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If you purchase any quantity of crypto and wish to keep it for yourself, you have the option of storing your crypto in either a “hot” wallet, a “cold” wallet, or a combination of the two. A crypto hot wallet is swifter and makes it simpler to exchange or use crypto, but since it is connected to the internet, it can be exposed to online attacks. However, a cold wallet is often not connected to the internet, making it less convenient even though it may be more secure.
Let’s learn more about these wallets in this blog, along with some best tips to secure your crypto wallet.
First things first, let’s see what is a crypto wallet.
Understanding crypto wallets
Crypto wallets are very crucial to cryptos. These wallets serve as a means for people to use and store digital currencies effectively. They provide investors with a reliable platform to send, receive, and manage their crypto assets.
As digital tokens exist on decentralized blockchains, crypto wallets do not directly store cryptos. Instead, they offer users a unique set of public and private keys that function as their “address” on various blockchains.
In simple terms, public keys can be compared to the address of a home, while private keys act as the actual key to the property. When it comes to crypto, public keys enable individuals to send digital currencies to the designated blockchain address, but they cannot access the coins without the corresponding private keys.
Self-custodial wallets grant users access to their private keys during the setup process. Typically presented as 12-24 word phrases known as seed phrases, these private keys ensure that users can recover their crypto assets even if their phone, laptop, or hardware wallet becomes unusable. To restore the crypto funds, users must input their private keys while setting up a new wallet.
Remembering that private keys grant anyone control over the cryptos stored in the wallet is crucial. Therefore, users of self-custodial wallets must keep their private keys confidential. In contrast, custodial wallets do not provide users with their private keys. Instead, a third-party entity stores the crypto on behalf of the individual.
Hot wallets
A crypto hot wallet, also known as a “software wallet,” is a crypto wallet that is constantly linked to the internet and the crypto network. A crypto hot wallet is designed for frequent crypto transactions and is simple to use on an exchange. With just a few clicks on a phone or computer, it sends and receives crypto.
Advantages:
- User-friendly: Since these services are always online, you may store and access your cryptos from any location effortlessly.
- Cost: Most hot wallets can be used for free.
- Convenience: If you are utilizing a hot wallet connected to a certain exchange, interacting within that ecosystem becomes simple.
Disadvantages:
- Security: Hot wallets are generally secure, but they are more susceptible to hacking since they are connected to the internet.
- Accessibility: Some wallet features may not be available in particular nations or jurisdictions since they need an internet connection, depending on local laws.
Cold wallets
Private keys are kept in an offline setting via crypto cold wallets, also referred to as cold storage. They don’t need an internet connection. Crypto transactions of cold wallets typically entail a signature procedure. The transaction with cold wallets begins online, switches to an offline procedure, and then, when the signing process is over, the entire transaction’s data is sent back to an online network. Options for crypto cold wallets include hardware wallets and paper wallets.
- Hardware wallets are made to be impenetrable to theft, making it impossible to steal computer funds even when they are plugged in.
- Although paper wallets are simply pieces of paper with a public wallet address and a private key, they perform similar functions to hardware wallets.
Advantages:
- Portability: Cold storage solutions are frequently little plug-in gadgets that can be readily transported anywhere in the world and used to log into decentralized applications.
- Security: Since transactions are signed locally, and your private keys never leave the device, the devices are substantially less susceptible to hackers.
- Autonomy: With cold storage, you can act as the only custodian of your crypto holdings, cutting off third-party programs from the process.
Disadvantages:
- Price: Hardware wallets are more expensive than online alternatives, with prices ranging from $79 to $255.
- Transfers: Compared to hot storage wallets, transfers between cold storage devices take a little longer.
- Layout: Using the smaller screens on hardware devices may need some users to go through a learning curve.
So, this was about hot wallets and cold wallets. In the following section, let’s check out the best tips to secure your crypto wallet.
5 Best tips to secure your crypto wallet
#1 Always have 2-Factor Authentication (2FA) active
Getting a Crypto wallet with two-factor authentication (2FA) is crucial. This adds an additional layer of security for your funds by mandating authentication before indulging in account activities like signing in, withdrawing, or sending funds. It will always request your 2FA code, so you can immediately detect if someone is attempting to access your wallet.
#2 Have a regular backup of your wallet
You can back up your wallet’s data with some wallet providers. By creating a backup of your wallet, you can access your information in case of hardware or software failure. You can also quickly recover your money and data if it is stolen or lost. Use multiple backup devices for easy account recovery.
