For many years Bitcoin has been known to the planet as a digital sort of money that at some point can replace the physical medium of exchange . With time its value has increased substantially and it’s proved itself as a secure store useful . Thus, many crypto enthusiasts has witnessed Bitcoin transformation into a best performing digital asset class. Despite Bitcoin price is volatile and corrects itself (drops from time to time) within the short-term, it’s rewarded its future investors with high returns. A highly profitable within the end of the day Bitcoin has even outperformed the normal financial assets including stocks and gold. An increasing mainstream adoption of Bitcoin and its outstanding performance has caught the eye of the many new retail and institutional investors.
Have you invested in Bitcoin or the other cryptocurrency and set your short-term trading or long-term investment goal? Then it’s essential that you simply understand the way to store your cryptocurrency and keep it safe. during this article, i will be able to tell you why it’s important to settle on the proper wallet for your Bitcoin and secure your digital assets. i will be able to also remind you about differing types of cryptocurrency wallets . Furthermore, i will be able to mention the foremost secure ‘Hardware’ sort of wallets and in explain the way to found out hardware wallet Ledger Nano S in my next article.
Why does one need a cryptocurrency wallet?
Nowadays cryptocurrency exchanges are the simplest and best place to shop for Bitcoin and other cryptocurrencies. These market places offer much higher liquidity and secure purchase options than peer-to-peer markets. Thus, you’ll instantly purchase Bitcoin together with your local currency and store them safely in an automatically generated cryptocurrency wallet on exchange. Keeping your cryptocurrency assets on exchanges is extremely convenient. you’ll trade your Bitcoin and make some gains or sell it at any suitable time. Moreover, you do not got to worry about fixing another cryptocurrency wallet and understand how it works.
Some of cryptocurrency enthusiasts believe that if you select a reputable cryptocurrency exchange with a robust security measures then storing your crypto funds there’s fine. So, they buy Bitcoin on the exchange and sometimes leave it there for an extended term. they have a tendency to ignore the very fact that cryptocurrency exchange holds your private keys to the wallet and may control your assets. Hence, you’re wrong if you think that that you simply are the sole person responsible of your crypto assets. Should crypto exchange consider any of your trading activity as being a suspicious, it can easily prevent you from accessing your account or just freeze your funds. And despite crypto exchanges are using high-security protective measures, they still remain very susceptible to hacking attacks.
Are cryptocurrency exchanges safe?
The most recent hacking attack on South Korean cryptocurrency exchange Upbit may be a good reminder of the danger of storing your cryptocurrency funds on an exchange.
On November 27th, 2019, $51.3 million was stolen from one among the most important crypto exchanges in South Korea , Upbit. 342,000 Ethereum was transferred from the Upbeat Ethereum Hot wallet to an unknown wallet. thanks to hacking attack, all deposits and withdrawals services are going to be on hold and remain inaccessible for a minimum of fortnight . To catch up on the losses, Upbit stated that it’ll cover $51.3 million from the company’s own funds. However, the crypto exchange hasn’t confirmed yet how long the method will take.
In 2019, the entire volume of cryptocurrency-related fraud and theft attacks resulted in losses worth of $4.4 billion. The crypto thefts this year have increased drastically and are much higher compared to $1.7 billion losses in 2018.
Since January 2019, there are seven major cryptocurrency exchanges hacks:
January 15 – Cryptopia (New Zealand) was hacked with estimated $16 million losses.
March 24 – DragonEx (Singapore) lost $7 million of its user funds.
March 30 – Bithumb (South Korea ) lost $13 million of EOS and $6.2 of XRP funds.
May 7 – Binance (Malta). Hackers stole 7,000 Bitcoins like $40.7 million;
June 27 – BiTrue (Singapore) exchange lost $4.2 million in XRP and Cardano of its users funds.
July 12 – Bitpoint (Japan) exchange lost $28 million in hacking attack that hit 50,000 users.
November 26 – Upbit (South Korea) is that the latest hacking victim after losing $51.3 million.
These hacking attacks represent the huge risks that crypto investors take whilst holding their digital assets within the wallets on crypto exchanges. And if you haven’t re-considered the way to secure your crypto funds, then now’s the time to try to to it.
What is a cryptocurrency wallet?
