In this section of the website, I wanted to fulfill two objectives:
- Explain what are the different types of cryptocurrency wallets out there and which ones are the most secure.
- Answer the question, “Where should I store my cryptocurrency? On Coinbase? in an Exchange? Where?”
Why Are Wallets Important?
Quite frankly, cryptocurrency is where the money is right now. It is historic and will for a very long time, change the way we conduct financial transactions. Most persons coming into cryptocurrency have no idea about how to secure their cryptocurrency and loads of people are coming into cryptocurrency every day and trading on the Exchanges. Well, this is perfect for the people who do not have the best of intentions, such as hackers. Newbies are the perfect target for hackers. Hackers are in abundance and very active.
Since there is so much money in cryptocurrency right now, hackers look for opportunities and ways to hack into systems so they can gain access to your money.
If hackers can hack into hospitals, governmental, and other systems where people have accounts, hacking into a cryptocurrency system where one has an account will not be too difficult for the seasoned hacker. The question is if someone gained access to your username and password to an account you have, will they be able to steal from your account? That is why banks, corporations, the military, businesses, and U.S.government agencies are requiring a second layer of security beyond the first one (username and password) called Two-Factor Authentication, also known as 2FA. Two-Factor Authentication may ask you for a PIN that you set up or challenge questions that you created when you set up your account or some other type of code known only by you.
I know of newbies who had their cryptocurrency Exchange accounts hacked because they never bothered to set up Two-Factor Authentication on their accounts. So once the hacker had their username and password, they could steal their money unhindered. Yet, if the person had enabled 2FA on their accounts, the hacker would be able to see what they have in their accounts but would not be able to steal anything without a 2FA code which is known only to the account holder and that code changes every 60 seconds. The account holder gets the fresh code from his/her mobile device which as the Google Authenticator App installed on it.
So hackers tend not to bother with accounts with 2FA enabled on them and go after newbies who do not know better.
I was watching a video on YouTube the other day and there was a guy on their bragging about all of the money he has made within cryptocurrency, (a six-digit figure) and he was showing visitors around within his cryptocurrency Exchange account. Yet, in plain sight on that video, I could see that he had no security enabled. If hackers saw that video, they would be salivating. I reached out to the person to let him know that it was imperative that he enable 2FA on his account or move that large sum of money onto a hardware wallet.
One clever way hackers gain access to account information is phishing emails. Within those emails are links that they hope the reader will click on. NEVER open a link in an email from a person you do not know. And, even if it is a person that you do know, make sure that the link that they sent you was not forwarded to you by them from someone else. Closely examine emails that you receive and do not open the ones that look suspicious. You can identify most phishing emails because of poor spelling or grammar.
Hackers get on Facebook and post links within groups you have joined. NEVER click on any link posted within a Facebook cryptocurrency group you have joined. A good moderator would quickly ban persons who post links.
To not enter websites that contain malware and viruses! Be anal about updating and running virus and malware programs on your computer. I use the following three programs to keep my computers virus and malware free. I run these once or twice EACH day religiously.
- AVG-Free Antivirus
Change your passwords periodically and make them difficult to guess. For example:
- Br1dgeBabE@754 (is OK)
- P1cklEdH0RseTaStEG0Odw1ThSaLT (is better)
So wallets are important because they hold your cryptocurrency and securing them is VERY important.
How Do Wallets Work?
When you get a wallet on any of the Exchanges – including Coinbase – you are creating a unique private key consisting of a string of code consisting of numbers and letters. These keys are extremely difficult to hack. Your private key is like a digital signature. So, when you make a transaction from your wallet, that private key “signs” or authorizes that transaction.
This private key is how the Blockchain knows who the transaction is assigned to. Your private key identifies you as the owner of the wallet from which the currency was taken.If a hacker gets your private key, they can sign for any transaction from your wallet. In other words, steal your money.
You are also given a public key. With this public key (aka address), you can receive cryptocurrency. For example, if someone says to me, “I like the content value of your website and would like to send you a donation” or “I would like to pay you for designing my website (or some other service),” I could give them my public key. For example, my Bitcoin Wallet is public key on Coinbase is:
Types of Wallets
There are three types …
- Paper wallets
- Desktop wallets
- Hardware wallets
The Paper Wallet
A paper wallet is a literal print-out of your Private and Public Key and SQR code. You store these in a safe and secure place such as a lockbox or even a safe deposit box if you have a large amount of money. Treat this paper wallet as real money. If you damage or lose this printout, your money is lost (gone).
The pro advantage of having a paper wallet is that they are secure and free.
How To Create a Bitcoin-Based Paper Wallet?
Go to WalletGenerator.net and follow all five steps.
How To Check Your Paper Wallet Balance?
How To Cash Out From Your Bitcoin Paper Wallet?