Practical acquaintance with cryptocurrencies begins with the selection and installation of a cryptocurrency wallet. Purchased or mined digital coins need to be stored somewhere, and if you do not have storage, then it is technically impossible to purchase them.
What is a crypto wallet
A cryptocurrency wallet is a special software that is installed on your computer or mobile device. Such a program can be provided as a service on a crypto online exchange or a specialized website. All these storages are constantly connected to the Internet and, on this basis, they are combined into a group of hot wallets.
The so-called cold storages include hardware and paper crypto wallets. They store your coins, or rather the access keys to them, offline. Cold storage is connected to the Internet as needed and not for long.
How good is a hot wallet?
There are not so many large crypto-investors holding hundreds of thousands of dollars in Bitcoin, Ethereum and other virtual coins on the market. The savings of most cryptocurrency users are an order of magnitude or two more modest.
The statement that the first wallet of a novice user is likely to be exactly hot is not far from the truth. To create a hot storage, it is enough to register an account on any cryptocurrency exchange. This is exactly what happens, especially since buying digital coins is the easiest and fastest way to get them in any amount available to you.
The exchange wallet is convenient for active trading and other ways of earning provided on the platform of your choice. The same can be said about mobile applications.
If we draw an analogy with fiat money, then hot storage can be compared to a regular physical wallet. It contains money for current expenses or a little more.
Everything changes when it comes to savings. They are not carried with them, but stored in a safe place so that they are not stolen. Such a place can be, for example, a safe or a bank account. Until your savings have reached a certain threshold, it is not economically feasible to provide any serious security measures for your funds.
In the digital world, everything looks about the same. Any software wallet is vulnerable to hacker attacks. This fully applies even to reputable trading platforms. The number of large crypto exchanges that have never been hacked can be counted on the fingers of one hand.
Things are even more difficult with little-known and new sites. Such a project may fail, unable to withstand competition, or initially be fraudulent. One-time transactions for the exchange of BTC to LTC can be successful and even profitable, but you should not leave your coins on dubious sites for a long time.
Yes, there are lucky people in the world who have been storing cryptocurrency online for years, but this luck can end at any moment. In addition to scammers, there are other threats in cyberspace: software failures and malware.
It is for these reasons that one of the security rules in the crypto world says: do not store large amounts in hot wallets.
What are cold storages?
Hardware cryptocurrency wallets are small devices of different designs. Outwardly, they may resemble flash drives, electronic keys or credit cards.
Tiny devices provide maximum protection for your funds:
There are metal cased models that are immune to the most common threats of physical damage. Yes, the strength of the hull is not yet a reason to test its limits with especially extreme methods.
You can keep this wallet with you.
They are ideal for storing large amounts for a long time.
Having two devices, you can create a backup copy of the wallet.
To complete a transaction, such a device must be connected to the Internet. Some models connect to a computer via a USB cable, some use wireless connections for this. When choosing a hardware device, pay attention to the functionality, security features, as well as the ability to easily restore access to your funds in case the keys are lost.
The main disadvantage of such gadgets is a rather high price. The most budget models in the Trezor and Ledger lines cost from $ 100, more advanced ones – up to $ 300.
Whether the need to connect to the Internet for each transaction is considered a disadvantage is a moot point. Moreover, there are software wallets for fast transactions.
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