A cryptocurrency wallet may be a software program that permit you to store, send and receive Bitcoin or the other cryptocurrency. Furthermore, it stores private and public keys which enable you to access and transfer your funds through various blockchains. once you download and found out cryptocurrency wallet, you generate the wallet address that’s almost like account number. the important identification of your wallet privacy comes within the sort of a personal key. Every private key’s related to a public key which forms the idea for ensuring safe transactions.
Private keys are extremely large and highly random codes (string of numbers and letters). they’re generated by your wallet during a cryptographic format that acts because the key to access your account. Private key helps to verify the authenticity of your ownership of cryptocurrency and allow you to spend your funds.
Every private key features a public key related to it. Both are the cryptographic tools to make sure safe use of cryptocurrency wallets. many of us think that crypto wallet address and public key are an equivalent . In fact, a cryptocurrency wallet address is that the compressed and shortened (hashed) version of your public key. A public key’s the unique identifier for your account on the blockchain. it’s wont to make sure you are the owner of wallet address which will receive funds.
If you’d wish to understand more about cryptocurrency wallets and therefore the difference between private and public keys, then you ought to read my earlier article. In “The key to secure cryptocurrency transactions” I explained intimately what’s Bitcoin wallet, private and public keys.
How to choose safe cryptocurrency wallet?
Many types of cryptocurrency wallets are suitable for each investor counting on the short or long-term strategy. the simplest way is to classify them into two categories: online (hot) and offline (cold) wallets.
Online cryptocurrency wallets are connected to the web and allow you to access your funds from anywhere. you want to remember that storing your cryptocurrency funds on these wallets means you store wallet keys in someone else’s server. Therefore, your digital assets aren’t only under your control. Crypto investors use online or hot wallets usually to store small amounts of cryptocurrencies. Thus, they use these wallets for transactions to shop for goods and services online, and regular cryptocurrency trading on exchanges. Online wallets include online web-based wallets, desktop wallets, cryptocurrency exchange wallets, and mobile wallets.
For more information on this sort of wallets, you ought to read my articles:
“What you would like to understand about Hot wallets”
“What are the simplest Hot wallets?”
Offline cryptocurrency wallets are amongst the foremost secure wallets to store your digital assets. they’re not connected to the web and are more like savings accounts. Hence, crypto investors typically follow ‘Hodlers” investment strategy and store larger amount of Bitcoin and cryptocurrencies for an extended time. These wallets occasionally require access to the web whilst investors are making a ‘one-off ‘ transaction. Offline or cold wallets are highly secure thanks to its owners aren’t sharing their private keys with third-parties or on cloud. These wallets are available the shape of a printed paper wallet or a hardware wallet almost like USB device.
If you’d wish to learn more about Offline wallets, then attend links of the subsequent articles:
“What you would like to understand about Cold wallets”
“Everything about Paper and Hardware cold wallets”
What cryptocurrency wallet to use?
It is vital to know advantages of those wallets as they need different purposes. Crypto investors should also bear in mind that each sort of wallet comes with its own risk. Therefore, to minimise the danger and avoid losing all of your crypto funds, many investors use few cryptocurrency wallets simultaneously:
Online cryptocurrency exchange wallets – investors are using these wallets to store bit of Bitcoin and cryptocurrencies for normal trading activities. Binance, Kraken and Coinbase are well-known and secure crypto exchanges within the world. you ought to never use this wallet type to store your main future investments!
Online mobile/desktop wallets – investors keep small fraction of Bitcoin or other cryptocurrencies in these wallets for normal purchases of products and services online. you’ll create your own mobile cryptocurrency wallet with Blockhain.com. it’s the safest and hottest wallet for storing your digital currencies. Additionally, you’ll download desktop version of Blockchain.com wallet and synchronize both wallets together. Another easy to use and multi-currency crypto wallet is named Trust Wallet. The Binance company behind Trust Wallet has been working to supply a secure and reliable wallet to its users.
Offline hardware wallet – this is often where investors and crypto enthusiasts keep majority (or all) of their cryptocurrencies for a mid to long-term. Nothing are often safer than this sort of wallets when it involves storing your crypto funds. The user’s private key’s stored during a physical hardware device that’s permanently disconnected from the web . The world’s hottest hardware wallet is Ledger Nano S. Most investors are using Ledger Nano S because it is affordable and offers the very best level of security for your cryptocurrencies. Therefore, you ought to concede to buy one and protect your future investments!