Stakero Blog

How to Choose a Crypto Wallet and Keep Your Coins Safe?

To interact with the blockchain network to send and receive cryptocurrency, a crypto wallet is required. All cryptocurrency platforms offer to use services for storing coins and beginners may be satisfied with a similar option. However, the services of the exchange can be hacked, or the exchange suddenly ceases to operate, and then you risk losing all your digital funds. If you trade in cryptocurrencies, then it is recommended to store on exchange services only the money necessary for trading or small amounts and for a short time.
Your main crypto capital should be transferred to your separate cryptocurrency wallet. Further about what they are and how to use them safely.

What is a Cryptocurrency Wallet?

Storing assets directly on a crypto wallet is a regular misconception.
It is important to understand that the currency in a crypto wallet is not the same as ordinary money in your pocket. In fact, your wallet is just two keys, it does not contain any money. Digital money itself is on the blockchain and never leaves it. When they are transferred from wallet to wallet, only one action occurs: the next block describing this transaction is added to the blockchain.

A crypto wallet is just a way to store a secret key to access your cryptocurrency. A simple analogy with bank plastic is suitable here since there is no money on your card either, it only opens access to a bank account.

A crypto wallet is needed to generate the necessary information to send and receive cryptocurrency through blockchain transactions, including public and private keys. It also provides an address that is generated from the public and private keys. This address is your space in the blockchain to which assets can be sent.

What kind of crypto wallets are there?

There are hot and cold crypto wallets. Hot wallets are connected to the Internet, they only work online and are mostly virtual. Cold wallets are autonomous and not connected to the network, they are physically shaped and can be touched, taken with you, or put in a safe, such as a paper wallet or a
hardware wallet. There is no perfect wallet for all occasions, for each task, a specific one is well sharpened.

Hardware crypto wallet

This is a cold wallet type. It looks like a flash drive that you can insert a USB port and start sending crypto. Sometimes these have additional protection and to decrypt the keys you need to enter a passphrase, or a fingerprint reader may be located on the body of the flash drive.

Some wallets can connect via Bluetooth and you can work with them from your phone. The main advantage of a hardware wallet is that it is not connected to the Internet, so it is impossible to hack it online. But someone can pull it out of your pocket and use phishing to find out the passphrase, or sometimes kidnapping and torture are used for this.

The main strengths of this kind of crypto wallet are the lack of an Internet connection, which makes it difficult for intruders to hack and steal money, as well as the fact that you do not need to rely on online services or other third parties and only you have access to your money.

However, a hardware wallet is easy to lose, and it will be impossible to recover funds if it is lost, damaged or forgotten.

Software crypto wallet

This type is the so-called hot wallet. It is just an application on your regular smartphone, tablet or laptop. The main advantage is the knowledgeable form factor of a mobile application, which is easy to use by simply taking out the usual device and checking your balance or transferring funds at any time.

That being said, the disadvantages can sometimes outweigh the convenience and speed of using a software wallet. If the smartphone is stolen, thieves can access all the cryptocurrency on the wallet. Also, if it breaks down, and you did not make backups or did not remember the seed phrase, then the money
will disappear irrevocably and no one can help you restore access to it.

But the main drawback is their lower security compared to hardware wallets since software wallets are vulnerable to hacker attacks.

Do crypto users need wallets?

You can choose a hardware wallet for those cases where you want to be sure of the security of your crypto assets and do not often trade. It is ideal to take your money with you when you go or moabroad. You just change your money for bitcoin, put it on a USB flash drive, and a flash drive in a backpack, and already on the spot, calmly exchange cryptocurrency for local currency. No explanation
with banks, tax and other mess.

A software wallet is great for keeping small amounts of money that you intend to spend, such as buying and selling frequently. If you often trade cryptocurrency, then it makes sense to keep funds where you can catch a price jump and make a deal in time. Also, when you constantly work with freelancers who accept payment in crypto, a hot wallet will be a very convenient option.

In the case when you want to receive interest for your money, then you can use services that pay a percentage for keeping funds with them. If your eye twitches at the thought that money is just lying there, then you should get money on such a platform.

How to Choose the Proper Crypto Wallet

When choosing which option is most suitable for you personally, you need to double-check your requirements. For example, if you plan to do cryptocurrency transactions relatively frequently, a hardware wallet will not work for you. And if you are planning a long-term investment, forget about online wallets.

Many users agree that for maximum convenience of constant use of crypto in everyday life and fast transactions with it, hot storage wallets are best suited. The most suitable option would be such a wallet, with which you can not only buy and store crypto but also exchange it for fiat currency, invest and transfer.

Another very important point is the availability of the wallet from different countries and the ability to interact with bank cards or transfer money regardless of where you are in the world. All this ultimately comes down to the convenience of using the service. The inaccessibility of cryptocurrency in the past was large because it was far from easy to use.

Now, many are trying to simplify as much as possible all work with crypto, to make it no more difficult than the most ordinary banking operations. So, some services offer their users to get a plastic card like those that banks give out to customers. You can use it in stores or terminals, which, you will agree, is also important for the very convenience that we are talking about. So we recommend that those choosing a service check in advance if they have a
similar service.

Maintain your crypto account security

Any crypto wallet will ask you to save a phrase of 12 or more words when creating an account. This is called a mnemonic phrase, seed phrase, or recovery phrase. The seed phrase is the essence of a private key, only encoded in ordinary words. For the safety of your digital currencies, it is not recommended to store the seed phrase on your devices and in electronic form.

One of the best ways to keep your seed safe from hackers is with multiple hard copies. With this, you can speculate and, for example, split the seed into several parts, so that if attackers find several of them, only you will still have access. Make backups so that you can restore access if you lose your seed!

Also, practice everyday cyber hygiene by keeping your passwords out of the reach of others and not disclosing their whereabouts. Do not visit suspicious sites and do not open suspicious emails from unknown addresses. Do not share about how much cryptocurrency you have and do not post sensitive information on social networks. Attackers could use such info to hack your wallets and accounts or to kidnap you.