There are several types of cryptocurrency wallets to allow users to store and access their digital currencies in different ways. The relevant question in this context is to what extent these portfolios are secure. Before taking on the security aspect, it is helpful to understand the various types or varieties of cryptocurrency wallets that exist today.
Cryptocurrency portfolio: types and varieties
These portfolios can be classified into three categories:
- Software portfolios
- Hardware wallets i
- Paper wallets
Cryptocurrency software portfolios can be subdivided back into desktop, online, and mobile portfolios.
- Desktop software portfolios: These wallets are designed to be downloaded and installed on desktops and laptops. This particular variety offers the highest level of security, although their accessibility is limited only to the computer on which they are installed. Also, in case your computer is hacked or infected with virus, there is a possibility that all your money will be lost.
- Online software portfolios: This range of cryptocurrency wallets runs in the cloud. Therefore, it can be easily accessed from any computer device and from any geographical location. In addition to the convenience of accessibility, these types of digital wallets store private keys online. The keys are controlled even by third parties; this makes them easily vulnerable to piracy and theft.
- Mobile software portfolios: Unlike the other two varieties, mobile software portfolios run on smartphones using an app. They can be easily used everywhere, including shops and malls. This range of wallets is usually much simpler and smaller compared to normal desktop wallets to accommodate the very limited space of mobile phones.
Difference between hardware and software portfolios
Digital hardware wallets vary from software wallets in terms of storing a user’s private keys. Hardware wallets store user keys on a hardware device (for example, USB). Therefore, as keys are stored offline, these wallets offer additional security. In addition, hardware wallets are easily compatible with many online interfaces and can also handle different currencies. This variety of cryptocurrency wallets is also easy to make transactions. As a user, you only need to plug the device into any computer connected to the web before entering a PIN, transferring the currency, and confirming the transaction. The hardware portfolio keeps your digital currency offline and therefore the risk factor or security concern is also much lower.
Digital paper wallets: This range of digital wallets is also easy to use and guarantees a high level of security. The term “paper wallet” only refers to the printed printing of the user’s public and private keys. However, given the cases, it can also refer to a software application designed to generate keys securely before printing.
Sweep with paper wallets
Using paper wallets is relatively a bit easier. To transfer any cryptocurrency to your paper wallet, simply transfer the funds from the software wallet to the public address, which shows your paper wallet. Similarly, when you want to spend or withdraw your money, you just need to transfer the funds from the paper wallet to the software wallet. This procedure is popularly known as “sweeping”.
Sweeping can be done manually, by entering private keys or scanning the QR code of a paper wallet.
How secure are the wallets of cryptocurrencies
Different varieties of digital wallets offer different levels of security. The security aspect depends mainly on two factors:
- The type of wallet you use: hardware, paper, online, desktop, or mobile
- A chosen service provider
Not to mention, it is much safer to keep coins in an offline environment, compared to online. There is simply no way to ignore security measures, regardless of the portfolio you have chosen. If you lose your private keys, all the money stored in your wallet will be out of your hands. On the other hand, if the wallet is hacked or funds are transferred to a scammer, it will not be possible to reverse the transaction or recover that money.
Investing in cryptocurrency is a smart business idea and for that, it is inevitable to use a proper portfolio. You just need to be careful to ensure the security of transactions and fund transactions.