Bitcoin and the cryptosphere are well on their way to mainstream acceptance. At this point, Bitcoin is practically a household name and, with the growing interest, there is no doubt that cryptocurrencies are here to stay. While everyone and their mother might have heard of Bitcoin, it doesn’t mean that the technology and the practices required to own and manipulate crypto are easy to understand and implement. One of the first things a novice user interested in obtaining cryptocurrencies must create is a wallet.
What is a Cryptocurrency Wallet?
Cryptocurrencies have the potential to represent large sums of money, and this wealth must be secured. It is tantamount to understand the only person responsible for the security and safety of those funds is its owner. It doesn’t matter if a server is hacked or malware is encountered, if the owner doesn’t take the necessary precautions, that wealth can be lost. Therefore, when dealing in the cryptosphere, where and how these funds are stored is of the utmost importance.
Strictly speaking, a crypto wallet is a digital location containing the data necessary to retrieve and manipulate crypto tokens. Bitcoin and other cryptocurrencies aren’t physically “located” in the wallet; they are stored on the blockchain, and it is only through utilizing certain information that a person can access them. But what is this essential information that allows a wallet to function?
How Does A Cryptocurrency Wallet Work?
The first pieces of the puzzle are the private key and public key. A public key is often represented as a long series of numbers and letters. It is this random string of characters that provides access to an address where coins and tokens can be sent. The address is the public key: any individual that wishes to send funds to the address uses the public key. However, to access these funds the private key is required. The address can be thought of as the Postal address to a P.O. box that anyone in the world can send a letter to, and the private key is the key to the P.O. box that opens the door and gives you access to the accumulated contents.
Any person in possession of a private key has complete access and total control of the funds contained within the accompanying wallet. This is why security and due diligence are of the utmost importance when dealing with cryptocurrency storage.
Hot Storage vs. Cold Storage
There are several types of wallets utilizing different technologies that can be used to protect crypto funds and they fall into two categories: hot storage and cold storage. Hot storage refers to wallets that are designed for easy access and are preferred by users that spend and transfer crypto funds on a regular basis. Cold storage, on the other hand, consists of wallets designed for long term storage, usually of large amounts of crypto, which will not be accessed regularly.
Desktop, mobile and web wallets can all be used to secure cryptocurrencies. Desktop wallets use software downloaded on a desktop computer to store the vital information needed to access these funds, while mobile wallets function similarly using mobile devices, usually on the Android operating system. There are also online services that store wallet details on secure online servers. These wallets are all considered hot storage because they operate on systems that connect to the internet and sacrifice some security for ease of access to funds.
Cold storage wallets are typically more secure than hot storage because they are not connected to the internet, and thus the threat of hacking and malicious actors is greatly reduced. Examples of cold storage are hardware wallets that use offline USB style devices to safeguard data as well as paper wallets.
Paper Wallets For Cryptocurrency
Simply put, a paper wallet is a piece of paper with the key information (public & private keys) printed on it. Since these wallets are not digital assets they are exceedingly more secure than any form of wallet that has a link to the internet. Paper wallets are not without faults however, and users must follow proper security protocols when creating a paper wallet to ensure the safety of the funds they represent.
How to Make a Crypto Paper Wallet
A crypto paper wallet can be created in a few minutes: there are a number of website generators that are quick and easy to use. You can go to BitAddress, use their random number generator to create a unique private key and in a few short steps you can print off a new paper wallet that is ready to use. This is the easiest but not the most secure way to create a paper wallet, however.
Since this process takes place on the internet there is the possibility that an outside party could be monitoring your actions on the screen. Considering the potential value of a paper wallet, taking a few more precautionary steps can provide an ultra-secure form of paper wallet.
Tips For Keeping A Safe Crypto Paper Wallet
PC users will need a clean flash drive and several open-source software programs available on the internet, as well as an offline printer. First, you will download an operating system such as Ubuntu to your PC as well as Linux Live in order to download Ubuntu onto the flash drive. You will also need the BitAddress software which will allow you to create the actual paper address. Using this software you will be able to run your computer from the OS on the flash drive creating a completely offline system. The offline BitAddress software will generate a new set of keys for your wallet which can then be produced using an offline printer. By using this method you can create an extremely secure method to generate any number of new paper wallets.
The Best Cryptocurrency Wallet For The Long Term?
When it comes to finding the best cryptocurrency wallet for long term holding, it is worth considering in this case that having the wallet stored offline has many advantages over hot wallets. However there is the downside of its physicality: paper can be permanently damaged or stolen, and if this wallet is lost it can be difficult, if not impossible to retrieve. Beyond practical protective measures, like laminating paper wallets and storing them in a secure location such as a safety deposit box, there are other protections against unfortunate events like these.
Seed phrases are a series of words that are inextricably linked to the private key: they work as a mnemonic that allows you to recover your private key if your wallet is damaged or lost. Utilizing a seed phrase can act as a form of back up for your private key. However, it is important to note that if someone acquires your seed phrase they can gain access to your wallet, so secure storage of these words is important as well.
Another technique to ensure security is to break up your wallet into several, partial wallets. Splitting a private key into three separate paper wallets which require at least two of the three components for the entire key to be formed is a good idea. Storing each of these partial wallets in different locations can further obfuscate the private key and increase security.
Safety Best Practices For Cryptocurrency
The world of cryptocurrencies is exciting and full of potential. The first step in taking advantage of these possibilities is to understand the different types of cryptocurrency wallets, their pros and cons, and then finding a wallet that suits your needs. Anyone interested in storing large amounts of crypto funds should look into paper wallets as an option. Paper wallets fulfill a set of requirements that serve a specific purpose: while they are not appropriate for everyday use and microtransactions, they are perfectly suited for large amounts of crypto in cold storage. If proper security protocols are followed, paper wallets can serve as a viable, long term solution for crypto storage.
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