- What is a cryptocurrency wallet?
- What is a public key?
- What is a private key?
- What is a seed phrase?
- How do cryptocurrency wallets work?
- The difference between hot and cold crypto wallets
- Types of hot wallets
- Types of cold wallets
- Pros and cons
- Best practices to keep your crypto assets safe
- The bottom line
What is a cryptocurrency wallet?
What is a public key?
What is a private key?
What is a seed phrase?
How do cryptocurrency wallets work?
The difference between hot and cold crypto wallets
Types of hot wallets
Desktop and mobile wallets
Types of cold wallets
Pros and cons
|Type of wallet||Pros||Cons|
|Browser wallet||Easy to use and interact with decentralized applications and exchanges.||Always connected to the internet, often only protected by a password.|
|Software wallet||Easy to use and store several cryptocurrencies.||Always connected to the internet, often only protected by a password.|
|Exchange wallet||Ideal for traders and users who need the tools offered by exchanges, such as futures and leveraged trading.||You don’t own the keys to the wallet, leaving the funds susceptible to hacks.|
|Hardware wallet||Physical access to the wallet is needed to execute transactions, making it very safe.||They cost up to hundreds of dollars, and transferring coins takes more time and effort.|
|Paper wallet||Compared to hardware wallets, paper wallets are free.||Easy to get destroyed or lost. Only hold one cryptocurrency type per wallet.|
Best practices to keep your crypto assets safe
- Only use trusted exchanges: when picking an exchange to buy, sell, and trade crypto on, only work with reputable exchanges. Look for exchanges with excellent reviews and that are well known and trusted within the crypto community. Coinbase, Binance, and Kraken are a couple of the most reputable exchanges.
- Use strong, unique passwords: Never reuse passwords across your accounts, especially since cryptocurrency services are prime targets for hackers. It’s recommended that these passwords contain at least 16 characters. A password manager can make this process easier and faster.
- Use multiple wallets: Don’t keep all your crypto assets in one place. The best way to handle it is by using one or several cold storages for long-term holdings, and at least one hot wallet for trading and transactions.
- Double check before sending crypto: Some malicious programs can edit and paste a wrong transaction address whenever you send a transaction. Typically, the new address belongs to an attacker. It’s better to be safe than sorry.
- Activate two-factor authentication (2FA) whenever possible: You should always enable two-factor authentication (2FA), it adds a second layer of security to your account. Ideally, use an app like Google Authenticator instead of SMS codes, as SIM card swapping is a common attack vector.
- Always use a VPN when using public WIFI: If you have to use public WIFI to access your crypto, always use a VPN to keep your traffic encrypted. Ideally, only access your crypto assets when using a private or secured network.
- Keep your holdings private: Try not to be too vocal about your holdings in public. The less people know about your digital assets, the better it is for your security. You never know who is watching or reading your public content and they may target you because they know there is something to be stolen.
- Don't fall for giveaway scams, phishing, fake websites: Don’t ever fall for offers sounding like “send us one Bitcoin and get two Bitcoin back.” This type of attack is quite common on Twitter, with attackers frequently impersonating celebrities, politicians, or crypto personalities. The same goes for fake websites and emails.
- Have a backup of your private keys/seed phrase: Losing access to all your holdings can be soul-crushing. So it's important to back them up and keep them in different locations, in case of a fire or similar damage.
The bottom line
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