With the evolution of the cryptocurrency industry, the ecosystem and the services that surround it have also developed. From wallets to exchanges the supportive infrastructure has risen along with the development of the industry. In this article, we will discuss cryptocurrency wallet security.
What Is A Crypto Wallet?
A digital currency wallet is an application that enables cryptocurrency users to store and retrieve their crypto assets. As with the traditional currency, you do not need your wallet to spend your cash, you just need it to store your cash. But that is not the case with cryptocurrency. A wallet is a prerequisite for you to even do any transaction.
These are applications that might run on a smartphone or a computer. You can imagine your digital currencies stored in a wallet the same way files are stored in any USB device. Cryptocurrency wallets primarily are of two types: cold wallet or hardware wallet and software wallet or digital wallet or hot wallet.
How Do Crypto Wallets Work?
Digital currencies are formulated and developed with blockchain technology. These currencies cannot be handled physically like any paper money or copper coins as they do not have any physical representation. All your crypto transaction records are maintained by your crypto wallet that also acts as an e-ledger. These wallets are specifically designed to provide a public and a private key that will keep your cryptos safe.
A private key is like your ATM pin that should be kept highly confidential. This is the only thing that you will require to do any transaction. If you lose your private keys then all your funds are lost forever.
Types of Cryptocurrency Wallets
Digital currency wallets are primarily of two types: Hardware or hot wallet and software or hot wallet. Both the wallets have their own specifications. Let us know about both the wallets in detail before drawing any conclusion on cryptocurrency wallet security.
What Is A Hardware Wallet?
Hardware wallets are safe and mighty crypto wallets. They allow you to store your private keys offline that in turn saves your crypto assets from getting hacked. There are many companies that manufacture hardware wallets for cryptocurrencies. These wallets look like USB devices that can be attached to any offline device in order to access the cryptos.
Examples: Ledger Nano X, Ledger Nano S, Tether, etc.
What Is A Software Wallet?
Software wallets are those crypto wallets that need to be installed on a computer or a smartphone. Private accounts on the crypto exchanges for example Coinbase also include software wallets. These software wallets are also known as hot wallets. Since they are operated with the help of the internet they are more prone to hackers as nothing on the internet now is private.
Cryptocurrency Wallet Security: Choose From Two
To check on cryptocurrency wallet security we will discuss both pros and cons of these wallets. Both have their pros and cons. It depends on you which will suit you best. So let us begin.
Software or Hot Wallet
Software wallets are easily accessible and are mobile. But since software wallets need to be accessed online they are more prone to hackers.
According to an online news based source for Cryptocurrency called Inside Bitcoin, over the past nine years there has been more than $11 billion worth of cryptocurrency stealing in various hacking incidents. The biggest incident that was reported was in 2014 where $6.68 billion of cryptos have vanished.
Hardware or Cold Wallets
Hardware wallets on the other hand can be operated offline and independently. But they can be bulky and may require more effort to access. They may not be as easily accessible as that of software wallets but their offline feature makes them much more safer than that of software wallets. When there is no intervention of the internet the cryptos and all other information are less prone to hackers. But in this case, as well there is a drawback. There are chances that your private key or the hardware device gets stolen. In that case, also the user cannot do anything. So after buying a cold wallet you can not be rest assured that your cryptos are safe for life. You have to make an attempt there as well.
Hardware vs Software Wallets: Verdict
Both the software and hardware wallets have their own pros and cons. But after comparing both of them this can be concluded that hardware or cold wallets are much more safer than that of software wallets. And that is because there is no intervention from any outside network. But these hardware wallets are pricey at times. So make the judgment all by yourself before choosing the best digital currency wallet for you.
After drawing a comparison about cryptocurrency wallet security it can be concluded that both the wallets: software and hardware try their level best to provide safety and security to their users, but hardware or cold wallets are safer as they work independently and offline.