Now that you’ve purchased some BTC and ETH on Coinbase it’s time to get a private wallet.
See when you purchase your currency on Coinbase, they hold your wallet information. If something were to occur with the site, your wallets could be compromised. So that’s why we have private wallets.
There are a few types of private wallets that provide different ways to store and access your digital currency. Wallets can be broken down into three distinct categories – software, hardware, and paper. Software wallets can be a desktop, mobile or online.
- Desktop: wallets are downloaded and installed on a PC or laptop. They are only accessible from the single computer in which they are downloaded. Desktop wallets offer one of the highest levels of security however if your computer is hacked or gets a virus there is the possibility that you may lose all your funds.
- Online: wallets run on the cloud and are accessible from any computing device in any location. While they are more convenient to access, online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.
- Mobile: wallets run on an app on your phone and are useful because they can be used anywhere including retail stores. Mobile wallets are usually much smaller and simpler than desktop wallets because of the limited space available on a mobile.
- Hardware: wallets differ from software wallets in that they store a user’s private keys on a hardware device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security. Hardware wallets can be compatible with several web interfaces and can support different currencies; it just depends on which one you decide to use. What’s more, making a transaction is easy. Users simply plug in their device to any internet-enabled computer or device, enter a pin, send currency and confirm. Hardware wallets make it possible to easily transact while also keeping your money offline and away from danger.
- Paper: wallets are easy to use and provide a very high level of security. While the term paper wallet can simply refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software that is used to securely generate a pair of keys which are then printed. Using a paper wallet is relatively straightforward. Transferring Bitcoin or any other currency to your paper wallet is accomplished by the transfer of funds from your software wallet to the public address shown on your paper wallet. Alternatively, if you want to withdraw or spend currency, all you need to do is transfer funds from your paper wallet to your software wallet. This process, often referred to as ‘sweeping,’ can either be done manually by entering your private keys or by scanning the QR code on the paper wallet.
I have experience with using:
- Desktop Wallet:
- Electrum BTC wallet
- Ethereum ETH wallet
- Online Wallet:
- Mobile Wallet:
Wallets are secure to varying degrees. The level of security depends on the type of wallet you use (desktop, mobile, online, paper, hardware) and the service provider. Online wallets can expose users to possible vulnerabilities in the wallet platform which can be exploited by hackers to steal your funds. Offline wallets, on the other hand, cannot be hacked because they simply aren’t connected to an online network.
Remember that no matter which wallet you use, losing your private keys will lead you to lose your money. If your wallet gets hacked, or you send money to a scammer, there is no way to reclaim lost currency or reverse the transaction. You must take precautions and be very careful! You are solely responsible.
- Backup your wallet. Store only small amounts of currency for everyday use online, on your computer or mobile, keeping the vast majority of your funds in a high security environment. Cold or offline storage options for backup like Ledger Nano or paper or USB will protect you against computer failures and allow you to recover your wallet should it be lost or stolen. It will not, however, protect you against eager hackers. The reality is, if you choose to use an online wallet there are inherent risks that can’t always be protected against.
- Add extra security layers. The more layers of security, the better. Setting long and complex passwords and ensuring any withdrawal of funds requires a password is a start. Use wallets that have a good reputation and provide extra security layers like two-factor authentication and additional pin code requirements every time a wallet application gets opened.