Сrypto Wallet: what is it?
Cryptocurrency is a very popular topic today. With its help today you can easily pay in stores that have the opportunity. The most popular cryptocurrencies today are Bitcoin and Ether, their capitalization is measured in trillions and will only gain momentum in the future. But now I want to talk about the storage of these cryptocurrencies, or rather about the wallets that they are, which are better and so on. Let’s go!
The crypto wallet is not only a place to store cryptocurrencies, it is also a tool for interaction with the blockchain network (a database that works decentrally and the blocks are encrypted with a special cipher). Cryptocurrencies are divided into such types as:
- hardware and others.
Depending on the mechanisms of the wallets, they were called “cold” and “hot”.
It is widely believed that cryptocurrencies retain the assets of their owners, but in reality, this is not the case. After all, wallets in fact store only tools for successful interaction with the blockchain, such as, for example, private or public keys for transactions. Private keys are a combination of random letters and symbols that cannot be guessed not only by a person but even by a computer. A public or public key consists of symbols and letters that are “composed” by a private key. Criminals could take advantage of this and obtain private public keys thus stealing cryptocurrency. They directly and provide access to the wallet. First you need to deal with cold and hot wallets. Let’s start with the first.
Hot wallets use the Internet for their work. They very often represent a service for storage user funds. In order to ensure the operation of such a wallet, the user must first install a special program that will interact with this service. Applications can be installed on both PC and smartphone. These wallets can be web applications or applications accessed through a browser, or through a special plugin to that browser. Hot wallets also have their types related to them web wallets or online wallets, their work takes place in a cloud environment, access is obtained through a web browser and provides access for storage and transfer of cryptocurrency. Wallets of this type store all data in the server or in the browser cache. But it is recommended to keep a small amount of money in these wallets. About the reason later. The advantage of these wallets is that they work quite quickly and without delay.
The downside and quite significant is that if the user cleared the browser cache and did not save a backup, then to restore access to funds is almost possible. Fraudsters have recently started to use it actively. This is the reason why you should not store a large amount of virtual funds in these types. But for a small amount, an online wallet is probably the best option for transactions and storage The next type of hot wallets. This is the so-called desktop or computer wallet. He, in turn, is also divided into some subtypes:
- “thick” or as they are called – “heavy” (they often load the entire database which contains blocks with encryption, in short, blockchain).
- “thin” (often do not require to load all contents of a blockchain and accordingly not to load memory).
Accordingly, when using this wallet, the user mainly takes information about the stored cryptocurrency from third-party services, which is almost impossible to check for honesty.
Now consider the “cold” cryptocurrencies. Their main difference from “hot” is that they do not require an Internet connection, and in order to receive funds you should enter a public key, and to withdraw to use a private key accordingly. Cold wallets as well as cold ones have their types. Here are the main ones:
- software wallet is a kind of program that can be installed on your PC. Surprisingly, this wallet also has its subtypes: light, which does not “force” to download the entire blockchain, and heavy, which in turn load the entire database.
- hardware wallet. This is a kind of flash wallet, because to use this wallet you need to connect the program to any device. Hardware wallets have their advantages, for example, they allow you to store private keys separately from gadgets that connect to the Internet.
Also in these wallets, all tools work inside the device, which has its own software, and therefore the data from the wallet is safe even when working with it. And thanks to this, attackers will not be able to steal your wallet, because it is securely protected by a PIN code. All access keys are not transmitted via the Internet, but are stored on a so-called flash drive (token). However, the cost is quite “biting” from 50 to 150 dollars. But like everything else in the world, hardware wallets have their drawbacks. And the first of them is that the user for transactions will have to “move” their assets from hardware on the e-wallet, so it is recommended to use the media for large transactions, rather than for single use.
Users also need to keep a special seed phrase as the pupil of the eye, which is a set of symbols and letters, to restore the wallet in case of data loss. So, if the user loses this “phrase” with the code, then, accordingly, you will permanently lose the cryptocurrency itself. Therefore, it is recommended to keep this “phrase” separate from the device.