#3 Safely keep your seed phrase in place
A wallet provider like MetaMask will generate a set of 12 to 24 random phrases as a “seed phrase.” You need to input this seed phrase in the same order you received when you signed up.
Unfortunately, there isn’t a legit “forgot your password” option. Therefore, with no exception, if you misplace your seed phrase, unfortunately, you also lose access to your wallet. Keep this seed phrase offline in a secure place. You can simply put it in the same spot where you keep your belongings by writing it on a piece of paper.
#4 Keep changing your passwords regularly or use a password manager
Looking at today’s environment, you can expect your credentials to be compromised eventually. Therefore, creating a complex password and keeping it safe while changing it frequently are the ways to keep your password secured.
Avoid using any passwords you already have when selecting a password for your Crypto wallet. Your password shouldn’t contain any personal information, too. It is safer to store passwords in a password manager than on your browser. Last but not least, switch your password every six months or so.
#5 Never click on suspicious links
Cybercriminals frequently use deceptive links to set their traps. They will make every attempt to catch the target’s attention and persuade them to click on odd links that take them to suspicious websites where they could be used to steal sensitive information and harm electronic devices.
Avoid clicking on links that are unfamiliar to you because doing so could jeopardize your Crypto wallet.
For more tips, click here.
Best cryptocurrency wallet in India – WazirX
WazirX is India’s most trusted crypto exchange in India, which also provide a wallet facility to its users. It is one of the top Bitcoin wallets in India and enables hassle-free purchasing, selling, and trading of virtual currencies, including Bitcoin, Ethereum, Ripple, and Litecoin. One of the top cryptocurrency wallets in India, it offers a smooth and effective trading experience across all platforms.
You have a web or mobile-based crypto wallet attached to the WazirX exchange. To use the wallet, all you have to do is create a WazirX account. On Wazirx, you can trade more than 250 pairs and keep your crypto in the wallet.
Using the wallet, you can conduct P2P (direct buy/sell) transactions and trade on the WazirX exchange. WazirX employs two-factor authentication for security, such as Google Authenticator or mobile OTP-based authentication.
Frequently Asked Questions
Who Invented Cryptocurrency?
Satoshi Nakamoto invented cryptocurrencies and the technology that makes them function in 2009. The presumed pseudonymous individual or persons who invented Bitcoin used this identity. In addition, Nakamoto created the first blockchain database. Even though many people have claimed to be Satoshi Nakamoto, the person's identity remains unknown.
Is Pi Cryptocurrency Safe?
Pi Network captured the crypto community’s interest even before it officially debuted. Its innovative mobile mining approach and user-friendly design simplify crypto adoption for a broader audience. Some users see this as a chance to get engaged in the crypto from the beginning and profit in the future, similar to how early Bitcoin adopters made huge profits by mining and keeping the coin. Other users have compared Pi to a worthless multi-level marketing (MLM) scheme.
What Is The Meaning Of Crypto?
A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.
How To Invest In Cryptocurrency Stocks?
Cryptocurrency can be purchased in two ways: through mining or exchanges. The process of confirming and adding transactions to the blockchain public ledger is known as cryptocurrency mining. Cryptocurrency exchanges are another option. Exchanges make money by charging transaction fees, but there are alternative platforms where you may communicate directly with other cryptocurrency traders.
How Cryptocurrency Works?
Cryptocurrencies use cryptography technology to keep transactions and their units (tokens) secure. Cryptocurrency works via a technology called the blockchain. A blockchain is a decentralized technology that handles and records transactions across numerous computers. The security of this technology is part of its value.
How To Invest In Cryptocurrency In India?
There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is the process of verifying and adding transactions between users to the blockchain public ledger. Purchasing cryptocurrency in India is a straightforward procedure where investors simply participate by registering with a crypto exchange such as WazirX. After registering for an account, citizens can trade multiple cryptocurrencies, store cryptocurrency in wallets, and more.
What Are The Best Cryptocurrencies To Invest In?
The best cryptocurrencies to invest in would be the ones you study and analyze in detail. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, and many altcoins such as Tron, Ripple, Litecoin, etc.
What Is Virtual Currency?
Virtual currency is a type of uncontrolled digital currency that can only be used online. It is exclusively stored and transacted using designated software, mobile or computer applications, or unique digital wallets, and all transactions are conducted through secure, dedicated networks. Because digital currency is just currency issued by a bank in digital form, virtual currency is not the same as a digital currency. Virtual currency, unlike ordinary money, is based on a trust structure and cannot be issued by a central bank or other banking regulatory organization.
Is Cryptocurrency Banned In India?
No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.
What Is The Safest Cryptocurrency To Invest In?
Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
