carrier may be damaged.
How to increase anonymity when using Bitcoin wallet
Bitcoin wallets are not completely anonymous. Almost all data, including public keys and transaction amounts, are publicly available. Although the use of cryptocurrency does not require binding to personal data and the transactions published do not show who exactly the transaction was between, the Bitcoin wallets address and the identity of its owner can be associated if desired.
For these reasons, there are some ways to increase anonymity:
- Using TOR or any other method to hide an IP address;
- Creating a new address for each new transaction;
- Using special bitcoin mixers that distribute bitcoins between hundreds of wallets and return the amount to the owner, thus confusing transaction traces.
How to protect Bitcoin wallet
Like a normal wallet, a Bitcoin wallet also needs protection. And given that this currency is electronic and is used primarily in the network, and attention to such money requires more. To ensure the safety of your savings, it is recommended to follow some rules.
Wallet encryption
It is the first thing you have to take care of. Encryption involves setting a strong password. But you should understand that a password will not protect you if your device is infected with viruses. That’s why it is recommended to use additional methods of protection.
Multiple signatures
Multi-signature is an excellent additional security feature. This method implies that a transaction is executed if it is signed by several users at once. This method can be successfully implemented between family members, business partners or even one client if they sign a transaction from a second device.
Other ways
These may include backups to help restore your wallet in the event of loss or damage to your device. Also, you can choose not to store large amounts of money in one wallet. It is better to leave small sums for usual expenses on the account of your purse for the personal computer, smartphone or on a server, and the basic sum to store in offline purses. Lack of connection to the Internet will protect your savings from scammers and malware.
