How to choose the right wallet to store your cryptoassets securely online and offline

Investing in cryptocurrency is one thing, however, storing it safely requires an entirely different set of skills and knowledge.

Fortunately, the digital currency experts at CryptoNews have put together a handy guide to give you an idea on how to protect your funds and choose the right wallet.

A cryptocurrency wallet is a software program designed to store your public and private keys, send and receive digital currencies, monitor their balance, and interact with various blockchains. You need to have a cryptocurrency wallet to manage your crypto assets and keep them secure and while there are many wallets out there, the key thing is whether they are hot or cold.

Hot and cold digital wallets

hot wallets

A hot wallet is connected to the internet and can be accessed at any time.

Hot wallets include all online cloud wallets, most mobile, and software wallets.

cold wallets

A cold wallet is not connected to the internet and allows you to store your funds offline – you can still receive funds at any time, but no-one can transfer them out.

Cold wallets are hardware wallets, offline kept paper wallets, USB and similar offline data storage devices, and even physical bearer items such as physical Bitcoins.

Which one is best?

Most cryptocurrency holders use both hot and cold wallets. Hot wallets are handy for frequent trading, while cold wallets are better for long-term holding of crypto assets.

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Types Of Cryptocurrency Wallets

There are four distinct categories of cryptocurrency wallets – paper, hardware, cloud, and online.

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Paper Wallets

Paper wallets are generally classified as cold storage. The term ‘paper wallet’ generally refers to a physical copy or paper print of your public and private keys. Other times it means software used to generate a pair of keys along with a digital file for printing.

Paper wallets can grant you a relatively high level of security.

You can import your paper wallet into a software client or simply scan its QR code to move your funds.

Although paper wallets are cold, they come with their share of risks, too.

Paper wallets can be easily damaged, burned, easy to copy and take pictures, and require mutual trust if you’re not making one yourself. To make paper wallets less fragile, sometimes people laminate them, create multiple copies and store them in different locations, engrave them on pieces of metal or other sturdy materials.

Be warned, CryptoNews advises that it is a bad idea to keep electronic copies of your paper wallet on your PC. The private key of paper wallets should always be kept offline – keeping your paper wallet files online makes it as secure as a hot wallet.

Cloud Wallets

Online wallets, by definition, are hot.

Using a cloud wallet, your funds can be accessed from any computer, device, or location. They are convenient, but they store your private keys online and can be controlled by third-parties, which makes them more vulnerable to attacks.

A safer version of cloud wallets is non-custodial online wallets. They are accessible via web and apps but the service provider does not have access to your private keys. In most cases, non-custodial wallets are a part of an exchange platform, meaning that they let you trade your coins in a safe and secure manner.

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Software wallets

Software wallets are downloaded and installed on a personal computer or smartphone – these are hot wallets.

Both desktop and mobile wallets offer a high level of security, however, they cannot protect you against hacks and viruses, so you should try your best to stay malware-free.

As a rule, mobile wallets are smaller and simpler than desktop wallets, but you can easily manage your funds using both of them.

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hardware wallets

Unlike software wallets, hardware wallets store your private keys on an external device like USB – they are cold and secure.

They are also capable of making online payments. Some hardware wallets are compatible with web interfaces and support multiple currencies.

They are designed to make transactions easy and convenient, so all you need to do is plug it in any online device, unlock your wallet, send currency, and confirm a transaction.

Hardware wallets are considered the safest means of storing crypto assets – the only drawback is that they are not free to use.

Getting a hardware wallet directly from a manufacturer is the most secure way. It is unsafe to buy it from other people, especially the ones you don’t know.

Typically, your wallet choice depends on your portfolio. Every serious project should have its native wallet which should be found at its website, but sometimes it may be more convenient to have a multi-currency wallet.

Keep in mind that not all multi-currency wallets support all coins – even hardware wallets have a limited amount of coins they support.

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Read the full article and find out more about best security practices on the CryptoNews website here.

WARNING: Nothing in this article should be read or understood to be financial and/or investment advice. Readers should take their own financial advice from a suitably qualified independent financial adviser before making any investment decisions.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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