Bitcoin (BTC), the most talked about and used cryptocurrencies, has attracted an enormous mass of people since it gained popularity. This is probably the first-ever digital currency or cryptocurrency and can be bought, sold and traded. Since it is a digital currency, one would need a digital wallet (not physical ones) to buy and sell Bitcoin or even store BTC safely.
Bitcoin wallets are crypto wallets or online wallets that work as a digital locker that enables you to store Bitcoins and send and receive Bitcoins from around the world. The Bitcoin wallets are used for security purposes. But, it is a fact that these wallets are much more vulnerable to malware and cyber-attacks. Thus, you need to follow some security measures to keep your digital assets safe.
Types of Crypto / Bitcoin Wallet Available
There are various types of cryptocurrency wallets or online wallets for securing your cryptocoins. In this segment, we will explain all the types of wallets in details that helps to buy and sell Bitcoin.
♠ Hot Wallet: A hot wallet is a digital wallet that is connected to the internet. Take, for example, when you send your bitcoin (BTC) to any cryptocurrency exchange’s wallet, you are actually depositing funds in a hot wallet. These wallets are straightforward to set up, and that the funds are accessible very quickly. This makes the entire process pretty convenient for the traders and the other regular users.
♠ Cold Wallets: Cold wallets are offline wallets or secure vaults for your digital assets and do not require any internet connection. The cold wallets use a physical medium to store your digital assets safely, and the keys are also stored offline. This makes it highly resistant to online hacking attempts. Thus, cold wallets tend to be way safer than holding the coins. This method is very suitable for long-term investors or HODLers.
♠ Software Wallets: The software wallets are usually hot wallets and are connected to the internet. The software wallets are available in various formats, and here are the most common types.
- Web Wallets – The web wallets can be used to access the blockchains via a browser interface without the requirement of installation or downloading. The web wallets include both the exchange wallets and the other browser oriented wallet providers. In most instances, you can create a new wallet and set your personal password for accessing it. But, some of the service providers do hold and manage the private key, which could be dangerous. Now, most web wallets enable you to secure your cryptocurrency by holding and managing your private keys.
- Desktop Wallets – The desktop wallets are softwares that you have to download and locally execute on your computer. The desktop wallets provide you with complete control over your funds and keys. As you generate a new desktop wallet, a file named “wallet.dat” gets stored locally on your desktop. This file stores the private key information that will be used to access your crypto addresses. Thus, it requires encryption with a personal password. You need to keep the files safe and not let others access them.
- Mobile Wallets – The mobile wallets work almost like desktop wallets except for the fact that the former ones are specially meant for smartphones. These are pretty convenient as they permit you to receive and send cryptocurrencies via the use of QR codes. As mobile wallets are also prone to hacking through malware infection and malicious apps, it is always recommended that you encrypt it with a password. You must also regularly backup your private keys or seed phrase.
♠ Hardware Wallets: The hardware wallets, as the name suggests, are physical, electronic devices that use a random number generator (RNG) for generating both private and public keys. Then the keys are stored in the device itself, which does not need an internet connection for storage. This implies that the hardware wallets are cold wallets and finds its mention as one of the most secure alternatives. These wallets offer a high level of security as compared to their counterparts from the online attacks.
However, they may possess a threat if the firmware implementation does not take place properly. Additionally, the hardware wallets tend to be usually less user-friendly, making it difficult to access the funds compared to the hot wallets. The hardware wallets are the best option if you hold a large amount of crypto and that too for a long time. You need to set up a PIN along with a recovery phrase to protect your device. These will help you in case your wallet gets lost.
♠ Paper Wallets: Paper wallets can be termed as pieces of paper on which you usually note down the crypto address and its private key. They are physically printed in the form of QR codes, after which these codes can be scanned for executing cryptocurrency transactions. Some of the paper wallet websites permit you to download their code for generating new addresses and keys while they remain offline. This makes sure that the wallets are highly resistant to online hacking attacks and probably are alternatives to cold storage. However, now the paper wallets are considered dangerous, owing to potential threats.
How Do I Secure My Bitcoin Wallet?
There are various ways in which you can keep your digital currency safe in crypto wallets. Here are all the pointers you need to abide by to keep away hackers from stealing your digital funds or crypto coins.
