How can we protect investment, security and several kinds of Cryptocurrency Wallets?
Virtual money needs to be stored in a safe place as well as ordinary money. We usually store ordinary money on a bank account or in a safe, but additionally we are used to have a small amount of money in our wallet. Virtual currency can be stored similar. Of course, nowadays everyone knows that cryptocurrency can´t be stored physically as it is technically not possible. Generally, the main reason is that virtual currency is information which is stored in Block chain. Therefore you are not able to put the currency in your pocket. This means that Cryptocurrency wallets are actually cases where you save access keys of your Cryptocurrency addresses.
This article will focus on the question, how and where you can save/store your virtual currency as well as the pros and cons of these repositories.
There are many possibilities where you can store your Cryptocurrency, but the selection, which is the most convenient one for you, is not simple. Each repository has its own pros and cons. Thus you will have to thoroughly consider, what type or place would be beneficial and convenient for you for saving your Cryptocurrency.
So, let´s have a look on the options.
Virtual Cryptocurrency wallets
What is a Virtual Cryptocurrency wallet? Some information was already mentioned above. Such a wallet contents the information concerning your Cryptocurrency, which are stored in Block chains. We distinguish two types of wallets. The first type is called Hot Wallet which is connected to the Internet. The second one is the Cold Wallet which is working offline. Generally, using Cold Wallets is definitely safer than using Hot Wallets as they are not endangered by hackers. Therefore these wallets are more convenient for a long-term storage of the Cryptocurrency. Whereas, Hot Wallets work online and you can get access to them from each of your devices or computers with an existing Internet connection. These wallets work on a web browser thus you need only credential which you set up during a registration process. The credential can be changed only by you.
One virtual wallet is able to generate an arbitrary number of addresses. You can make them public and everyone can send the virtual money to the address, which then will be saved in your wallet. It is working similar like a public key. The key is mathematically interconnected with all addresses which are a possession of one wallet. The wallet is not able to recognize a transaction without the key. Moreover, you cannot send and receive any transaction without this key. You must not share/tell that key to anybody.
Types of wallets where you can save your Cryptocurrency:
Hot Wallets (online wallet)
- A Web wallet
- A Mobile wallet
- A Software wallet
Cold Wallets (offline wallet)
- A Paper wallet
- A Hardware wallet
1) Web wallets
This type of a wallet is suitable for everyone, who wants to store his Cryptocurrency for a long time. The usages of these wallets are simpler than using other wallets. But anyway, they include the highest risk for storing Cryptocurrency as a service provider is managing your financial resources and holds your key. For this reason, you should have only a small amount of money in those wallets for a daily using or a short-term business. We would like to recommend you several security methods for this type of wallets such as a two-factor authentication. Despite that fact such wallets have steadily a significant position in the Cryptocurrency environment.
Handling web wallets is simple and I am sure that each beginner can manage it. They look like a service of Internet banking. You have to know your credentials such as an e-mail address, a password and an ID, which was specifically determined for you. In most cases web wallets can support only a limited number of Cryptocurrency or they are focused on only one Cryptocurrency. However, they have many benefits like sending money to Cryptocurrency market or to pay with them. At this time the number of markets allowing the payment with those wallets is growing every month. Many of these wallets have their own mobile application for smart phones thus you can check your virtual money whenever you want.
2) Mobile wallets
A mobile wallet is one of the most popular kinds of wallets among the mobile applications for smart phones. These simple applications can save your codes and it allows you to pay directly with them with your smart phone. You will undoubtedly appreciate their help as you have your cell phone with you almost everywhere you are and at every time. Therefore, you will have your Cryptocurrency always with you. If you have a cell phone with the NFC function, you can pay with the Cryptocurrency only by putting your phone on a cryptocurrency terminal. One of the biggest advantages of these wallets is that they are able to store multi-currencies. This means that you can possess several different Cryptocurrencies in one wallet, where you can ex-change them. Nevertheless, you must be aware of their security issues, meaning to avoid, that a third side gets access to your private key.
Mobile wallets do not download data from Block chains; therefore they do not use a space in your cell phone. They store only a fragment.
Free wallets have a very positive reference. You can find this wallet in a form of a web wallet or as a mobile wallet as well. It is also multi-currency enabled. It’s primarily benefit is that you can make it safe due to several ways which are provided by Free wallet. More information about it you can find under the following link: https://freewallet.org.
Please follow a link for more information about other mobile wallets.
