There are several types of cryptocurrency wallets to allow users to store and access their digital currencies in different ways. The question that is relevant in this context is how secure these portfolios are. Before addressing the security aspect, it is helpful to understand the different types or varieties of cryptocurrency wallets that currently exist.
Cryptocurrency portfolio: types and varieties
These portfolios can generally be classified into 3 categories:
- Software portfolios
- Hardware wallets and
- Paper wallets
Cryptocurrency software portfolios can be further subdivided into desktop, online, and mobile portfolios.
- Desktop Software Portfolios: These wallets are intended to be downloaded and installed on desktops and laptops. This particular variety offers the highest level of security, although its accessibility is limited only to the computer on which they are installed. Also, if your computer is hacked or infected by a virus, there is a chance that someone will lose all your money.
- Online software portfolios: This range of cryptocurrency wallets runs in the cloud. Thus, 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 even controlled 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 retail stores and malls. This range of wallets is usually much simpler and smaller compared to normal desktop wallets to fit with very limited space for mobile phones.
Difference between hardware and software portfolios
Digital hardware wallets vary from software wallets to the storage of a user’s private keys. Hardware wallets store user keys on a hardware device (for example, USB). As the keys are stored offline, these wallets provide added security. In addition, hardware wallets are easily supported by many online interfaces and can also handle different currencies. It is also easy to trade with this variety of cryptocurrency wallets. As a user, you only need to connect your device to any computer that is connected to the web before entering a PIN, transferring currency, and confirming the transaction. Hardware wallets keep your digital currency offline, so the risk factor or security concern is also much lower.
Digital Paper Wallets: This range of digital wallets is also easy to use and ensures a high level of security. The term “paper wallet” refers only to the hard copy of a user’s public and private keys. However, considering the cases, you can also refer to a software application designed to generate keys securely before printing.
Sweeping with paper wallets
Using paper wallets is relatively easier. To transfer any cryptocurrency to your paper wallet, simply transfer the funds from the software wallet to the public address that shows your paper wallet. Similarly, when you want to spend or withdraw your money, just transfer the funds from your paper wallet to your software wallet. This procedure is popularly called “sweeping”.
Sweeping can be done manually, by entering private keys or by scanning the QR code in a paper wallet.
How secure are cryptocurrency wallets
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’s much safer to keep coins in an offline environment compared to online. There is no way to ignore security measures, regardless of the portfolio chosen. If you lose your private keys, all the money stored in your wallet will disappear from your hands. On the other hand, if your wallet is hacked or you transfer funds to a scammer, it will not be possible to reverse the transaction or recover that money.
Investing in cryptocurrency is a smart business idea, so using the right portfolio is inevitable. Just take some precaution to ensure the safe and secure aspect of your fund transfers and transactions.