Types of Cryptocurrency Wallets and Their Overall Security Aspect

There exists various types of cryptocurrency wallets to allow users store and access their digital currencies in different ways. The question that is relevant in this context is how far are these wallets secure. Before taking up the security aspect, it is helpful to understand the various types or varieties of cryptocurrency wallets that exist today.

Cryptocurrency wallet: Types and varieties

These wallets can broadly be classified in 3 categories:

  • Software wallets
  • Hardware wallets and
  • Paper wallets

Cryptocurrency software wallets can again be sub-divided into desktop, online and mobile wallets.

  • Desktop software wallets: These wallets are meant to be downloaded and installed on desktop PCs and laptops. This particular variety offers the highest level of security though their accessibility is limited only to the computer in which they are installed. Moreover, in case, if the computer gets hacked or is virus-infected, there’s a possibility that one may lose all his or her money.
  • Online software wallets: This range of cryptocurrency wallets run on the Cloud. Thus, they can easily be accessed from any computing device and from any geographical location. Apart from accessibility convenience, this type of digital wallets store the private keys online. The keys are even controlled by third-parties; this makes them easily vulnerable to hacking and theft.
  • Mobile software wallets: Unlike the two other varieties, mobile software wallets run on smartphones through an app. These can easily be used everywhere, including retail stores and malls. This range of the wallets is usually much simpler and smaller compared to the normal desktop ones to accommodate with the very limited space on mobile handsets.

Difference between hardware and software wallets

Hardware digital wallets vary from the software ones on the aspect of storing a user’s private keys. The hardware wallets store the user keys in a hardware device (for example, the USB). Thus, as the keys are stored offline, these wallets offer an added security. Moreover, hardware wallets are easily compatible with many online interfaces and can also handle different currencies. This variety of cryptocurrency wallets is also easy to make transactions with. As a user, you just need to plug in the device to any computer, which is connected to the web before entering a PIN, transfer the currency and just confirm the transaction. Your digital currency is kept offline by the hardware wallets and thus, the risk factor or security concern is also much lesser.

Paper digital wallets: This range of digital wallets is also user-friendly and ensures a high-level of security. The term “paper wallet” just refers to the hardcopy printout of a user’s both public and private keys. However, considering the instances, it can also refer to a software application meant to generate the keys securely before printing.

Sweeping with paper wallets

Using paper wallets is relatively somewhat easier. In order to transfer any cryptocurrency to your paper wallet, just transfer the funds from the software wallet to the public address, which your paper wallet displays. Similarly, when you want to spend or withdraw your money, just transfer the funds from the paper wallet to your software wallet. This procedure is popularly referred to as ‘sweeping’.

Sweeping can be done either manually, by entering the private keys or scanning the QR code on a paper wallet.

How secure cryptocurrency wallets are

Different varieties of digital wallets offer different levels of security. The security aspect mainly depends on two factors:

  • The type of wallet you use – hardware, paper, online, desktop or mobile
  • A chosen service provider

It doesn’t require mentioning, it is much safer to keep the currencies in offline environment, as compared to online. There’s just no way to ignore the security measures, irrespective of the wallet one has chosen. If you lose your private keys, all the money kept in the wallet will be gone away from your hands. On the other hand, if the wallet gets hacked or you transfer funds to a scammer, it won’t be possible to reverse the transaction nor reclaim that money.

What Is Bitcoin and the Blockchain and Why It Is Important to Invest Now

There is increasingly growing interest and buzz around bitcoin these days. You may have heard of it before or not. Either way, it is a multi-trillion-dollar financial industry that is practically flying under the radar of most people (only about 2% of the population is even aware of its existence), which makes it a prime time to get positioned before it hits the mainstream. And the time is now because cryptocurrency awareness is going viral. Even some universities are teaching classes on bitcoin, cryptocurrencies and blockchain technology!

What is Bitcoin Exactly?

Bitcoin is a digital currency (or digital money), that is electronically held, which means it is not tangible like fiat currency (dollars, euros, yen, etc.). It was created cryptographically, and thus it is a cryptocurrency. It runs on open-source software and it is not controlled by entities. It is decentralized and not governed by banks or government.

What is the Blockchain?

Blockchain technology is where bitcoin and other cryptocurrencies exist. The blockchain is also used for other applications other than cryptocurrencies, such as running smart contracts, for example. In a nutshell, the blockchain is a digital ledger that is decentralized. It stores records of all transactions that occur within it and is run by a peer-to-peer network. This means that individuals and businesses use it to transfer digital assets to each other via the Internet with no third party (i.e., banks, governments) needed.

The Importance Blockchain Technology and Investing in It

From a business perspective, blockchain technology can improve business processes and significantly lower costs. It will also allow businesses to offer more benefits of service to customers. For instance, financial institutions could use blockchain technology to improve processes for things such as settlements and insurance.

From an individual perspective, blockchain technology offers opportunities for significantly high returns on cryptocurrency investment as compared to traditional investments.

Blochchain technology and cryptocurrencies are quickly proving to be an inevitable part of the future of money and finances in the global economy. It is something that will soon become mainstream in the world financial market, and those who invest early as early adopters of this amazing innovative technology will be among the newest millionaires in the coming years and beyond.