Each cryptocurrency holder faced a problem – where it is safe to store their assets. The choice of a crypto-wallet is an important issue for crypto enthusiasts, so the FNI Blockchain will help to figure out which wallets are on the market and what should be your focus.
What is the cryptowallet? Types of wallets
For a start, it is important to say that there are several types of wallets. They are divided according to the principle of software binding. There are two main types – “hot” (or “fast”) and “cold” (“slow”). The first requires the presence of the Internet, and the second is not connected to the worldwide web.
The following types of crypto wallets can be classified as hot:
- Online wallets that are on individual platforms or exchanges;
- Mobile wallets that work with smartphones or tablets;
- “Paper” wallets that are generated on special sites, are saved and printed out in the QR code form, which is access to the account;
- Desktop wallets that are installed on a computer or laptop
As for the “cold” wallet, this class of crypto devices should include a hardware wallet. This is a small physical device the size of a USB flash drive that stores all the important information about cryptocurrency – from the amount of data to the last transaction.
It is important to note that a hot wallet is not worse than a cold one but even reliable. The bottom line is that regardless of the form of ownership, the reliability of a particular type of cryptowallet depends on the security settings and usability.
Hot crypto wallets: features and functionality
As for security, it is hot wallets that are most often amenable to attacks by cybercriminals. Being tied to an Internet connection or being at a crypto platform, these digital vaults are vulnerable. However, despite this, technical support teams continue to improve their products, eradicating security weaknesses.
As practice shows, mobile crypto wallets hack most often. Developers equip it with functions of varying degrees of convenience, but the level of cryptographic protection of most wallets is rather low. This is due to the insufficient number of industry professionals who can create a well-protected application. According to various sources, 70-90% of mobile crypto wallets have significant vulnerabilities. A moderate degree of vulnerability is found in more than 90% of cases.
Online wallet: beware, it is very easy to hack!
As for online wallets, they imply more opportunities for cryptographic protection, but not all owners of the corresponding resources use these opportunities, so the degree of actual security varies from resource to resource.
Among the popular online wallets, we want to highlight Cryptonator, Holy Transaction and Coinomi. Many users believe that they have best recommended themselves for working and storing funds in the hot cryptocurrency wallets class.
However, it is worth noting one feature – all three wallets appeared in different periods of cryptocurrency fever. Cryptonator began its activities in 2014, and Holy Transaction and Coinomi only at the end of 2015 and in the middle of 2016, respectively. At the same time, the data of crypto-storage were justified both during the test and with a fully functional load.
Let’s start with a cryptowallet Cryptonator. This is one of the most popular online wallets, part mobile, as it has applications for iOS and Android. Also worth noting is its multicurrency (16 crypto and 4 ordinary currencies). There is a two-factor authentication with confirmation by e-mail or by phone, a password is assumed. However, there were some drawbacks: according to reviews, users often encountered cases of incomplete transactions – when the transfer was confirmed, but the money in the recipient’s wallet did not appear. Technical support does not solve these problems, despite their prevalence. So it makes sense to talk about imperfect protection, but not the fact that purely technical – it is quite likely that the human factor.
At the same time, Holy Transaction (HT) is not inferior to the functionality of its colleagues. The multicurrency online wallet HT supports storage of 12 cryptocurrencies, dollars and euros. In Western Europe, it has an extensive network of ATMs and continues to expand, so it is possible that it will reach the CIS countries, where cryptocurrencies are not prohibited and where their legalization is possible. It is considered one of the most convenient wallets for beginners thanks to an intuitive interface. But the HD wallet technology is missing, the keys to the wallets are stored on servers. Of the benefits – the presence of two-factor authentication and the ability to come up with a complex password. However, while Holy Transaction works in a regular manner, there are practically no reviews about the unavailability of funds.
