Wallet Security: The Crypto Wallet and Useful Security Tips.
Wallets are where we keep valuable things, usually money in the form of cash, credit or debit cards and so on. We know the importance of always keeping our wallets safe and never allowing them to get into the wrong hands.
This helps to prevent theft, electronic fraud and so on.
Same applies to a crypto wallet, the only difference is the electronic and digital nature of the crypto wallet, and also the nature of the valuable stuff that you can keep in it.
In this article we’ll be talking about the crypto wallet, what wallet security is, key wallet security features and types of crypto wallets…
So let's get right to it!
The Crypto Wallet and Wallet Security
What is a crypto wallet? A simple definition of a crypto wallet is a hardware device or software tool where you can store crypto assets and can also perform crypto transactions with. Sending and receiving of crypto assets are the usual crypto transactions.
In more technical terms; the crypto wallet is a hardware device or software program that keeps the private and public keys to your crypto assets.
Public and Private Keys
Keys are a string of alphanumeric characters (numbers and letters) that are used for encryption and decryption of cryptocurrency transactions.
What are Public keys?
Public keys can be likened to your regular bank account number. You may share your account number with others, usually for the purpose of receiving payments; sharing your account number poses little to no risk at all to you.
According to this article by Gemini's Cryptopedia ; a public key is said to be a cryptographic code that enables one to receive crypto assets. A shortened form of a public key is what is known as a "wallet address" or simply "address".
This address may be shared with others for the purpose of receiving crypto without any serious risks.
What are Private Keys?
In this article by computer security company McAfee, a private key is described as being similar to your internet banking passwords and debit or credit card pins which you must safeguard and should never share with anyone This helps to prevent unauthorized access to your account and theft.
While a public key lets others send crypto assets to you by encryption, a private key allows you to unlock the crypto assets and gives you ownership of the crypto by decryption.
It is very important to always safeguard your private keys and never to share your private keys with anyone or put your private keys where anyone may gain unauthorized access to it. This is to prevent them from stealing your crypto or wiping your account clean.
Let's now move into the topic of wallet security…
What is Wallet Security?
Wallet security talks about precautions, tips and steps that we must take to keep our digital or crypto assets safe.
Types of Crypto wallets and their Security levels
People say very often that certain types of wallets offer a better level of security than others. So you might ask yourself certain questions:
What is the most secure wallet?
Can a wallet be hacked?
How can I make my wallet secure?
Let's try to get some insight into the different types of wallets together with their quality, security features and mechanisms, so that you may be able to answer those questions and choose which one is best for you.
Custodial Wallets
A Custodial wallet is a type of wallet in which your crypto assets are managed and held by a web-based third party platform, like a crypto exchange.
In other words, the third party holds the private keys to your wallet.
As custodial wallets are usually web-based, the said third party allows you login access to your crypto wallet usually for the purpose of receiving or sending crypto.
These third party platforms usually offer very user friendly interfaces and because they keep the private keys to your wallet, you enjoy the option of getting login assistance and recovering your password in the event that you lose or forget your password.
A possible downside to using custodial wallets is that it is web-based. As we know, web-based platforms are usually prone to hacks and other forms of cyber security breaches.
These third party platforms usually try to maintain a high level of security and may offer some compensation for losses that occur from cyber attacks or security breaches, as long as the security breach does not occur as a result of the user's own carelessness.
Good examples of platforms that offer custodial wallets services are; Coinbase, Binance, OKX and FTX.
Non-Custodial Wallets
Non-Custodial Wallets are wallets in which only the wallet owner has access to the private keys.
As the wallet owner, only you have access to your wallet and have the sole responsibility of managing and safeguarding your private keys and crypto assets.
A possible downside to the use of non-custodial wallets is that there is no option of recovering your private keys in the event that you lose or forget your keys. It is therefore very important that you always keep your private keys safe and secure.
Good examples of non custodial wallets are: Ledger Nano S, Trezor One, Exodus and Zengo.
Hardware Wallets
According to Cryptocom, a hardware wallet is a physical device that you may use to store the private keys to your crypto assets.
Hardware wallets usually look like USB flash drives, with some of them having Bluetooth connectivity.
The hardware wallet is also called a cold wallet, as it is used for offline storage or cold storage of crypto assets.
However, when you need to send crypto from a hardware wallet you would need to connect it to the internet using a software application created by the manufacturer.
The hardware wallet is a form of a non custodial wallet in the sense that, only you have your private keys and also the sole responsibility of keeping it safe. There are no forms of recovery options if you lose your private keys.
Being a form of offline storage, the hardware wallet is less prone to internet security breaches.
Here are some hardware wallet examples: Ledger Nano S, Trezor One, KeepKey
Software wallets
In this CoinMarketCap article, a software wallet is defined as a wallet available in the form of internet-based mobile and desktop applications that allows you to store, send and receive crypto.
