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CRYPTO GLOSSARY: CRYPTO WALLETS

Despite the concept of storing the money, digital wallets don’t work as a usual pocket wallet and they are not in a physical form. Actually, what exists are records of transactions stored on the blockchain.

Crypto Wallets is a software program built, essentially, to stores the private and public keys in a software program. With the proposal to interact with blockchain, allowing users to send and receive their digital currencies and to analyze their balance. So, if you are into the universe of crypto coins you will get one.

The wallets differ by three distinct categories: software, which one can be a desktop, mobile or online, a hardware and a paper. Likewise, they can be broken down into two categories, online and offline, with security mechanisms differing respectively. The online ones, or “hot” wallets, use two-factor authentication in case hackers tries to get into your account. The warm wallets, the ones you need to install as a software or as an app, use 12-word backup phrase and pin-codes. The third one is called “cold” wallet, which is a hardware located at a USB stick or a special gadget – it seems the most secure way of holding your cryptos, however, according to recent reports, even hardware wallets are not foolproof.

Besides, crypto wallets already come with security tools to beef up its access against hackers. One especially is called HD-safe, or hierarchical deterministic safe, that sets a new address every time you sign in, generating a new address for your wallet every time you send or receive funds. This option makes the transactions harder to track, and impossible for hackers to calculate the actual amount of money you keep at your wallet.

Hackers and tips to protect you from it

The lack of reliability in digital wallets is an expressive negative point to potential users who want to join the technology. Even more because, in most cases, if your digital money is gone, it’s gone. You can eventually track the address of the last transaction but will not bring any real solution. As the anonymous nature of cryptocurrency ownership is determined by whoever holds the codes for it and the company of your wallet does not certify security, you will be alone in it. So, anticipate possible mistakes will ensure more trust and for it, you will have to be aware of the potential threat and how to use your wallet correctly:

  • Always review your wallet and PC/smartphone security and if it has significant flaws;
  • Phishing is the most popular type of fraud – hackers may send you a fake email from behalf of your wallet service with a fake URL. It will differ by one or several letters from the real URL of your wallet service;
  • Be careful with suspect links;
  • Simple human mistakes are common – keeping private keys in the mail, exposing the key at public, using public unprotected networks that allow the hacker to get any important information;
  • Big amount of tokens and large transactions may attract hackers to hack your wallet! So, if possible, more transactions with a smaller amount of money are always better than just one transaction with a big amount;
  • Be aware of the malware! Whoever kind of wallet you use, you should certify that no malware is installed;
  • Always backup your wallet! Offline storages options for backup will protect you against computer failures and will allow you to recover your wallet. However, will not protect you against eager hackers;
  • Keep always your software up to date – that way you will have the latest security enhancements available;
  • Add extra security layers.

And, most important, always remember where you put your pin code. Some wallets provide access via Touch/Face ID instead of the large codes. Extra care will be your best option.

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