The use of digital currencies is on the rise. However, just like with all new technologies, the more widespread the use, the more opportunities for bad actors to engage in nefarious activities. That’s why a secure crypto wallet just makes good sense, and as much as we would like to believe that TRASTRA is the best option out there, it certainly isn’t the only one.
What are crypto wallets?
Before getting into how to choose one, you should have a good idea of what a crypto wallet is in the first place. When a cryptocurrency exchange takes place, it isn’t the same as a transfer of physical assets, where you come into ownership of, say, a dollar bill. Instead, what happens is that ownership is signed off from one party to the next. Two crucial pieces of information are necessary to complete this transaction: a public key and a private key.
Think of the public key as your email and the private key as your email password. You give out one, but not the other. The public and private keys must match before a transaction can be completed. Once this authentication is done, the balance in your crypto wallet will change based on the type of transaction being completed.
Hot vs. cold wallets
So, now that you know how to keep your coins safe, you decide you are ready to start dipping your toe into crypto. The first thing you need to determine is whether you prefer a hot wallet or a cold wallet.
- With a hot wallet, your ledger is kept completely online. You can monitor and engage in transactions from your phone or your computer. Some are even browser-based, meaning you can access them anywhere with an internet connection. The focus is convenience. However, that does come at the cost of vulnerability. Being web-based means, this method has the same weaknesses as anything else online, namely hackers exploiting hidden vulnerabilities or using malware to break into your account.
- A cold wallet is a physical piece of hardware, typically a USB drive, which only allows transactions while it’s connected to the computer. These are security-focused, with the main vulnerability being a human error, like falling for a phishing attack. Some may find this a bit inconvenient, and if you lose your USB drive, much like losing a wallet full of cash, you effectively lose access to your crypto.
Which method is best will depend on you and what you value most. Hot wallets are generally more desirable for active traders due to their ease of use and speed. Those who only occasionally trade may favor cold wallets. However, a good practice might be to use both, treating your cold wallet as a savings account where you keep most of your money.
Other things you need to know about crypto wallets
A few more points to keep in mind:
- Not all wallets support all cryptocurrencies. Make sure you do proper research before committing.
- There are different fee structures and other expenses. Some hot wallets may engage in a fee structure that allows for trading expediency. Naturally, cold wallets, being a physical storage method, are something you have actually to purchase, meaning there is an upfront cost involved.
- Just as with other investments like the stock market and other commodities, prudence and diversification are never bad practices.
- Know yourself and what you are comfortable with.
- Crypto prices can be unpredictable, even more so than more traditional investments like EFTs or mutual funds.
As alluded to above, more people than ever are looking to cryptocurrency with different goals in mind. Some want to fund or supplement their retirement, some are looking for a get rich quick scheme (don’t be this person), and others are just curious.
Crypto is certainly an exciting and revolutionary new asset, and it’s still too soon to tell what long-term performance looks like. What’s evident today, though, is the importance of keeping your assets safe. There are several great sources on the matter, so be sure to educate yourself as best as possible to make the best choice for you.
