There are many types of cryptocurrency wallets that allow users to store and access their digital currencies in different ways. An important question in this context is how safe these wallets are. Before taking the security aspect, it is helpful to understand all the types or varieties of cryptocurrencies that exist today.
Cryptocurrency portfolio: types and varieties
These portfolios can be broadly classified into 3 categories:
- Software portfolios
- Hardware wallets and
- Paper wallets
Cryptocurrency software portfolios can be redistributed to desktop, online and mobile wallets.
- Desktop software portfolios: These wallets must be downloaded and installed on desktop computers and laptops. This variety offers the highest level of security, although their accessibility is limited only to the computer on which it is installed. Also, just in case, if your computer is hacked or infected with a virus, there is a chance that you will lose all your money.
- Online software portfolios: This range of cryptocurrencies runs in the Cloud. This way, they can be easily accessed from any computer device and from any geographical location. In addition to accessibility convenience, this type of digital wallet stores private keys online. The keys are controlled by third parties; which easily injures them in the face of hacking and theft.
- Mobile software portfolios: Unlike the other two varieties, mobile software portfolios run on phones through an app. These can be easily used anywhere, including retail stores and shopping malls. This range of wallets tends to be much simpler and smaller compared to regular desktops to accommodate very limited space on mobile phones.
The difference between hardware and software portfolios
Digital hardware portfolios change with the software in terms of storing the user’s private keys. Hardware wallets store user keys on a hardware device (such as USB). This way, as the keys are stored offline, these wallets provide more security. In addition, hardware portfolios are easily compatible with many online interfaces and can also handle different currencies. This type of cryptocurrency wallet is also easy to make transactions with. As a user, you must connect your device to any computer connected to the network before entering your PIN, transfer currency, and confirm the transaction. Your digital currency is kept offline by hardware wallets, so the risk factor or security concern is also much lower.
Digital paper wallets: This range of digital wallets is also easy to use and guarantees a high level of security. The term “paper wallet” refers to the printing of a user’s public and private keys. However, considering the cases, we can also mention a software application designed to securely create keys before printing.
Sweep with paper bags
Using paper wallets is pretty easy. To transfer any cryptocurrency to your wallet, you simply transfer the funds from the software portfolio to the public address that your wallet displays. Also, when you want to spend or withdraw your money, transfer paper wallet funds to your software. This procedure is usually called a “sweep”.
The scan can be done manually by entering private keys or scanning the QR code in the paper wallet.
How secure are cryptocurrency wallets
Different varieties of digital wallets offer different levels of security. The security aspect depends mainly on two factors:
- The type of wallet you use: hardware, paper, online, desktop or mobile
- Selected service provider
Needless to say, it is much safer to keep currencies in an offline environment compared to online ones. There is no way to ignore security measures, regardless of the wallet you choose. If you lose your private keys, all the money stored in your wallet will be taken out of your hands. On the other hand, if the wallet is hacked or you transfer the money to a scammer, you will not be able to reverse the transaction or even recover that money.
Investing in cryptocurrency is a smart business idea and using the right portfolio for this is inevitable. You need to be very careful to ensure the safety and security of your funds transfers and transactions.