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.
There are 2 types of wallet in general, cold wallets & hot wallets.
Cold wallets are comparatively safer so let’s discuss cold wallets first.
A type of cold wallet where private keys are stored offline on a USB like device.
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.
- 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.
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-
- Not secure.
- Not an official site.
- 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.
One can’t go lazy on security in crypto space, therefore here are some security tips-
- Keep a track of what you bought & what you didn’t.
- 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.
- Diversify your risk by having- Multiple different wallets.
Multiple different devices.
Multiple different bank accounts.
- Use different exchanges.
- 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.
- Use a random generator to -
Generate email id username,
Generate password ( of at least 16 characters, 32 recommended)
- Never take screenshots, pictures of your wallets, seed phrases, private keys etc.
Have them written down on a separate piece of paper & store it in a secure location.
- Using hardware wallets helps because your keys are stored offline on the device and only you can sign the transaction.
- You can use a trust wallet wherein you can have upto 10 different wallets with unique seed phrase & private keys.
- Rather than having multiple wallets linked to a single seed phrase/private key.
Remember, diversification is the key.
- Use etherscan, bsc scan & tin.network to check funds in your wallets instead of opening your wallet.
- Ledger NANO S was recently compromised, therefore we prefer LEDGER NANO X & TREZOR wallet.
- 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.