A Definite Guide to Cryptocurrency Wallets
2020 was a great year for cryptocurrencies. And 2021 is set to be even bigger than ever. With the supply of Bitcoin (BTC) running out, prices for cryptocurrency are steadily on the rise.
At the time of writing, Ethereum (ETH) prices have broken a new record – shooting past $3,000. With so much growth potential in the market, you can be forgiven for wanting to get aboard the train.
The 2 most dominant strategies used by traders are either leveraging on short-term price changes for a profit or playing the long-term game.
But a word of caution – cryptocurrencies are extremely volatile. And prices are liable to change suddenly with little to no warning. This means that you could suddenly be left with nothing or make severe losses if luck is not on your side.
However, before you get into the market, you’ll need to know how you can store your cryptocurrencies. As they do not exist in the physical world, you’ll need to make use of specialized storage services.
Let’s take a look at what they are:
The most common wallet used by most crypto enthusiasts are hot wallets. Which are basically fully online services that store cryptocurrencies.
Hot wallets are online 100% of the time and give you easy access to your cryptocurrencies. Also, most crypto hot wallets allow you to seamlessly transfer funds from one user to another. Making them a great option for those who regularly utilize cryptocurrencies.
Besides that, they’re also free and very easy to use. The widespread availability of crypto wallets gives you plenty of choices to choose from.
However, there are considerations that you’ll need to take into account when using a hot wallet.
The lack of regulation for one means that there is often little to no legal oversight as to how these online wallets are managed. So you could end up being the victim of a scam should the wallet suddenly collapse overnight.
Also, hot wallets are a favorite target of hackers, cyber thieves, and scammers of all kinds. For example, the infamous Mt.Gox was at one point handling 80% of the world’s Bitcoin transactions prior to its collapses.
But numerous security breaches and heists resulted in massive losses for the company which led to its dissolution.
So if you’re planning to use a hot wallet, it’s better to err on the side of caution. Keep a limited amount of funds in your hot wallet and store the rest elsewhere.
This brings us nicely to:
In direct contrast to hot wallets, cold wallets store your cryptocurrencies offline. Cold wallets exist in a variety of formats. They range from sophisticated, hard disks and pen drives to the basic i.e. a simple sheet of paper.
Most of the time, crypto enthusiasts tend to go with the hard disk. They’re easily available, relatively cheap, and portable.
As an added plus, a hard disk can be locked away in a safe for more secure storage. While cold wallets are secure, they are not without their own problems.
Firstly, there’s always the risk that your cold wallet could be lost/stolen/accidentally thrown away or destroyed. Also let’s not forget that if you forgot the password to your encrypted cold wallet, there’s no way you can ever get in again. Like these poor guys.
What you’d want to do is to have a good split between your hot and cold wallets. Leave a small sum in your hot wallet for transactional purposes and the bulk of your holdings in a cold wallet.
To be on the safe side, have numerous backups or reminders for your passwords. Although you should also take extra care when storing those. For more info on crypto wallets check out this detailed guide from Tezro: blog.tezro.com/best-crypto-wallet-apps/
By taking the right steps, you can safely store your cryptocurrencies without having to worry. Just make sure that you don’t accidentally forget anything.