There are different types of cryptocurrency wallets for users to store and access their digital currencies in different ways. Relevant in this context is the question of how secure these wallets are. Before taking the security aspect, it is helpful to understand the different types or types of cryptocurrency wallets that currently exist.
Cryptocurrency Wallet: Types and Types
These wallets can be broadly classified into 3 categories:
- Software wallet
- Hardware wallet and
- Paper wallet
Cryptocurrency software wallets can be further divided into desktop, online and mobile wallets.
- Desktop Software Wallet: These wallets are meant to be downloaded and installed on desktop PCs and laptops. This particular variety provides the highest level of protection although their accessibility is limited only to the computer on which it is installed. Moreover, if the computer is hacked or virus-infected, there is a possibility that someone may lose all its money.
- Online software wallet: The range of these cryptocurrency wallets runs in the cloud. Thus, they can be easily accessed from any computing device and from any geographical location. In addition to the convenience of accessibility, these national digital wallets store private keys online. Keys are even controlled by third parties; This makes them easily vulnerable to hacking and theft.
- Mobile Software Wallet: Unlike the other two variants, mobile software wallets are powered on smartphones via an app. They can easily be used everywhere, including retail stores and malls. This range of wallets is usually much simpler and smaller than ordinary desktops to accommodate very limited space on mobile handsets.
The difference between hardware and software wallet
Hardware digital wallets differ from software in terms of storing a user’s private keys. Hardware wallets store user keys on a user device (for example, USB). So, when keys are stored offline, these wallets provide an extra protection. In addition, hardware wallets are easily compatible with many online interfaces and can handle a variety of currencies. These different types of cryptocurrency wallets are also easy to deal with. As a user, you only need to plug the device into a computer, which is connected to the web before entering a PIN, confirming currency transfers and cable transactions. Your digital currency is kept offline by the hardware wallet and thus, the risk factor or security concern is much less.
Paper Digital Wallet: This type of digital wallet also ensures user-friendly and high-level security. The term “paper wallet” simply refers to the hardcopy printout of both the user’s public and private keys. However, considering the examples, it may also refer to a software application intended to securely generate keys before printing.
Scrubbing in a paper wallet
Paper wallets are relatively easy to use. To transfer any cryptocurrency to your paper wallet, simply transfer funds from the software wallet to the public address, which displays your paper wallet. Similarly, when you want to spend or withdraw your money, simply transfer funds from your paper wallet to your software wallet. This method is popularly known as ‘broom’.
Sweeping can be done manually by entering private keys or scanning the QR code on a paper wallet.
How secure are cryptocurrency wallets
Different types of digital wallets provide different levels of protection. The security aspect 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 much safer to keep currencies offline than online. There is no way to ignore the security measures regardless of the wallet. If you lose your personal keys, all the money in your wallet will go out of your hands. On the other hand, if the wallet is hacked or you transfer funds to a scammer, it will not be possible to reverse the transaction or reclaim that money.
Investing in cryptocurrency is a smart business concept and using the right wallet for it is inevitable. You need to be a little more careful to ensure safety and security aspects for your fund transfer and transactions.