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Cryptocurrency offers its users an array of fantastic features ranging from identity-theft protection to lack of transactional fees. With so many benefits, more and more people are embracing crypto not just for its potential investment returns, but also as a means of conducting everyday activities. There are now BitCoin ATMs, and many retailers accept crypto as payment.
The question, however, is how safe crypto wallets are. In general, a crypto wallet is much more reliable than the one you keep in your pocket, but it still has its vulnerabilities. Here’s how you can be smart and protect yourself.
What Is a Crypto Wallet?
Remember that, at the end of the day, cryptocurrency is a piece of data. Crypto wallets come in many different forms. They can be hardware or software, or even a “brain wallet” which is a person remembering the information needed to access their account.
Regardless of what form they take, all wallets store public and private keys which are then used to spend currency. The public key is used to ensure you are the owner of an address that can receive funds. Private keys are what you use to spend your chosen cryptocurrency.
Although there are many different types of wallets, most people embrace software wallets as they are the most convenient and user-friendly ones. However, the problem is that as cryptocurrency has risen value, so has the number of attacks aimed at it. The current estimate is that hacking attempts have increased five-fold over the last few years and that the trend is only set to continue to rise.
Exchanges and currencies themselves have taken preventative measures, but it is up to individuals to follow a secure protocol. Software wallets are susceptible to attack because hackers rely on phishing, malware, and all other sorts of tricks to get the information they need. You don’t even need to be on a cryptocurrency-related website. Instead, any suspicious site may contain code that strips your computer of sensitive information.
How You Can Improve Security
This is where you may want to invest in a hardware wallet. Think about it this way. As you are going to spend several thousand dollars investing in the currency, you probably want to make sure it is well-guarded, right?
When you move to a hardware wallet, your security vastly increases. Hardware wallets come in many different forms. It can be something as simple as a programmed USB stick or a specific device that requires someone to physically press a button to sign for transactions.
Just don’t forget, however, that if you electronically back up your hardware wallet, then it is only as secure as a software wallet, so you are minimizing its benefits.
Additional Safety Measures You Can Take
From moving between software to hardware crypto wallets, there are other measures you can take. For many crypto users, this now becomes a question of investment of time and energy and whether these extra steps are worth it or not. If you are new to crypto and have a small investment, then using a software wallet on a reliable platform with a strong password is more than adequate.
However, once you become more seriously involved and particularly if you have a large coin collection, then you will want to take some further steps to ensure security. Hardware crypto wallets are an excellent start, but from here you’ll also want to consider the advantage of hot versus cold wallets. Hot wallets are those connected to the internet while cold wallets are not.
The short answer is that anything connected to the internet is vulnerable so for every moment your hard wallet is online, it may be open to attack.
This is where some users go for “deep cold storage” where they store currencies in wallets never connected to the internet. Think of it as a bank vault. In this case, even the private keys are generated offline. This ensures the security of your private key, but it makes transactions much more complicated and time-consuming.
Turn to a VPN
Besides the security measures mentioned above, another way of securing your online activities is using a reliable VPN. Not only does a VPN hide your IP address, but it also encrypts all the data you transfer online. Make sure to go for a paid VPN version, as those offered for free may cause even more trouble to your crypto wallet security.
Keeping Your Crypto Wallet Safe from Cyber Attack
At the end of the day, how safe your crypto wallet is depends on a tradeoff between convenience and safety. Software-based wallets which allow you to quickly exchange and purchase currency offer you the greatest usability.
On the other hand, deep cold storage ensures your private keys are safe from even the most determined attackers. A hybrid approach of a hardware wallet connected periodically to the internet is best.
With this, you can minimize the amount of time you are vulnerable while still being able to exchange easily allowing you to keep the best of what cryptocurrency has to offer.