Let’s state the obvious – security in our industry is an issue. In light of multiple security breaches over the years, securing cryptocurrency funds in the right wallet with strong features is more important than ever.
- There is no one size fits all when it comes to wallets but hardware wallets are generally the most secure choice for the everyday investor
- The most important feature to take into consideration when choosing a wallet is how the wallet provider manages the private key
Security has become a more prevalent issue than ever this year. A number of events have happened to highlight why security is of the utmost importance:
- The year kicked off with Cryptopia being hacked for roughly $16 million
- The founder of QuadrigaCX dies with the sole access to the exchange’s funds
- Leading exchange Binance got hacked for $40 million worth of bitcoin
Securing funds in a wallet has long been recognized as a prudent way for investors to manage the cryptocurrency they acquire. It is not always as simple as that. There are many intricacies to understand when choosing a wallet. There are numerous different types to consider and a vast array of features to be aware of when choosing where to secure your funds. There is no one size fits all when it comes to wallets. What works best for a billionaire will be drastically different from what an investor with $10,000 in funds requires.
Wallets Types to Consider for Utmost Security
Hardware wallets are the best choice for the average investor looking to apply a high degree of security to their funds. Hardware wallets secure users funds offline and apply high levels of encryption so that the users are protected even if they use their hardware device on a computer that has been compromised. These wallets leverage the best of both offline and online capabilities. Users can receive funds to their address while the wallet is offline and can connect their device to a computer to send transactions and monitor their balance. It is even possible to integrate some of the devices with other wallet applications to set up watch-only balances whereby users can monitor their balance from their mobile device. The leading hardware wallet devices on the market are Trezor, Ledger, and KeepKey. All of these have a great reputation. Some have wider support for altcoins and may be more attractive to certain users because of this.
One of the main downsides with a hardware wallet is they come with a price tag. The leading hardware wallets providers typically offer hardware devices in the range of $99 to $249. Those who are seeking a free solution have an array of other options. Desktop wallets are often a strong alternative to hardware wallets. Desktop wallets such as Exodus support a wide variety of cryptocurrencies and allow users to manage their cryptocurrency funds from their computer device.
Other types of wallets available to be used include paper wallets, web-based wallets, and browser-based wallets. Paper wallets are a great way to store funds offline that users don’t plan on transacting with for the foreseeable future. However, this wallet type is more suitable for advanced users. Web-based and browser-based wallets are typically a poor choice given how they manage users private keys. However, they are often used due to their convenience and the same applies to the wallets provided by exchanges. Another convenient option for users is to simply leave their funds on the wallet provided by the exchange. The exchange hacks examples noted at the start of this article should be enough to dissuade readers from doing this with a significant amount of funds.
Security Features of Top Wallets
The most important feature to recognize when choosing a wallet is how the private key is managed. The problem with web-based and browser-based wallets is the private key is often stored on the servers of the wallet provider meaning that the wallet provider professionals have access to the key. Sometimes this is alleviated by having high levels of encryption. But the best wallets put the user in control of their own private keys.
Choosing the Right Wallet
When making a final choice on what wallet to choose, don’t be dissuaded by wallet providers marketing numerous features and vast functionality. Such wallets can often make an unacceptable tradeoff with their level of security. A hardware wallet is definitely a safe choice if an investor has a significant amount of funds. If vying to go for a different wallet, it is important to understand how the wallet provider manages the private keys of the wallet users. It is also useful to read reviews of analysts in the industry as they will easily be able to point out the key strengths and weaknesses.
Reviews of wallets can also be found on sites such as cryptocompare.com.
HODL Finance is the European digital lending company. HODL Finance issues loans backed by cryptocurrency and other digital assets. Founded by the shareholders of the peer-to-peer lending platform, Savy, HODL Finance now serves clients around the world.