Johannesburg, 21 Jun 2021
Usually, storing crypto-assets may not turn out to be the safest option. However, the risks involved are fairly lower for the exchanges that keep most of their assets in cold storage, have insurance, and implement other top-quality security measures, including penetration testing and constant audits.
For the other exchanges, the risk involved should only be accepted if the investor trades often and uses the capabilities of the exchange, which include providing newer crypto-assets. If the investor does not trade regularly, he should consider one of the wallets that will be introduced.
There are generally five types of wallets: Mobile, desktop, hardware, web and paper wallet. For the sake of clarity, Bitcoin will be used in explaining these wallets.
Mobile wallets
This refers to the kind of wallet that stores private keys on the device, instead of a third-party server. These are akin to lightweight clients in the sense they don't download the Bitcoin blockchain. Users can use them easily on the go anytime they need to transfer Bitcoin to their relatives and friends to pay at locations that accept Bitcoin as payment.
Several wallets appear as mobile wallets on application stores but are not mobile wallets - in terms of technicalities. They are basically cloud (or web) wallets that offer services via mobile applications. This difference is manifested in who is storing the private keys. If a third-party is storing the private keys and the wallet accesses that data via the Internet, then it is a web wallet. However, if a smartphone stores the private keys, then the mobile application is simply a mobile wallet. Examples of mobile wallets are Breadwallets and Airbitz.
Desktop wallets
This involves storing private keys directly on the computer that downloads the software. The user has total control and no one else has the power to send or spend his Bitcoin. Generally, there are two types of desktop wallets. These include a lightweight client and a full client. The term "clients'' simply talks about the functionality of the software application that runs on the computer. A lightweight client offers an easier method for storing Bitcoin, while a full client is a more intensive application that stores Bitcoin.
At the advent of Bitcoin, this wallet was associated with Satoshi's software, which is now known as the Bitcoin core. This wallet is a full client, which implies that it needs a complete download of significant bandwidth and storage. A computer that runs this software is counted as a full node in the Bitcoin network, which implies that it has a record of all transactions made on Bitcoin. Full nodes are beneficial for the purpose of security and autonomy.
Hardware wallet
The growth of Bitcoin influence and popularity all over the world has made companies that have created dedicated hardware that can efficiently store private keys. Many hardware wallets offer a wide range of functionality. Some examples of popular wallets are:
- Ledger Nano S: This device connects to a USB port and ensures easy storage of Bitcoin and other kinds of altcoins. It has a clear OLED display on a flash-like device that offers verification anytime a transaction takes place on the device.
- Trevor: This is a secure means of storing Bitcoin. It creates private keys that stay permanently on the device. It shields the data from all kinds of viruses that may affect other devices.
- KeepKey: It stores information and also provides information on transactions. It is protected by a PIN.
The hardware wallet's data are not completely lost even if the wallet is misplaced. A seed, which acts as a backup password, can help recreate the private keys and allow access again to Bitcoin.
Note: The convenience associated with trading Bitcoin has attracted and maintained the interest of several investors across the world. Trading can be done efficiently on several platforms, including Bitcoin formula.
Web wallet
Also known as cloud wallet, the web wallet can be easily accessed from anywhere, which makes it very great. Some even offer the option of controlling the private key, which enables them to act as a lightweight desktop wallet.
Vaulting is a prominent characteristic of a web wallet, which delays the process of withdrawal of crypto-assets to ensure the holder is offered more time to cancel any attempted withdrawal. This is good to deter any hacker's attempt that might have found their way around the user's password and are attempting to move the crypto-assets to a different address.
Paper wallets
One of the easiest ways to store private keys happens to be very secure, once it is done properly. This consists of writing a string of long alphanumeric public-private key pairs on a paper piece. This paper can then be stored in a safe place for a long time. This can support all kinds of crypto-assets since it involves just pen and paper.
The world of crypto-assets needs an efficient and convenient way to store keys to protect funds. As the crypto-assets marketplace grows, there will be options available that will make transactions in the digital world easy and very secure.