When you own cryptocurrencies for the long term, safety should be your biggest concern. Several people and groups with ill intent might hack your account to steal your funds; hence it is always advised to use a wallet instead of a centralized exchange to hold your cryptocurrencies.
As the owner, using wallets is one of the most responsible things you do since if you lose your cryptocurrencies, you probably won't be able to retrieve them.
Wallets are the backbone of the cryptocurrency industry; no matter who it is, retailers, institutions, and whales have to use wallets to protect their assets.
Despite being responsible and taking all the necessary precautions, hackers find a way to get through your wallet and drain your funds. It is therefore recommended to take some extra precautions to safeguard your money and enjoy a smooth journey in these growing decentralized funds. That is why we have written this article to help improve the security of your assets, but before that, let us understand the different types of wallets, their uses, and their drawbacks.
A cold wallet is a crypto storage hardware that is not connected to the internet; it is therefore known as a hardware wallet. These cold wallets are typically in the shape of a USB stick or hard disk and are considered the most secure wallet type. In order to gain access, hackers would need to acquire the device and the associated passcode physically. While security is the most prominent, the cost and difficulty of use are the biggest cons.
A hot wallet is a cryptocurrency story software wallet that is mostly always connected to the internet and the crypto network and hence is not as secure as hardware wallets. Hot wallets are therefore known as software wallets. The flexible nature of hot wallets makes them anything from a mobile app to a browser extension. Hence, flexibility is the biggest pro of such wallets, while less security is the biggest con.
Custodial wallets are wallets in which third parties handle the private keys; these third parties are therefore in total control of your funds. These third parties are generally centralized exchanges like Binance and WazirX; these wallets are also known as spot/trading wallets. Hence, even though centralization is the biggest con of such wallets, it is one of the most accessible and convenient options.
Creating a secure password is one of the most basic things you can do to keep your funds safe; this is not just accessible to the crypto world; strong passwords help you secure your identity all over the internet.
By following a few basic steps, you can protect yourself from most attacks. A strong password should have:
A capital letter
length should be more than 8
should have special signs like @,/ etc
Password should not be guessable
2FA or Two Factor Authentication is two-step verification; it is basically a security process that needs two different authentications to get in. While one step is a password, the other could be anything from OTP to google authenticator.2FA is the best and most convenient way to protect both users' credentials and the from being accessed resources. 2FA can be an essential feature to secure your custodial wallets. Therefore, always enable 2FA whenever it is available.
As mentioned above, a cold wallet is the most secured wallet type. Since most hackers attack you from the internet, a cold wallet, which is rarely connected to it, is the best way for security. Cold wallets need upfront investment; they cost anywhere from $50 to $150. This investment can seem like a lot, but it can save you thousands of dollars one day.
Private keys are the keys that are used to verify ownership and verify transactions. These keys are the most important item in your crypt journey, and hence it is highly advised that you do not give them to anybody. Backing up private keys somewhere offline in a bank security box is the best way to keep them safe. But many people store it on the internet and use high-level encryption to hide these keys.
While using software wallets on the phone, always update the wallet whenever a new update rolls in. This is an excellent practice because developers keep on working and making the wallet as secure as possible, and for that, they need to roll out regular updates.
There are many nefarious groups out there who will try to impersonate trending blockchain projects and would ask you to download fake apps or connect your wallet extension to fake websites by offering unrealistic amounts of free airdrops. Many of these malevolent parties keep lurking around on social media websites like Telegram and Twitter; look out for them.
Cryptocurrencies, while being one of the most profitable markets out there, there are hundreds of hacking cases because of neglection by users; if you can prevent them, your crypto journey will be smooth and hassle-free.