Coinomi is the third prominent representative of hot cryptocurrency wallets, however, it has proved itself quite vulnerable to simple hacker attacks. Despite this, its popularity has not been declining for more than two years. This mobile service is available only to owners of phones on the Android OS. Multicurrency (more than 40 cryptocurrencies) and multilingual (English is also available). The software shift code is open, which indicates the willingness of developers to cooperate. There is an HD wallet, and private keys are stored by the user. However, there is no two-factor authentication. Although a malicious file caught on a smartphone and having managed to get the keys to the wallets, it will most likely be able to steal confirmation codes, so there is no special meaning in it.
Paper crypto wallets: the concept of protection and efficiency
“Paper” crypto wallets differ from online wallets in that the user does not need to register: the address and private key are generated on the site randomly. Both the address and key are presented in an alphanumeric form and in the form of a QR code. Users are assured that the private key is kept only by the owner, but in practice, there is no evidence of this. Not to mention the fact that scanning a QR-code with a tablet or smartphone also creates certain vulnerabilities, since the key is on devices without protection.
Blockchain, perhaps, is the most popular online wallet for bitcoins and has proven itself to be quite reliable. But there are delays in sending funds and other failures. Technical support eliminates them, but with moderate speed. Blockchain supports two-factor authentication, involves the creation of a strong password and seed-key. It is possible to synchronize with a smartphone via a QR code, which makes a personal wallet more vulnerable.
But BitAddress, though not inferior in popularity among wallets to its competitors, but has a number of advantages from its “colleagues”. The trick is that the address of the wallet and the key can be generated by randomly moving the mouse around the screen. Obviously, they may be at the disposal of the site owners. “Advanced” users can copy the site to a USB flash drive and run it using a virtual machine with the Internet turned off. This is a safer way, but only before the first transaction, which will require an internet connection. Not to mention the fact that much depends on the software with which the transaction will be made. There are few negative reviews about the service, but few people use paper resources as a long-term and reliable wallet.
Desktop wallets: “thick” and “thin”. What is important to know about it
As for desktop crypto-wallets, they are divided into two types -“thick” and “thin.” The first ones involve downloading the programs of the wallet and blockchain to a computer, the second – only the programs of the wallet itself, and the transaction information is stored on another server, where the program actually applies.
Exodus is a great example of a desktop wallet. According to its functionality, it is a multi-currency “thin” desktop wallet that supports internal currency exchange thanks to cooperation with the ShapeShift exchange. It has an intuitive and stylish interface, superior to its competitors. Differs technical support in the face of the creators who are ready to help the novice and open to suggestions from experienced users. It assumes the presence of a complex password, there are an HD wallet and the ability to create a backup copy of the wallet using the utility from the developers (which is also a plus, since third-party utilities tend to be not completely safe).
As for the “thin” wallets, they offer protection from the frivolity of users in the form of HD wallet technology. It involves the creation of a seed phrase based on 12 random words, which wallets “see” as a code. Based on this code, you can create any number of addresses with your own keys without the risk of losing data. If the keys are forgotten, this phrase is enough for the user to access their data.
Among the most prominent representatives of this type of wallets is Electrum. During its existence, one of the oldest Bitcoin wallets has released programs for various operating systems (as a “thin” wallet) and applications for smartphones. Also has open source. It is convenient for those who need increased anonymity, because it works without problems when connecting to the Tor network, through a proxy, etc. It involves the creation of a complex password, seed-key. Private keys are controlled by the user, regardless of whether he uses his desktop or mobile wallet. It is reliable enough, there are few negative reviews, technical support actively contacts with users.
“Thick” is considered more reliable because the other server is an invisible phenomenon, it is not known as protected and it is not known by whom it is serviced. On the other hand, server owners have the opportunity to protect them – at least, better than ordinary users can protect their devices. For this reason, it is not the servers that are hacked more often, but individual accounts, and here the fault of both the user and the developer may be equivalent.
Cold hardware wallet: 5 benefits for the user
However, hardware crypto wallets are considered security leaders. But relatively few people use them, not least because they cost about $ 100-200 when all the others are free.