Software wallets may also be said to be non-custodial, as only you have sole custody of and access to your private keys, so it must always be kept safe and secure as there are no available recovery options.
As software wallets are internet-based, they may be prone to certain cyber attacks and internet security breaches.
Some examples of Software wallets are TrustWallet, Metamask and ZenGo
Having said all that, let’s answer those questions;
What is the most secure wallet?
Each type of wallet, the hardware wallet and software wallet, has its own peculiar security risks. A good way to mitigate these risks might be to use both wallets so as to strike an even balance between both wallets.
Can a wallet be hacked? Yes, a wallet can be hacked. Software wallets and Custodial wallets, as they are web-based, are more prone to getting hacked.
How can I make my wallet more secure?
Ensuring your wallet is always secure, requires a continuous and conscious effort. In a subsequent section in this article specific wallet security tips are given.
Crypto wallet Security Risks and Threats.
Understanding some of the common security risks and threats associated with crypto wallets will be important towards helping you avoid them. Here we’ll be listing some of the very common ones:
Software wallets Security Risks:
According to Cyber security experts, hackers and criminals with nothing but malicious intentions are constantly devising ways to steal assets from digital wallets.
Here are some of the methods these criminals use:
Phishing: Phishing is the practice of cunningly encouraging people to provide private information about their crypto wallets.
Hackers and cyber criminals do this by sending unsolicited emails and messages, to trick and encourage people to give them sensitive information, while they pose as legitimate businesses.
Use of Malware/Spyware/Virus: These are harmful computer programs that are designed to gain unauthorized access into a computer system. These harmful computer programs have the ability to find and leak private and sensitive information such as crypto account passwords, email passwords, private keys and so on.
These harmful programs may be transmitted through certain websites and links contained in unsolicited emails.
Stealing of Mobile devices and Computers: Criminals may steal mobile devices and computers in order to get private information that would enable them to gain access to crypto wallets.
Cyber security experts encourage extra caution while surfing the web and the use of anti-malware applications to avoid falling victim to these scams.
Hardware Wallets Security Risk
As hardware wallets are mostly offline and used for cold storage, they are less prone to cyber attacks. However there is still a risk of a physical hardware wallet being stolen together with the private keys if they are written down somewhere.
Crypto Wallet Security Tips
Now that we have learnt about some of the basic components of a crypto wallet and their relevance to wallet security, we now take a look at some important wallet security tips.
In the following points we give some crypto wallet security best practices.
Never give your private keys, email passwords or crypto account passwords to anyone. It is important to always keep this at the back of your mind, especially about your private keys, anyone who has this information can gain access to your wallet, carry out unauthorized transactions and steal all of your crypto assets.
Never click on links or download attachments from spam or unsolicited emails or WhatsApp messages or messages on any other social networking platform. Hackers send you these emails with malicious intentions. Once you download the attachment or click the link, you may unknowingly download harmful malware programs that may be used to steal your information.
You should not visit websites with a lot of adware, especially websites with adult content, from devices that contain your sensitive wallet information. This reduces the chances of downloading harmful software programs like malwares, spywares and so on.
Always store your wallet private keys offline. Don't take pictures or screenshots of your private keys and save them on your phone or computer or cloud. Always keep your private keys written down somewhere and in a safe location offline.
You should always have a backup of your private keys. While you have your private keys written somewhere, in one location, there should be another back in a different location, just in case something happens.
Do not fall victim to phishing scams. Cyber criminals come up with new schemes everyday to get your private information. Phishing attacks targeted at crypto assets are on the increase. No reputable or legitimate company or business will ask you for your private keys, password or any other sensitive information, do not reveal such information to anyone under any circumstance.
Avoid putting out information about the amount of Bitcoin or NFTs or crypto tokens that you have on social media. This is important so that you do not become the target of cyber criminals.Keep such information to yourself.
Using both software wallets and hardware wallets may be a good option, especially if you own a lot of Bitcoin or other crypto assets. This will allow you to enjoy the security and safety of both the software and hardware wallets. As hardware wallets offer offline storage, a hardware wallet might be best suited for long term offline storage, as it will be less prone to cyber attacks.
Avoid using public wifi on devices that contain your crypto wallets. Use of public wifi may put you at a risk of downloading malicious computer programs that may
steal your private information.
Enable Two-factor authentication (2FA), this provides an extra layer of security.
Take extra caution during interactions with people on social media, especially when participating in giveaways, be careful about schemes that promise enormous returns, as they might be targeted at tricking you into revealing sensitive information.
The cryptocurrency and NFT markets are worth millions of dollars. These markets have caught the attention of cyber criminals, therefore we have to be watchful, observe the best wallet security practices and take every necessary precaution so that we do not fall victim to them.
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