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Posted on Mar 04 2020,12:40 pm
Types of cryptocurrency wallets and how to protect cryptocurrency wallets
Types of online and offline cryptocurrency wallets and how to protect cryptocurrency wallets
How to choose and protect a cryptocurrency wallet
In July 2017, one of the largest cryptocurrency exchanges in the world, BTC-e, suddenly became unavailable. Trading on the exchange for the last day before the shutdown amounted to about 56.7 million dollars. USA. The official reason for the shutdown of the exchange was the FBI accusation against Alexander Vinnik of money laundering using cryptocurrency. Exchange accounts were seized, exchange servers seized. About a million client accounts fell under attack, and it was very difficult to return a day from. The management of the exchange for more than a month and a half has been considering the possibility of a refund.
Following BTC-e, another largest exchange, Poloniex, made amendments to the contract, stating as a separate clause that the exchange is not responsible for money lost by the trader (stolen or otherwise lost) and does not guarantee the security of the platform. In other words, representatives of the exchange preferred to evade responsibility and do not exclude problems with hacking. This clause of the agreement immediately gave investors a reason to suppose that the exchange itself was not averse to using forbidden methods for capturing accounts, arguing this fact by hacking.
Unsurprisingly, investor confidence in uncontrolled and unregulated exchanges fell. An alternative to storing cryptocurrency on exchange accounts can be electronic wallets. Read about their types, advantages and disadvantages, as well as protection methods.
The best cryptocurrency wallets
An electronic cryptocurrency wallet is a wallet that stores a private key that allows access to cryptocurrencies. That is, this is a kind of key, a password that gives access to cryptocurrencies hosted on the blockchain. And its transfer to public access means the actual loss of cryptocurrencies. Wallets can be developed for a separate cryptocurrency or multicurrency (for the most popular cryptocurrencies). They can be divided into two groups: online and offline wallets.
1. Online Wallets
They are a third party service. Keys in this case are located on remote servers. They allow not only opening several wallets for different cryptocurrencies, but also conducting convertible operations, trading on exchanges, calculating commissions using built-in calculators, etc.
anonymity. Verification is not needed, the owner of the wallet remains unknown;
the ability to work with several cryptocurrencies;
high transaction speed.
risks inherent in cryptocurrency exchanges. Some wallets were created with obviously fraudulent purposes; the risks of breaking wallets remain;
additional expenses. In addition to the exchange commission, you will have to pay a commission to the service.
There are no reliable ways to protect money on such platforms. Therefore, recommendations for protecting money come down to diversifying risks, that is, working simultaneously with several wallets. Given the profitability of cryptocurrencies from 100% for several months, this option is optimal.
Examples of popular online wallets:
HolyTransaction. The multi-currency wallet, founded in 2014, supports more than 10 of the most popular cryptocurrencies. It has an intuitive interface, the commission in comparison with other wallets is average;
Coinbase, created in 2012,it supports bitcoin and ethereum;
Cryptonator The most popular multicurrency wallet in the CIS.
2. Offline Wallets
They represent the storage of keys on their own media without access to the Internet. There are several such options:
1. Desktop . Wallets that involve storing keys on your hard drive. They are considered one of the most reliable options among offline wallets. They are a program installed on a computer with the help of which access to data on a cryptocurrency account is carried out. Their disadvantage is the need for continuous updating, which takes up a lot of memory (from 100 GB). Therefore, desktop programs are divided into "thick" and "thin". "Thick" ("heavy") - programs that themselves from the very beginning download all the block chains and constantly update them. "Thin" ("light") - download the necessary information from third-party services. Despite the fact that the key file remains on the computer, there is a risk that the data from the services will not be downloaded as needed.
Exodus Has a built-in exchange platform ShareShift, supports 7 cryptocurrencies;
Bitcoin Core. One of the best wallets for bitcoin, working with all operating systems;
Armory It is an addition to Bitcoin Core, which allows to increase the level of security of private key storage.
2. Hardware . They are a separate removable media like a flash drive. This method of storing keys is not very popular yet, because it is suitable only for long-term storage (it is inconvenient to trade from it). But he does not overload the computer.
Examples of devices:
KeepKay. Supports 4 major cryptocurrencies;
flash Ledger USB Bitcoin Wallet;
3. Browser . Programs that are made as extensions for the Chrome and Firefox browsers. They have a minimalistic design, pleasant for visual perception.
Jaxx, supporting 14 cryptocurrencies, has open source code, allows you to export and import keys, and has a desktop version for Windows and Linux.
4. Mobile . They are programs for installation on mobile media (gadgets). Mobile wallets provide payment for goods and services. It is rather a transit option for storing cryptocurrencies, since mobile devices do not provide for constant updating of the blockchain.
Coinomi. One of the best wallets for Android, supporting more than 50 cryptocurrencies. Its advantage is the ability to enter a seed phrase, which allows you to restore wallet data;
Xapo. A California company wallet that supports bitcoin. Money on the wallet is insured, there is the possibility of issuing a debit card, you need to bind a mobile number.
5. Paper . A unique option for storing keys, which is a printout of a picture with a QR code containing a public address and a private key. Long-term storage option for those who do not trust electronics.
Each wallet has its advantages and disadvantages. Which option to choose depends on the goals. For larger amounts, desktop versions are better, paper media - for those who are used to cash currency, they are considered the most reliable from the point of view of the absence of hacking risks.
Ways to protect cryptocurrency wallets
Online platforms are a risk associated with a third party. But cold wallets are not completely safe. There are many viruses that read key data and transmit it to third parties. Some viruses not only open access to passwords, but also install hidden software that uses the power of a computer for mining. Alas, anti-virus programs are not always effective, because the best protection is autonomy and control over which sites are opened and programs are downloaded.
Other ways to protect cryptocurrency wallets:
encryption. The wallet is password protected. A classic way of protection that minimally protects data. It does not give an absolute guarantee, since there are viruses that read keystrokes. Any password can be hacked;
backup. The data used for changes in transactions can be stored in different places and may not be accessible to the user. Because we are talking about a full backup of the wallet;
multi-signature. Optimal protection against hacking online wallets, provides for the signing of transactions by two or more people. Multi-signature is used in a business environment where an account can belong to several partners. It is possible to create 2 accounts from different devices - this way the investor builds multi-level protection.
And finally, the most reliable option is to not mess with electronic wallets and cryptocurrency exchanges at all. Not so long ago, LiteForex offered traders a new service - trading in leading cryptocurrencies . Your trading account is reliably protected from hacking, and the broker's work is strictly controlled by regulators and an independent auditor. Join the number of professional traders and earn on technology! Successful to your trade!