How to protect your Cryptocurrency Wallet is a somewhat complex dilemma for those who are starting in the world of crypto assets. But, the first thing to know is that threats to the security of digital currencies are not closely associated with the blockchain technology; but to third-party interfaces that allow access to your network. That is to say, devices where wallets and private keys are stored or on websites where cryptocurrencies are purchased.
It should be remembered that crypto assets are not regulated by governments or central banks. Therefore, it is our responsibility to take the necessary measures to protect our funds; In addition, in the event of loss of funds, the probability of being able to recover them is minimal.
Thinking about how to protect your Cryptocurrency Wallet is not something that responds to whims, checkered paranoia or something like that. On the contrary, it represents an action that is aligned with the need to take care of and protect our assets against hackers or malicious people.
The custody of cryptocurrencies
A wallet or virtual wallet is the tool that gives us access to cryptocurrencies. Unlike the traditional wallet that we carry in our pants pocket; A wallet does not physically contain our crypto assets, but rather they are found on the blockchain or on the chain of blocks.
How is the proccess? The digital wallet records the private key, the public key, the public address, the transaction history and the balance of the cryptocurrencies that we have.
Nevertheless, the main axis of the entire crypto asset custody system is the private key, which generates the public key which in turn produces a public address.
- The public address: As its name suggests, it can be shared with all users. Therefore, if a friend wants to send us bitcoins, we share with him / her the public address of our wallet that works as a bank code.
- The private key: It must be stored with care. And it is that only with it, you can authorize transactions from our wallet to that of another person and provide a cryptographic proof of the origin of their bitcoins.
How to protect your Cryptocurrency Wallet it has its science. Knowing the modus operandi of virtual wallets is key to protect our crypto assets in the best possible way.
A transfer of ownership, not funds
So well a virtual wallet does not physically contain cryptocurrencies and they are found in the blockchain that we can only access with a private key.How does a shipment of crypto assets work then?
It is easy to understand, when sending a bitcoin to a friend, when we authorize the transaction from our wallet to another, we simply subscribe the ownership of that bitcoin to the address of our friend's wallet.
In other words, chen we send that bitcoin to our friend's wallet, the blockchain permanently and immutable records that bitcoin is now his property. Therefore, we are talking about a transfer of ownership, not funds.
How to protect your Cryptocurrency Wallet: Hot wallet and cold wallet
To understand how to protect your Cryptocurrency Wallet it is necessary to know that wallets are classified into "Hot wallet" and "Cold wallet". The former is connected to the Internet, while the latter remains offline most of the time. Which is more secure? Find out below:
- Hot Wallet
They are less secure virtual wallets, but they allow us to use our cryptocurrencies comfortably and quickly, offering more services than cold wallets. They can be applications, desktop programs, websites or exchange.
The hot wallets are ideal for those who want to embark on a journey in the world of cryptocurrencies. And it is that they are easier to use and help to understand the dynamics of the market little by little, without risking having to manage our investments on our own.
In addition, being connected to the Internet, therefore, to the blockchain, they allow buying and selling crypto assets in a few minutes. In times of great market volatility, or when prices go up and down very quickly, it is essential that we are able to operate immediately, both to contain losses and to obtain the desired profit margin.
However, keep in mind that hot wallets are more vulnerable than cold wallets to hacker attacks and phishing attempts. Precisely due to the fact that they are connected to the Internet.
The theme of account security It is essential for any company that offers cryptocurrency custody services. Therefore, even when the procedures to access our funds seem a bit cumbersome and with several steps to follow, they are actually strategies to protect our cryptocurrencies.
- Cold Wallet
They are wallets that are not connected to the network, which means that they are safer and act as a real bet to maintain large and long-term investments. Of course, there are several varieties, each with unique properties.
They can also be desktop applications or programs, but they are not connected to the Internet. However, this does not make them completely immune; computers and smartphones can be infected with a virus or hacked.
The safest cold wallet of all is hardware (USB stick) or paper (paper wallet). The paper wallet, however, does not allow the direct use of cryptocurrencies, since it does nothing more than keep the private key safe. That is, the access code to our cryptocurrencies.
Definitely, acts as a safe that keeps our cryptocurrencies very safe, at the expense of ease of use and the ability to use them out of the box.
The best ways to protect your cryptocurrency wallet
How to protect your Cryptocurrency Wallet responds to three essential elements:
- Secure private keys
- Secure recovery phrase
- Protect your computer against cryptographic malware.
Regardless of the type of wallet used, the private key should never be disclosed. The same goes for the seed phrase.
Most of the methods used to protect online accounts are valid for that of a crypto wallet. So, it is advised to use complex passwords, verify the address of a site before any connection and Two-factor authentication (2FA).
- Cold Wallet: They require precautions for use, so it is essential to ensure that the software where the computer is installed is virus-free before configuring the wallet. It is also necessary to verify that the software version is constantly updated, especially if a fork occurs.
- Hot Wallet: “It is necessary to collect as much information as possible on the chosen platform. For this, we must have the best tools in terms of security such as multi-factor authentication, SSL encryption and use devices for the preservation of crypto assets ".
It is common practice to use multiple platforms as long as the chosen passwords are complex enough and different on each of them.
Conclusions
Whatever the case, chen we think about how to protect your Cryptocurrency Wallet automatically, it must be related to the application of various security measures such as having a secure password manager so that we do not lose our passwords, including periodic backups so that it is possible to recover our wallet in case we lose our equipment (smartphone or computer).
Not even the most experienced users in the cryptosphere are safe from attack and losses of funds are always the order of the day. Therefore, the security of our virtual wallet should not be taken lightly and prevention remains, for the moment, the best means of protection.