Opt For A Cryptocurrency Wallet That Serves Your Purpose
As already discussed, there are various types of BTC wallets online. Every wallet has its own characteristics. As a result, you need to choose the bitcoin wallet that fits your trading and storage requirements. While selecting a digital wallet, its provider point must also be kept in mind. You need to have a bitcoin wallet from a reliable provider. However, some of the cryptocurrency exchanges offer their users free and secure Bitcoin wallet, such as Paxful.
Enable The Two-Factor Authentication
It is crucial to have a safe Bitcoin wallet possessing two-factor authentication or 2-FA. This enables your Bitcoin wallet to have an additional layer of security for your digital funds by needing verification before completing the account activities such as signing in and withdrawing or sending coins. It will also ask for your 2FA code. This makes it easier for you to know instantly if someone is trying to snoop into your wallet.
Enable Encryption For Your Bitcoin Wallet
2FA is essential, along with encrypting your digital wallet. This step again offers another line of defense against potential cyber threats. Encrypting your Bitcoin wallet permits you to set a password and simultaneously lock your coins whenever somebody tries to access your account. The hacker of the malicious actors would not be able to steal your crypto coins unless he has explicit knowledge of what password you have set.
Backup Your Wallet Regularly
Some blockchain wallet providers permit you to backup your wallet data. Backing up your wallet’s data will ensure you can access your data in case you encounter software or a computer system failure. Simultaneously, you can retrieve your data and funds quickly in the instance it gets stolen or lost. For easy account recovery, you must use multiple backup devices. You should make use of various devices like hard drives – CDs and USBs as well as papers.
Make Use Of The Multi-Signature Feature
If you have a large amount of cryptocurrency, it is better that you choose a multisig wallet. It is a secure way to store your bitcoin. Some cryptocurrency wallets are in for this feature. This requires the digital signatures of several authorized users before you can actually access the Bitcoin wallet. However, without these users’ authorization, the hackers would not be able to access your bitcoin wallet and steal funds from them. If you already own a wallet and have not enabled this feature yet, you need to do it at the earliest.
Regularly Update Your Software
You must make a habit of updating your software regularly. Installing software updates make sure you get the latest improvements on security and features that fix your wallets’ requirements. To have a hassle-free experience, you can go ahead and turn on the automatic updates.
Do Not Stick To A Single Password
If you own more than one online account, you must never use the same passwords for many wallets. It is better if you stick to one password against one account. Additionally, you have to use strong passwords in all of your accounts. An ideal combination is that of uppercase and lowercase letters, symbols and numbers. This helps you create a strong and lengthy password, usually harder to crack. You must also not share your confidential information, such as your BTC wallet password and the best way is to memorize it.
Never Offer Your Private Key
Your wallet’s private key is as crucial as your ATM PIN. One of the many ways to protect it and your crypto funds is to save your private keys offline. Either you can write the private key down on paper and safely keep it to dodge deterioration or use cold storage devices called the cold wallets that you can access offline.
Do Not Click On The Suspicious or Unknown Links
Cybercriminals often trap their victims via deceptive links or phishing links. They will get to every possible way to lure their target into clicking on the unnatural links that lead to unsafe websites stealing confidential data and harming the electronic devices. Clicking a potentially dangerous link could risk your Bitcoin wallet. Thus, you must avoid tapping on the links that you do not know or expect.
Prefer A Secured Internet Connection
If public Wi-Fi is your go-to choice when it comes to the internet, then you must keep in mind that hackers love to be on the public internet connection as well. Most of the time, free public networks are unsecured. This makes it easier for hackers to steal the confidential information of the users. If you need to connect to an internet connection outside of your residence, you should connect your phone’s hotspot to your laptop. You can also use a premium VPN or Virtual Private Network for securing your connection. You should also turn off your phone’s Bluetooth connection for avoiding any unknown connection with the other local devices.
The hackers are always on the lookout for opportunities that will help them steal your data. Thus, you need to be aware and guard your wallets against potential cyber-attacks using these best practices for building the most secure Bitcoin wallet. The accessibility, reliability and safety of your cryptocurrency funds are much more critical. This is the reason you have to be sure to utilize the robust security of the bitcoin wallets you use.
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