3) Software wallets
In comparison to the wallets mentioned above, a safer variation is a software wallet. You can install it to your personal computer like a common software. This wallet is able to generate a new private key and a new account where you can create an arbitrary number of addresses. Only you have an access to your private key due to the key is not stored by a service provider as the keys of the wallets mentioned above. A software wallet can be downloaded in a full or a light version. One of the disadvantages of that wallet is that it has the ability to download all bulks of dates from the Block chain. Moreover, the full version is able to back-up a copy of that data which takes a large space on your hard drive. I am sure that you are familiar with the fact that this reliable software is official. Nevertheless, you do not have a 100% guaranty of its security which can´t be guaranteed by a long password (it should be an essential rule). For that reason, a software wallet should not be installed on devices which are permanently connected to the Internet. One of the solutions of this situation might be to creating a virtual computer for example via Virtual Box. You can install your wallet there in a read only mode and put as storage of your public addresses. If so, you can steadily check your financial resources on your computer. In case of the hacking of your computer, you do not lose your money as you can upload a file of your wallet on an USB stick. This file can be moved to a computer that is not connected to the Internet all the time.
Another shortfall of the software wallets is that your virtual money can´t be available for you every time. It depends on the computer where the wallet is installed. Moreover, you cannot pay at the Cryptocurrency terminals as it is the case by using mobile wallets. It means that the software wallets lose their mobile usage. However, you can send your virtual money to a market, from a wallet to a wallet or even pay your purchase in e-shop (but only in this case). Nevertheless, the software wallets have a very good-quality and are safe.
4) Paper wallets
Paper wallets are one of the safest kinds of wallets. This type of wallet is convenient for people who have a higher amount of virtual money or want to save this money for a long time. You do not have to install any software to your computer or set up a password or a private key. You will only generate a wallet (plus its private key) and an address (for receiving Cryptocurrency) on a website. The private key is not property of any service provider. Only you are the owner of the private key (in a PAPER FORM). You can find a lot of generators of Cryptocurrency wallets and most of them work out quite well. These generators create also QR codes for you. Due to these codes you can better receive or import Cryptocurrency to your cell phone. In case of using the paper wallets, you will only generate their identifying code where you will send your virtual money. A document related to a code of the wallet should be printed and hidden in a safe place. According to the advice of many experts, you should make more copies of the documents and hide them in different places. The main reason is that a paper form of the wallet could be easily damaged and even somebody can steal it. Therefore keeping it safe is essential. Another difference of the paper wallet is related to the withdrawal or the sending of your virtual money. In those cases you have to send all of your stored in your wallet. You can´t operate only with parts of your money in the wallet as you could lose the rest of the virtual money. These kinds of paper wallets are not suitable for a business on a daily basis, because it is actually only a private key printed on a sheet of paper. If you want to buy a Cryptocurrency at a machine, you would get only a printed wallet on a sheet of paper. If you want to transfer your virtual money from an online wallet to a paper wallet, you have to create a new paper, which would be defined for the money.
5) Hardware wallets
Generally, hardware wallets are the safest ones. These types of wallets are more convenient for storing a higher amount of virtual money for a long time. You should install a mobile wallet if you want to handle or sell also only parts of your money.
Hardware wallets look like USB sticks. There are types of them who have an extra display. You can buy these wallets in the Czech Republic. Each type of the wallets varies by its size, functions and the technology. Its display shows you important information like the address of the wallet. First of all, you will have to set up your wallet. You will get a seed showed on the display, which was generated for you. In case of a transaction, you must enter your password and confirm it. In fact, hardware wallets combine all pros of the wallets such as mobility, control of your private key as mentioned above. In that case you can use an access to your classical software wallet. Of course, you do not save your Cryptocurrency to a hardware wallet. The most important thing is to get your private key. Due to this key you will get to your hardware wallet via authentication to a web or software environment. Currently, you can save many different Cryptocurrencies. Additionally, a big advantage of the hardware wallet is that if you lose this wallet, you can get your virtual money thanks to a master seed which was created by the wallet during your first setting.
The most popular hardware wallet is TREZOR which costs roughly 69EUR. This wallet is the first one among the hardware wallets. It was developed by the Satoshi Lab Company in the Czech Republic. Nowadays, you can get its brand-new version TREZOR T.
Another great hardware wallet is the competitive wallet Ledger Nano S, which you can buy for roughly two thousands 100EUR. It is a simple USB stick. Due to this wallet you can store a great amount of different Cryptocurrencies, even the smaller one.
6) Are Cryptocurrency wallets safe?
The security of the Cryptocurrency wallets depends on the way of use. We should not forget that the only one way how to get your virtual money is by using your credentials and passwords, which you handle. If you do not save or backup that information, somebody could steal your virtual money very easily. Therefore you must be careful and handle your wallets properly in order to protect your virtual money.