How to keep your crypto wallet safe
If you're viewing this article, you probably have a cryptocurrency wallet. In the event you do not have one and are here to learn, wallets are necessary in order to store and use your cryptocurrencies. But if you're not careful, your wallet can be stolen or hacked, which would result in the loss of all your digital assets. In this article, we will discuss how to keep your crypto wallet safe and protect your investment.
What is a crypto wallet?
A crypto wallet is a digital wallet that stores your cryptocurrencies. Unlike a traditional wallet, which stores your fiat currency, a crypto wallet stores your digital assets in an encrypted format. Crypto wallets can be both software-based and hardware-based.
Software-based wallets are the most common type of crypto wallet and are typically free to use. Hardware-based wallets, such as those by Ledger, are physical devices that store your cryptocurrencies offline. While hardware-based crypto wallets are not required to hold or use cryptocurrencies, they are highly recommended for security purposes.
Technically, crypto wallets don't exactly store your cryptocurrencies. The coins are stored on the blockchain in a distributed or decentralized way. Wallets store easy access to the coins via private and public keys. The public key (also known as the wallet address) allows people to send funds into the wallet. The private key (which can be generated using the seed phrase) allows users to send funds out of the wallet.
Types of crypto wallets:
In order to identify what kind of safety you need to bear in mind, here are the types of crypto wallets:
- Desktop wallets: These are downloaded and installed on your computer. They offer a higher level of security, since they're not connected to the internet twenty-four seven. However, if your computer is hacked or infected with malware, your coins could be at risk.
- Mobile wallets: These are apps that you download and install on your smartphone. They're convenient since you can use them to make transactions on the go. But like desktop wallets, they're also vulnerable to hacking if your phone is stolen or lost.
- Online wallets: These are websites that provide online storage for your coins. They're the most convenient option, but they're also the least secure since they're constantly connected to the internet. If the website is hacked, your coins could be gone for good.
- Hardware wallets: These are physical devices that store your coins offline. They're the most secure option, but they're also the most expensive. If you're serious about keeping your coins safe, a hardware wallet is worth the investment.
What's the difference between custodial and non-custodial wallets?
- Custodial wallets: These are wallets that are provided by a third-party service. The service will hold your crypto for you and they will have control over your private keys. This means that if the service is hacked or goes out of business, you could lose your crypto.
- Non-custodial wallets: These are wallets where you control your own private keys. This means that you're responsible for your own crypto and no one else can access them. Non-custodial wallets are more secure, but they require a bit more effort to set up, use, and it all rests on you to keep it safe.
Hot wallets vs Cold wallets
It is also important to know the difference between hot wallets and cold wallets. Both have their own advantages and disadvantages, so it's important to understand the difference before deciding which one is right for you.
- Hot wallets are wallets that are connected to the internet. This means they're convenient and easy to use, but it also makes them more vulnerable to hacking and scamming.
- Cold wallets, on the other hand, are offline and much more secure. However, this also means they're less convenient to use since you can't access your coins without physically connecting to the device.
Ultimately, if we are speaking in terms of crypto wallet safety and if security is your top priority, then a cold wallet is probably the way to go. But if you're more concerned about convenience, then a hot wallet might be a better fit. Just make sure to utilize the few tips we offer you below.
Crypto wallet protection for online wallets:
There are a number of things you need to do in order to keep your wallet safe:
- Choose a reputable wallet provider: There are many different wallets available on the market, so it's important to choose one that is reputable and has a good track record. Don’t forget to DYOR!
- Keep your wallet updated: As with any software, it's important to keep your wallet up-to-date with the latest security patches.
- Use a strong password: This should go without saying, but using a strong password is critical in protecting your wallet from hackers. Make sure to use a combination of letters, numbers, and special characters. Also, do not reuse your passwords.
- Use password managers: Password managers can generate strong passwords for you and store them in an encrypted database.
- Enable two-factor authentication: Many wallets now offer two-factor authentication as an extra layer of security. This means that in addition to your password, you will also need to enter a code that is sent to your mobile phone or generated through an app in order to access your account.
- Keep track of all transactions made: For auditing processes it is important to stay on top of keeping track of all transactions that are made in your wallet.
- Avoid clicking on links or downloading files from unknown sources: As you might know, phishing scams have been on a rise when it comes to email and across all social media platforms, so it’s important to be more than careful.
- Avoid using public WiFi: If you do, do it with a VPN and TOR.
- Never share your seed phrases: Make sure to keep your seed phrase safe and as inaccessible as possible. There are many ways to do this, such as writing it down on a paper, on an old phone, or with other more expensive options.
- Check connected sites: When you connect your wallet to any site or dapp, it will usually stay connected until explicitly disconnected. This is generally good practice for making sure that the website isn't compromised by malicious people who may want access users' personal information – which could lead to theft.
- Review smart contract allowances: Giving permission for your wallet to interact with smart contracts is a necessary step in purchasing and selling tokens. As The KYC Alliance highlights, this remains active until you revoke it. You can check what smart contract allowances you have through websites such as UnRekt. You can use these websites to revoke permissions: Ethereum (ETH), Binance Smartchain (BSC), Polygon (MATIC), Avalanch (AVAX), Fantom (FTM).
- Use browser extensions to detect phishing: Browser extensions can help to prevent you from being scammed. Interlock is on the cusp of introducing such a browser extension which is going to work with its own native token $ILOCK.
Extra tip: If you would like to check whether your credentials (email address, passwords, etc.) have been compromised at some point, input your email address in this website. It will tell you in which data breach cases your email address might have been involved in.
By following these simple steps, you can help ensure that your crypto wallet is safe and secure. Our CEO, Rick Deacon, also had some advice on this.
“Not your keys, not your crypto. Always keep assets not being actively traded in a cold wallet. Always ensure strong passwords and multi-factor where applicable on custodial wallets. Keep your seed phrase safe and NEVER give it away. Use sites like revoke.cash to check hot wallets permissions and allowances.”
So take the time to do it right, and you'll be able to enjoy some peace of mind knowing that your investment is well-protected.