Cryptocurrency is the new craze currently, everyone wants to buy in !! But the real struggle starts once you have bought your first cryptocurrencies, be it Bitcoin or any other. All cryptocurrencies are currently being bought at various crypto exchanges around the world, but their security still remains a major concern.
Given the repetitive hacks various exchanges have gone through, it is very difficult to trust any of the platforms to old your cryptocoins for you. Multiple crypto fans have gone through this issue and few have gone a step ahead and have tried to solve this problem.
In the recent years, many companies have come into existence, which provides a hardware wallet, think of it like your personal crypto bank account which you can carry in your pocket.
Hardware wallets are like USB devices, which store your cryptocurrencies for you. Since they are not connected to the internet at all times, they are essentially safer than an online exchange. They also allow you to securely generate and store your private keys offline.
A cryptocurrency wallet is a medium that allows you to store, receive, and send cryptocurrency. Most tokens come with their own wallet. However, there is a multitude of third-party wallets that allow you to store a variety of tokens as well.
The cryptocurrency world is still a very young and under-regulated world. With the amount of money flowing, and the lack of law enforcement still in the space, it’s not a world where you would particularly want to subject yourself to possible hacking. Often times, if funds are hacked and stolen, it can be near impossible for you to get them back.
A cryptocurrency wallet generally includes,
Public and Private Keys that give you access to tokens stored on the wallet and Algorithms that manage the keys and allow you to send and receive funds on the cryptocurrency network. There are two types of wallets, hot and cold.
Hot wallets are connected to the internet at all times and are more prone to a hack. Cold wallets are more secure since they are not online and require a physical presence to cause any harm like a hack.
Hardware wallets generate their own private key which is not visible even to the user and store it right on the device.
These wallets have been designed to operate using a PIN number, just like your ATM. All you have to do is to connect it to your computer and enter the PIN. The wallet opens and you can make your desired crypto transaction. Some have added an additional feature wherein you have to enter the Pin again to confirm a transaction, often a transaction PIN which is different from the login PIN. Once you are done, you can disconnect your wallet from the internet and store it in a physically safe location – making your private keys off-limits to cyber hackers.
Other additional features include small screens and two-factor authentication.
In order to set up your crypto wallet, the first thing to do is to set up your own PIN code. After that, you would be asked to generate your set of “seed” words.
The pin acts as a second layer of protection in case anyone gets their hands on your hardware wallet. You must input your pin to access your funds on any computer. On most wallets, if the pin is input incorrectly multiple times in a row, all the data on the hardware wallet will be wiped or locked. So its critical that you remember your own PIN code. Its also advised not to write it down anywhere, since that would compromise the security of your hardware wallet.
Your list of seed words acts as a secondary barrier for protecting your funds. If your hardware wallet get damaged or lost, or maybe the data on it gets wiped out for some reason, do not worry !! You can get back control of your funds if you follow the given steps and enter the set seed words in the same order. Once verified, you would be given back access to your funds.
Word of caution – if you buy a hardware wallet from an unauthorized distributor (not recommended), be sure to generate your own seed words upon setup to protect your funds.
There are a variety of hardware wallets out on the market, however, two of the most popular and trusted are the Trezor and Ledger Nano S.
Trezor Hardware Wallet
Trezor is quite popular amongst cryptocurrency users since it was the original Bitcoin wallet in the market in the early days. It sports a small screen and generally goes for $110. The device is compatible with both desktop and mobile devices and comes with its own software interface to manage and trade your funds. It likes a small USB device with physical buttons that allow you to scroll through their menus and authorize transactions. It has now introduced multiple models, some of them provide additional levels of safety as well.
Trezor Software Interface
As of January 2018, Trezor can support the following coins:
Now lets got to the next one on our list,
The Ledger Nano S came a lot after the Trezor but quickly gained popularity due to its sleek design and a great looking OLED display. It was also quoted to be 2017’s most popular Christmas gift. The Ledger goes for a slightly lower price of $95 as compared to the Trezor. It sports a stainless steel design and also has a chrome extension that allows you to easily view your account, and send and receive funds. The Ledger also has physical buttons that allow you to scroll through menus and authorize transactions.
It supports a lot more crypto coins as compared to Trezor. As of January 2018, the Ledger can support:
Many more coins are to be added in the coming months,
Trezor & Ledger
Both devices are reliable, trusted wallets and are very comparable in most aspects. Either would be a great investment and secure place to store your funds. The biggest differentiator would be comparing to find out which wallet supports most of your coins.
Stored in a safe place, a backup of your wallet can protect you against computer failures and many human mistakes. It can also allow you to recover your wallet after your mobile or computer was stolen if you keep your wallet encrypted.
Some wallets use many hidden private keys internally. If you only have a backup of the private keys for your visible Bitcoin addresses, you might not be able to recover a great part of your funds with your backup.
Any backup that is stored online is highly vulnerable to theft. Even a computer that is connected to the Internet is vulnerable to malicious software. As such, encrypting any backup that is exposed to the network is a good security practice.
