The LUDUM team’s got some special news for you today! Many of you have asked us to do a blog post on crypto wallets. We will give you a breakdown of the five main kinds of hot and cold wallets that are out there. Decide what kind is best for your crypto assets.
Before we jump into the five different types of vaults that most people use to store their crypto, let’s look at the two most rudimentary kinds which is “hot” and “cold”.
A hot wallet is usually used for making purchases using your cryptocurrency. If you have a trading account with a company like Bittrex, this can be considered a hot wallet as your currency will be stored on that company’s computer servers. If your wallet is on your desktop computer and that computer is connected to the Internet, then this is also a hot wallet. Having a hot wallet is great for transactions as you can easily transfer funds from one person to another or to a business. But it also means that wallet is less secure. Which brings us to a cold wallet.
With a cold wallet you’re completely offline, on a device that does not connect to the Internet. This makes it much harder to complete a financial transaction. But you can’t be hacked. What is important to remember is that serious traders tend to have both hot and cold wallets, as they’re used for different purposes. So let’s go take a look at the breakdown of our five main categories of crypto wallets.
First up we’re looking at desktop wallets. A desktop wallet for crypto is one that actually sits on your computer. This does give you some security, as you’re not supposed to be able to access this wallet from anywhere aside the actual desktop. However desktop computers are pretty much always connected to the Internet. And if it is connected to the Internet, and if the computer does get hacked, then someone can steal the funds from the wallets. For those of you reading this blog: How secure do you feel your desktop wallets actually are?
Next we have online wallets. There are a series of pluses and minuses here too. With an online wallet, all of your information and crypto is stored on the digital cloud. This makes it very easy for you to access your crypto , as you can access the cloud from anywhere. However, it also means that people who want to steal your currency have easier access, as they can also access the cloud from anywhere.
With an online account your wallet is controlled by a third party and these companies have a vested interest in protecting your funds since they don’t want to lose customers. We’d love to know how many of you think that this way of storing crypto will gain or lose popularity in the future.
In the third spot we’re looking at mobile wallets. Mobile wallets are similar to your desktop wallets, in a sense that you control the actual application through something installed on your phone. There are great many different wallets available out there for both iOS and Android. The biggest plus with a mobile wallet is you can use it whenever you want. This is very handy if you intend to use your cryptocurrency in the same way people use fiat-currency to pay for goods and services. Since your mobile device is always connected to the Internet, hacking is still a danger. For those of you you have a mobile wallet now: how many of you started on a mobile wallet versus a desktop wallet?
Hardware wallets are great for security. If you decide to use hardware wallets, you will still be making your transactions online, but your keys are stored offline. This gives you an extra layer of security over your hot wallet options. Hardware wallets are fairly easy to use: you plug it into an Internet connected device, enter your PIN, send funds, confirm, and the transaction completes.
We would love to know the breakdown of people who are only using hardware wallets versus those of you who have some of their crypto in a hardware wallet and the rest in a hot wallet of some kind.
Last but not least we have paper wallets. Yes, you did hear that correctly, a paper wallet. Which seems kind of impossible when you’re thinking about cryptocurrency. But it’s actually just the last step in keeping things as secure as possible. “Paper wallet” can mean one of a couple of things. Generally it means you have a piece of paper containing your public and private keys on it. So if you wish to make a payment for something, you just enter these details manually. However, it can also mean a piece of paper that has been printed by official encrypted software which has your keys on it and also a QR code. Which is used to make payments. It may seem kind of old school to have paper in the world of crypto, but it is a secure way to protect your funds. We are curious to know, if any of you fine folks reading this blog still use a paper wallet.