Finally, we move on to a paper-based wallet or just a “paper” wallet. Here, everything is simply cryptocurrency stored at the expense of the key and address, which in turn are printed on paper. All data from cryptocurrency are also stored separately from the Internet which in turn protects against intruders. The advantage over hardware wallets is that paper ones are cheaper.
Cryptocurrencies for smartphones. They are considered especially popular for the simple reason that most people spend more time on smartphones than on PCs.
These cryptocurrencies can be downloaded as a regular application from Google Play.
Why users need “cold” wallets
The logical question is why you need “cold” wallets. First, they are needed if the user has a lot of virtual money:
- if the user is not going to spend everything at once and plans to keep money for a long time;
- and if the user is not going to make frequent transactions. Cold wallets can look like a flash drive, or a regular storage device, connected via a USB port to a PC or smartphone.
How to make payment transactions through a cold wallet. To replenish users crypto wallet, users must first wait for the database (blockchain) to load (it can take from 1 to 2 weeks).
Next users need to open a browser window, or open a special application where the address and QR code. The address is used by users to obtain cryptocurrency, such as Bitcoin. In order to check the reliability of the wallet, it is recommended to deposit a small amount of money for transactions. And if all goes well, you can make larger amounts.
No matter how good the “cold” wallets seem, they have their drawbacks, for example, as mentioned above, if the user loses the seed phrase or forgets the PIN code, it will be extremely difficult to regain access to the wallet and, accordingly, to the funds. To avoid this, it is recommended to write down all passwords and PIN codes on a secure medium. And it is simply more responsible to save and choose a password.
How to protect a “cold” wallet
In order to better protect your crypto wallet from intruders, it is recommended to take the following steps:
- create copies of private keys and store them on multiple media;
- users should not tell a large number of people about your PIN code from your wallet or “phrase”, as well as the place where they are stored;
- it is recommended to use special means of protection, such as the so-called multi-signature (one of the types of passwords);
- users should also use a large number of means to protect their crypto wallet, such as special “strong passwords”;
- and users also need to make copies of your passwords and PINs and store it on multiple media.
And finally, do not go for suspicious links, which supposedly sag your money should not.
Which is still the best cryptocurrency
The best of all cryptocurrencies are considered to be “cold” wallets, and more specifically hardware crypto wallets, because they do not need to be connected to the Internet, but can be connected immediately to the desired devices that connect to the network. Also, if the user requests a transaction, the system only signs it, and does not create an application on a PC or phone.
Since there are many cryptocurrencies, before users open it, you need to decide on the choice. To do this, users must first understand what digital currencies you plan to store in it. After all, different cryptocurrencies are aimed at using different cryptocurrencies. There are those in which you can store only one currency, but most, and in particular the cryptocurrency Tokenexus, allows you to credit and store several different cryptocurrencies. At the same time do not chase the number of digital currencies that can be stored in the wallet. In most cases, 6 major cryptocurrencies are enough: Bitcoin, Ethereum, Tether, Litecoin, Ripple and Bitcoin Cash.
The second point to pay attention to is the registration procedure. Some cryptocurrencies may require a complex registration process. Others, on the other hand, are limited to e-mail and telephone. If users are not ready to go through a complex registration process, it is better to focus on the cryptocurrency that requires minimal effort to register.
In the world of cryptocurrencies, as in the real world, there are fraudsters who want to get users money. Therefore, one of the key factors when choosing a cryptocurrency is the security of users assets. In order for users digital currencies to be secure, the cryptocurrency must use the latest encryption and authentication technologies. It is traditionally believed that “cold” – safer than “hot”. At the same time, wallets of the “mixed” type, such as Tokenexus, can be on the one hand as safe as ordinary cold wallets, and on the other – as convenient as “hot”.
It is important to pay attention to the additional capabilities of cryptocurrencies. Some can provide the ability to quickly pay for certain services, others – integrated with cryptocurrency trading platforms, the third – to provide additional earning opportunities.