THE BEST DEFENSE IS A GOOD WALLET

Bitcoin overcomes the $15,000 threshold, Ethereum approaches $500; IOTA is up 1100% since November. The world of cryptocurrencies is being invested by an increasingly greater wave of interest from people around the world. However, while confidence on cryptos rises so should also the attention paid to how digital money is stored. In 2014, one of the biggest exchange platforms of the time, Mt. Gox, collapsed leading to a loss of 650.000 Bitcoins. Unfortunately we have no shortage of such cases since when Bitcoin came to the world, and there is no guarantee that these episodes will not repeat themselves in the future. However, taking appropriate action can greatly reduce the chances of giving up digital money to malicious actors or losing it. Knowing what a cryptocurrency wallet is and the differences between the different options available is the first stip towards a better cryptocurrency management.

WHAT IS A CRYPTOCURRENCY WALLET

A cryptocurrency wallet is a software program equipped with an address (public key) and a unique signature system (private key). In other words, a wallet collects the keys to access a given cryptocurrency without storing the actual cryptocurrency. Depending on one's own preferences and needs, there are several possibilities from which one can choose

THE DIFFERENT TYPES OF CRYPTOCURRENCY WALLETS

There are two main ways of storing cryptocurrency: online and offline.

Online/hot wallets, which can be divided into:

• Web wallets: web wallets like blockchain.info or Coinbase keep the private key on their servers and do not assign it to the holder of the wallet, thereby exposing themselves to high risk of hacking. On the other hand, web wallets are an easy way to store cryptocurrency and exchange it for other assets;
• Software wallets: software wallets, which can be downloaded either for desktop or mobile, allow the user to hold control of the wallet private and public keys, thereby having more control over the money stored in them. Despite the increased control some noticeable risks are involved, including losing the password or being subjected to hacking. Software wallets are best suited for making payments with small amounts while they are not recommended for storing large sums of money. Popular software wallets include Jaxx, Mycelium (which is interoperable with popular hardware wallets) and Breadwallet.

Offline/cold wallets, which can be divided into

• Hardware wallets: small hard drives on which private and public keys are stored offline, thereby reducing the risk of being intercepted by malicious actors. In this case all the transactions are stored on the USB drive, while the computer will be used exclusively to broadcast the transaction to the network. Despite being one of the most secure forms of storage for cryptocurrencies, hardware wallets slow down the timing of transaction approvals. For this reason, it is suggested to transfer small amounts of money on software wallets when wanting to execute transactions. The most popular hardware wallets include Trezor, Keepkey and Ledger Nano S.
• Paper wallets: arguably the most secure but also most cumbersome form of cryptocurrency storage, paper wallets are obtained by simply creating offline the public and private keys and by writing them down on a piece of paper. Paper wallets are a very secure form of data storage, since the keys are never shared on the computer. Some drawbacks are the risk of losing the piece of paper or the need share the keys each time a transaction has to be made

Be it by encryption, offline generation, double authentication or through any other methods, it is fundamental to stress the importance of always storing the private keys safely. Diversify your options: use different types of wallets and have more than a pair of keys. The higher the value of a coin, the higher the number of malicious actors interested in appropriating it. Therefore, taking early measures to protect your crypto money is fundamental for when it will increase in value over time, and it will probably do. Remember: buying cryptocurrency is good, storing it properly is great.