Last year, hackers stole around $292.66m in cryptocurrency through breaching users’ logins, raising concerns about the ability of cryptocurrency wallets to protect money.
With a market capitalisation exceeding $360bn, cryptocurrency investors became more suspicious. They started to search for new means to protect their data and money. Moreover, security breaches are on the rise, feeding the need for cryptocurrency traders to take extra precautions when using exchanges and storing their cryptocurrencies.
CyrptoLydian reviews what a cryptocurrency wallet is and how to protect and secure it.
What Is Cryptocurrency Wallet?
If anyone wants to use a cryptocurrency, he/she will need a digital wallet. A cryptocurrency wallet is a programme or service that stores public and/or private keys and tracks ownership, receipt, or spending of cryptocurrency. However, the cryptocurrency itself is not in the wallet. The cryptocurrency is decentralised and maintained in a publicly available ledger called “blockchain”.
The wallet has two kinds: hot and cold wallets. The hot wallet operates through the Internet. The cold wallet works offline, and its owner can receive funds and operations all the time but cannot transfer the amounts out of it.
The cryptocurrency wallet comes in many forms: desktop, mobile, web, and hardware. Mobile and software wallets are hot wallets, while hardware and paper wallets are cold ones.
Mobile wallet operates on a smart-phone, while a software wallet uses software.
Hardware wallet, such as USB wallet, is a device holding the wallet to keep it secure and operate offline transactions. Paper wallet is a cold wallet where its owner can print his/her keys and save and restore them.
Protecting Cryptocurrency Wallet
According to the Bitcoin website, many exchanges and online wallets suffered from security breaches in the past. Such services generally still do not provide enough insurance and security to store money like a bank.
“You should choose such services very carefully. Additionally, using two-factor authentication is recommended,” it advised.
Two-factor authentication is an authentication method that provides access to a service or a product only after presenting two pieces of evidence to an authentication mechanism. Instead of using just one password to access your digital wallet, it enhances your security by requesting an additional code.
The code can be sent to your phone as text or email and is only valid for a few minutes.
Use Different Types of Crypto Wallets
One of the ways to keep your wallet safe is using hot and cold wallets. The hot wallet is best for immediate operations and trading. On the other hand, a cold wallet can be used offline for the currencies to be stored for long-term investment.
This way, if malware tries to intercept your password for your online wallet, the rest of your money will be safely stored on a hard disk, USB, or paper, out of the reach of hackers.
Use a VPN
A VPN application is another way to enhance the security, as a VPN can encrypt the Internet connection and prevent hackers from monitoring cryptocurrency exchanges. Many cryptocurrency traders use this tool to ensure their anonymity online.
Update Your Device’s Software and Antivirus
One of the best ways to make your device stronger and reduce vulnerabilities is by updating software and updating your antivirus regularly.
These regular updates remove vulnerabilities as soon as they appear to keep your device safe from malware attacks.
Usually, updates carry security fixes and potential vulnerabilities.