Types of cryptocurrency wallets and ways to protect them - TopAsiaFX

024, Dec 2021

Cryptocurrency exchanges are vulnerable to frequent breaches and DDOS attacks, and they cannot provide a 100% guarantee that the funds will be safe. Wallets are an alternative to exchanges. Even if they make the execution of transactions more complicated, they secure higher protection than exchanges can do.

Our review will introduce you to the advantages and drawbacks of online wallets, types of offline wallets, and their simplest examples. Also, you’ll get to know a couple of ways to protect your private wallet's keys from an eventual breach.

How to choose and protect a cryptocurrency wallet

One of the world’s biggest cryptocurrency exchanges BTC-e became suddenly unavailable in July 2017. Trading volumes had equaled about $56.7 million dollars the day before the accident. The official reason for BTC-e suspension was the FBI charging Alexander Vinnik with money laundering by use of cryptocurrencies. The exchange’s accounts and servers were arrested and confiscated.

Approximately 1 million client accounts were compromised and it was really hard to get back the money from those accounts. The exchange management had been examining money refunds for over 1.5 months.

Just after BTC-e, another big exchange, Poloniex, amended its agreement by adding a separate item saying the exchange couldn’t be held liable for any money lost by a trader (stolen or lost in any other way) and did not guarantee safety on the platform.

In other words, the representatives of the exchange chose to avoid responsibility and did not exclude breaches. This new item gave investors a reason to suppose that the exchange itself may be glad to use prohibited methods for taking hold of accounts in the guise of the breach.

Unsurprisingly, investors’ confidence in uncontrolled and unregulated exchanges was undermined. E-wallets may be an alternative to exchange accounts. Read on to find out their advantages, disadvantages, and protection methods.

Best cryptocurrency wallets

An e-wallet for cryptocurrencies is a wallet where you store your personal key to cryptocurrencies. It is a kind of password that provides access to cryptocurrencies kept on the blockchain. Making it public means losing cryptocurrencies. E-wallets may be reserved for a particular cryptocurrency or they may be multicurrency. They may be subdivided into 2 groups: online and offline wallets. Continue reading on LiteFinance.