Types of Crypto Wallets

People think of crypto wallets as traditional wallets where we can store crypto.

In reality, a crypto wallet is just a tool which lets us access our crypto which lies on the blockchain network & not in the crypto wallet.

WALLETS

There are 2 types of wallet in general, cold wallets & hot wallets.

Cold wallets are comparatively safer so let’s discuss cold wallets first.

HARDWARE WALLETS-

A type of cold wallet where private keys are stored offline on a USB like device.

For example-

1. Ledger Nano S

• Here, you can store over 1000+ types of different crypto currencies.
• But you can only have 3 apps installed at a time for access, eg- BTC, ETH, RIPPLE.
• You can think of it like a mobile phone, where you can have 3 diff apps installed at a time.
• Its database got hacked once and all Ledger nano s wallets got compromised.

2. Ledger Nano X

• It’s similar to Ledger Nano S, the only difference is that it is compatible with both IOS & android devices.
• Its design is a bit smooth & sleek & twice the price of Ledger nano S.
• Can give 8+ hours of battery backup once fully charged.

3. Trezor

• Similar to Ledger wallets but doesn’t support any mobile app.
• Also it’s made of plastic & is more expensive than Ledger wallets.
• More reliable, since it has never been compromised unlike Ledger nano s.

HOT WALLETS-

Here private keys are either stored over exchange or your browser.

1 . Centralized Exchange wallets-

• You don’t have access to private keys, seed phrases, CEX has it.
• Here your-
• Bank = Blockchain
• Account no = Wallet address/Public addres
• Online Banking apps = Wallets
• Login Credential = Private Key & Seed Phrases.
• You don’t get access to your private keys on CEX wallets, CEX owns them.
• Therefore it’s recommended to not keep a lot of your crypto on one exchange.
• Eg- Binance, Coinbase etc.

2 . Browser injected wallets-

• Better security because you have access to your private keys & seed phrases & wallet address.
• If you delete the extension without storing the private keys , seed phrase, your funds are gone forever.
• Eg- Trust wallets, Metamask.

There’s 2048 words in total which are used to make a seed phrase of 12 words.

SCAMS & ATTACKS-

Since crypto is a new space which is unregulated, the risk & rewards in the space are quite high.

Let’s discuss some types of attacks & scams in this space…

1 . DUSTING-

• It’s a very common scam these days.
• In this, a lot of tokens are air dropped into the wallet.
• But when you try to sell them over DEX, you basically have to approve the token contract.
• By doing that you basically are giving access to that contract to access your funds & they drain out your wallet.

To put cherry on the top, these tokens sent by hackers can never be sold.

2. PHISHING SITES-

If you end up going to a site, which is-

1. Not secure.
2. Not an official site.
3. Then you might lose your funds FOREVER.

Hackers are very smart nowadays, they know people aren’t that much concerned about crypto security & find new ways to scam.

The biggest challenge with crypto is you’re ideally becoming your own bank & therefore you need to have security like a bank.

SAFETY TIPS-

One can’t go lazy on security in crypto space, therefore here are some security tips-

1. Keep a track of what you bought & what you didn’t.
2. If you don’t remember buying something & it’s there in your wallet, you should- Never sell it. Change the wallet & move your funds there.
3. Diversify your risk by having- Multiple different wallets.
   Multiple different devices.
   Multiple different bank accounts.
4. Use different exchanges.
5. Never ever share your seed phrase, private keys with anyone, if you want to then- Never use apps which aren’t end to end encrypted.
   Never use apps which store data over a cloud.
   A good alternative is the “Signal” app, but not whatsapp because it stores data over cloud.
6. Use a random generator to -
   Generate email id username,
   Generate password ( of at least 16 characters, 32 recommended)
7. Never take screenshots, pictures of your wallets, seed phrases, private keys etc.

Instead…

Have them written down on a separate piece of paper & store it in a secure location.

1. Using hardware wallets helps because your keys are stored offline on the device and only you can sign the transaction.
2. You can use a trust wallet wherein you can have upto 10 different wallets with unique seed phrase & private keys.
3. Rather than having multiple wallets linked to a single seed phrase/private key.

Eg- Metamask.

Remember, diversification is the key.

1. Use etherscan, bsc scan & tin.network to check funds in your wallets instead of opening your wallet.
2. Ledger NANO S was recently compromised, therefore we prefer LEDGER NANO X & TREZOR wallet.
3. Once you have your seed phrase & private key generated, it’s recommended to back it up over a hardware wallet, so that only you can sign the transaction now.