Cold storage cryptocurrency implies physical access to the storage medium, which protects it from attempts to access via the Internet. A hardware cryptocurrency wallet is generally recognized as the safest and most convenient way to store digital assets.
This type of storage began to appear on the market as early as 2013-2014, but it gained particular popularity only today, after the rapid growth of the BTC rate. When you synchronize a crypto wallet with a personal computer, the cold wallet becomes extensive functionality for performing operations.
Advantages of a cold wallet:
- All transactions are confirmed not through a computer, but through buttons located directly on the hardware wallet device itself. This will not allow transferring the crypt to someone else’s account during a virus attack or hacker raid. The presence of the interface of the crypto-wallet allows its owner to verify the accuracy and correctness of the sending address.
- To work with a crypto-wallet, a special software or a list of Bitcoin wallets is used. You do not have to have separate wallets for each altcoin.
- The small size of the device allows you to carry it with you, even in your pocket. And no need to worry that you will lose the password or the device itself since all data can be easily recovered.
- Even the absence of an Internet connection will not prevent you from signing transactions.
- A person who is not dedicated to the world of cryptocurrency, seeing such a device, will not consider it valuable, which only increases its security, protecting it from unenlightened thieves.
Among the most popular and commonly used cold-type wallets, Ledger, Trezor and KeepKey are worth noting. They have established themselves as the best of the entire cohort of hardware devices, where the level of security and functionality meets user requirements.
Let’s start with the world famous crypto wallet Ledger. He has several models, they all work on the same principle. Users have complaints about the strength of the display, otherwise there are few negative reviews about the physical equipment of the device. There are three risks, like other hardware wallets: theft, the substitution of addresses during a transaction, the loss or distribution of a seed-key. All risks are relatively low.
You can get rid of the first if you carefully handle the wallet. The second can be reduced to almost zero if you use reliable and compatible crypto-wallets, through which the transfer takes place, for example, the same Electrum. But the application for Chrome, recommended by manufacturers, also has not failed yet. As for the seed-key, it should be stored in a safe place and not rely on memory, thereby reducing the latter risk to a minimum.
But Trezor, as an alternative to Ledger, allows you to store several crypto tokens at once: Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic. Works well with Windows, macOS, Linux. Many people consider Trezor’s crypto-wallet to be the most popular one, and all because the legendary M. Palatinus took it into his own hands, developing the first pool and promoting the idea of group mining to the masses. The connection is via USB-port, control – via OLED-display. Useful add-ons include backup and the ability to remotely erase data, which is especially useful when losing a wallet. PIN protection is also quite original: incorrectly entering a password doubles the load on the device. Is it possible to choose the correct PIN? Practically no, because there are more than 6 thousand possible options.
KeepKey, on the contrary, is designed to work with Bitcoin, Litecoin, Dogecoin, Dash, Namecoin and Testnet. A distinctive feature is the 3.12 inch on-screen OLED display, which displays information about the current balance and payments. Outgoing transactions are automatically encrypted with a private key recorded and stored on the device itself. The key is written as a string of 12 randomly generated words. Access protection is provided by a PIN-code, with the possibility of blocking after several incorrect authorization attempts. To restore access, you will need to enter a special mnemonic phrase. The wallet is equipped with a micro-USB port and USB HID interface. To connect to a computer using a USB or Micro-USB cable.
Cryptocurrency wallets are beginning to become an important part of the life and work of not only professional crypto traders, but also ordinary users who believe in the future of the blockchain and cryptocurrencies. When choosing a wallet from a huge amount on the market, it is worth noting one important detail: ease of use and handling are not always justified, since security is a big question.
It is important for users to choose: either to sacrifice speed and a comprehensive opportunity to use a wallet, or to risk money. The choice depends entirely on the desire of the crypto asset holder. But one thing still needs to be said – the further the crypto trader moves forward in his desire to develop as a specialist in the field, the more often free and cold wallets are replaced by hardware devices.