There are various cryptocurrency wallets available to allow users to store and access digital currencies in a variety of ways. The question in this context is how reliable these wallets are. Before examining the security aspect, it is useful to understand the different types of cryptocurrency wallets available today.
Cryptocurrency wallet: types and types
These wallets can be broadly classified into 3 categories:
- Software wallets
- Equipment wallets and
- Paper wallets
Cryptocurrency software wallets can again be divided into desktop, online and mobile wallets.
- Desktop software wallets: These wallets can be downloaded and installed on desktops and laptops. This range offers the highest level of security, although access is limited only by the computer on which they are installed. In addition, if a computer is attacked or infected with a virus, it is likely to lose all its money.
- Online software wallets: This cryptocurrency wallet works in the Cloud. Thus, it can be easily accessed from any computer device and from any geographical location. In addition to the convenience of accessibility, this type of digital wallet stores special keys online. Buttons are even controlled by third parties; this makes them easily susceptible to hacking and theft.
- Mobile application wallets: Unlike the other two types, mobile app wallets work on smartphones through an app. They can be easily used anywhere, including retail stores and shopping malls. This range of wallets is simpler and smaller than a normal desktop to have very limited space on mobile phones.
The difference between hardware and software wallets
Hardware digital wallets differ from software in that they store the user’s private keys. Hardware wallets store user keys on a device (such as USB). So because the keys are stored offline, these wallets offer extra security. In addition, hardware wallets are easily compatible with many online interfaces and can handle different currencies. It is also easy to make transactions with different crypto currency wallets. As a user, you must connect the device to any computer connected to the web, enter the currency, and confirm the transaction before entering a PIN. Your digital currency is kept offline by hardware wallets, so there is less risk or security issue.
Paper digital wallets: These digital wallets are also user-friendly and provide a high level of security. The term “paper wallet” refers to the printing of both public and private keys by a user. However, considering the examples, you can also refer to a software application designed to reliably generate keys before printing.
Sweep with paper wallets
Paper wallets are relatively easy to use. To transfer any cryptocurrency to your paper wallet, simply transfer the money from the software wallet to the general address where your paper wallet is displayed. Similarly, when you want to spend or withdraw your money, just transfer the funds from your paper wallet to your software wallet. This procedure is popularly called ‘broom’.
Sweeping can be done manually, by entering special keys or by scanning the QR code on a paper wallet.
How reliable are cryptocurrency wallets
Different digital wallets offer different levels of security. The security aspect mainly depends on two factors:
- The type of wallet you use – hardware, paper, online, desktop or mobile
- A selected service provider
Needless to say, it is safer to keep currencies offline than online. Regardless of the wallet you choose, there is no way to come without taking safety precautions. If you lose your private keys, you will lose all the money in your wallet. On the other hand, if your wallet is hacked or you transfer money to a scammer, it will not be possible to reverse the transaction and get that money back.
Investing in cryptocurrency is a smart business idea and it is inevitable to use a suitable wallet. You need to be a little more careful to ensure the safety and security aspect in your background transfers and transactions.