Single points of failure are bad for security. If your backup is not dependent on a single location, it is less likely that any bad event will prevent you to recover your wallet. You might also want to consider using different media like USB keys, papers, and CDs.
You need to back up your wallet on a regular basis to make sure that all recent Bitcoin change addresses and all new Bitcoin addresses you created are included in your backup. However, all applications will be soon using wallets that only need to be backed up once.
Encrypting your wallet or your smartphone allows you to set a password for anyone trying to withdraw any funds. This helps protect against thieves, though it cannot protect against key logging hardware or software.
You should make sure you never forget the password or your funds will be permanently lost. Unlike your bank, there are very limited password recovery options with Bitcoin. In fact, you should be able to remember your password even after many years without using it. In doubt, you might want to keep a paper copy of your password in a safe place like a vault.
Any password that contains only letters or recognizable words can be considered very weak and easy to break. A strong password must contain letters, numbers, punctuation marks and must be at least 16 characters long. The most secure passwords are those generated by programs designed specifically for that purpose. Strong passwords are usually harder to remember, so you should take care of memorizing it.
Using the latest version of your Bitcoin software allows you to receive important stability and security fixes. Updates can prevent problems of varying severity, include new useful features and help keep your wallet safe. Installing updates for all other software on your computer or mobile is also important to keep your wallet environment safer.
Bitcoin includes a multi-signature feature that allows a transaction to require multiple independent approvals to be spent. This can be used by an organization to give its members access to its treasury while only allowing a withdrawal if 3 of 5 members sign the transaction. Some web wallets also provide multi-signature wallets, allowing the user to keep control over their money while preventing a thief from stealing funds by compromising a single device or server.
While hardware wallets are by far the most secure way to hold your funds, there are a few alternatives that may be better suited for day traders or users with very small funds.
Various cryptocurrency exchanges also store your coins at their backends, using a cold wallet and a hot wallet system. The daily rolling capital is stored in the hot wallet with a high level of security. The majority of the user’s crypto wealth is stored in cold wallets, which are stored at unknown locations and are heavily guarded. Since many popular bitcoin and other cryptocurrency exchanges do a huge amount of business on a daily basis, with a high traffic, the number of cryptocoins, they essentially hold millions of dollars worth of cryptocoins. Making them a favorite spot for hackers.
In the recent past, multiple exchanges have had their reputation tarnished with million-dollar hacks. So, learning from these incidents, I would suggest that you go for a hardware wallet.
Exchanges are often the easiest platforms to quickly trade your assets. While they may be more simple to trade on, they are the riskiest platform to store your funds on as they manage and store all their users’ private keys for them- making them prime targets for attack. It would not be wise to store significant amounts on them, specifically if they are long-term holds.
Another option for you could be to trade on Cryptomite. Our platform firmly believes in the decentralized nature of cryptocurrencies. Leaning from other’s mistakes, we have introduced a model in which we merely act as your entry gate to the crypto market.
We provide well over 400 coins for you to buy, and the best part is that we don’t keep or store your coin at all !! They are your coins and you should be the one holding on to them in your own hardware wallets, so we get a destination address from you at the time of coin swapping and we do all the hard work. We swap your coins in the high liquidity international cryptocurrency market, and get you the best rate, once we have your coins, we immediately send them to your desired location. You can even track the transaction in real time through our special transaction window.
We understand that the crypto world is in its nascent stages and many people do not yet understand the dynamics of it. We, therefore, act as intermediaries for them, so that our customers can safely enter the crypto market and enjoy the freedom it provides. If you wish to visit our site, please go to www.cryptomite.co
Desktop wallets are like software’s which you download to your computer, they are a bit safer than exchanges but if your laptop or computer gets compromised or gets infected with a virus, your funds are at risk as well. With these, you can only access your funds from the device to which you downloaded the wallet.
They can be accessed from any computer with an internet connection, similar to Gmail. While these wallets might be the most convenient to access, they are also some of the easiest to hack since the provider stores your private keys for you. The moment you provide your private’s keys to a third party, your funds are vulnerable to a hack, always remember that.
Since paper wallets are a type of “cold storage”, they have often been regarded as an equally secure, affordable alternative to hardware wallets. While in certain use cases they can offer as much security, their UX can be challenging and if not printed and stored properly, can be vulnerable to attacks.
Because a paper wallet is completely unencrypted, malware present on your computer may be able to read your keys when you finally attempt to access your funds. To protect yourself, you must sweep (empty) your wallet and create a new key every time you decide to access your funds. This is a critical step.
We at Cryptomite would suggest you go for a hardware wallet and feel free to use our services to the fullest. Full privacy and best rates are what we strive for. The rule of thumb is that if you’re investing more than a week’s worth of salary, it’s probably time to invest in a hardware wallet. Hardware wallets give you an extra layer of protection against cyber-attacks, phishing sites, and malware. While it may be painful to shell out $100+ now for this small device, it would be a lot more painful to lose a couple thousand or more due to poor wallet security.
Publish Date: September 18, 2018 9:23 AM