There are different types of cryptocurrency wallets to allow users to store and access their digital currency in a variety of ways. The question that pertains to this is how secure these wallets are. Before taking the security aspect, it is helpful to understand the different types or variations of the existing cryptocurrency wallet.
Cryptocurrency Wallet: Types and Types
These wallets can be broadly classified into 3 categories:
- Software wallet
- Hardware wallet and
- Paper wallet
Cryptocurrency software wallets can again be subdivided into desktop, online and mobile wallets.
- Desktop Software Wallet: These wallets are for downloading and installing on desktop PCs and laptops. This particular variation provides the highest level of security, although their accessibility is limited to the computer where they are installed. Moreover, if the computer is hacked or infected by a virus, it is likely to lose all its money.
- Online Software Wallet: This range of cryptocurrencies runs in the wallet cloud. Thus, they can be easily accessed from any computing device and from any geographical location. In addition to accessibility, this type of digital wallet stores personal keys online. Keys are even controlled by third parties; This makes them easily vulnerable to hacking and theft.
- Mobile Software Wallet: Unlike the other two types, mobile software wallets run on smartphones through an app. These can be easily used everywhere including retail stores and malls. This range of wallets is usually much simpler and smaller than normal desktops to accommodate very limited space on mobile handsets.
The difference between hardware and software wallet
Hardware digital wallets differ from software in terms of storing users’ personal keys. Hardware wallets store user keys (for example, USB) on a hardware device. Thus, while the keys are stored offline, these wallets provide an extra security. In addition, hardware wallets are easily compatible with many online interfaces and can handle a variety of currencies. It is also easy to transact with this type of cryptocurrency wallet. As a user, you only need to plug in the device to any computer connected to the web, transfer the currency and confirm the transaction before entering a PIN. Your digital currency is kept offline by the hardware wallet and thus, the risk factor or security concern is much less.
Paper Digital Wallet: This range of digital wallets ensures user-friendly and high-level security. The term “paper wallet” simply refers to a hardcopy printout of a user’s key, both public and private. However, considering the examples, it can also refer to a software application that is meant to create keys securely before printing.
Sweeping with a paper wallet
Paper wallets are relatively easy to use. To transfer any cryptocurrency to your paper wallet, simply transfer funds from the software wallet to the public address, which displays your paper wallet. Similarly, when you want to spend or withdraw your money, simply transfer funds from your paper wallet to your software wallet. This method is popularly known as ‘sweeping’.
Sweeping can be done either manually, by entering a private key or by scanning a QR code on a paper wallet.
How secure is the cryptocurrency wallet?
Different types of digital wallets provide 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 selected service provider
Needless to say, it is much safer to keep money in an offline environment than online. There is no way to ignore the security system, the wallet is chosen regardless. If you lose your personal key, all the money in your wallet will be gone. On the other hand, if the wallet is hacked or you transfer funds to a scammer, it will not be possible to reverse the transaction or recover that money.
Investing in cryptocurrency is a smart business concept and using a suitable wallet is essential. You just have to be more discriminating with the help you render toward other people.