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How to protect your crypto wallet

12 Oct, 2023 11 min read
How to protect your crypto wallet

Security is one of the most important words in crypto. It's also one of the reasons why many people hesitate to invest in cryptocurrency. However, protecting your funds is easier than you think. There are several simple rules on how to protect a crypto wallet, which we will share with you in this article. Let's explore why keep crypto in wallets and how to protect your crypto wallet from hackers.

What is a crypto wallet?

Wallets are used for storing cryptocurrency. They store public and private keys and support cryptocurrency transfers through the blockchain. Depending on what wallet type you choose, you can interact with decentralised apps and buy and sell crypto assets

Cryptocurrency transactions don't represent the process of sending crypto tokens from one smartphone to another. When you send cryptocurrency assets, you use private keys to sign the transaction and broadcast it to the blockchain network. It then includes your transaction to reflect the updated balance in your address and the one of the recipient. 

So, using a crypto wallet doesn't equal storing assets like physical wallets. They function by reading the public ledger to reveal the balance in your address and holding private keys to let you make transactions. 

Crypto wallet types

Crypto wallet types

Before discussing tips and rules on how to protect your crypto wallets, let's learn about different types of wallets and which is the best fit for your needs. 

Generally speaking, there are two main types of crypto wallets: Software-based hot wallets and physical cold wallets. 


Choose your wallet
 

Hot Wallets

The main difference lies in the connection to the Internet. Hot wallets need an Internet connection to work smoothly, whereas cold wallets are mainly kept offline. It means the funds stored in hot wallets are more accessible to hackers than crypto assets in cold wallets. 

The first and foremost recommendation to everyone wondering, "why keep crypto in a wallet and how to protect your crypto wallet from hackers?" would be not to store large amounts of your assets in a hot wallet. You can mitigate the risk of storing digital money in hot wallets. 

Some of the most common examples of hot wallets include: 

  • Web-based wallets
  • Mobile wallets
  • Desktop wallets. 

Cold Wallets

Cold wallets are kept offline. They are a less convenient way of storing your crypto assets but more secure. The two most common examples of cold wallets are paper wallets and hardware wallets.

Hot Wallet vs Cold Wallet: What's the Difference?

Both types of crypto wallets have their benefits and drawbacks. The best option depends on what you expect to get and how you'll use it. If you plan to trade daily, then the accessibility of the cryptocurrency wallet is important. In this case, hot wallets should be your best pick. On the other hand, if you need to store big amounts of crypto assets and pay a lot of attention to how to keep your crypto wallet safe, then it would be a wise move to invest in a cold wallet.

Hot wallet

Cold wallet

Work online 

Kept offline 

Vulnerable to hacking 

More resistant to attacks 

Easy to use 

Less convenient, more expensive

Best suited for beginners and regular traders who need to make quick online payments

Best suited for those who need to store big amounts of crypto assets for a long time


Choose your wallet
 

Other Types of Crypto Wallets 

Besides the two most used crypto wallet types, there are several subtypes. 

  • A paper wallet is a physical location where a private or public key is printed or written down. It's one of the safest wallets to store cryptocurrency than keeping your funds in a hot wallet because there's no way for hackers to access these private keys. On the other hand, the risk of losing a paper wallet or destroying it may result in irrecoverable funds. 
  • A hardware wallet is an external device (usually a USB or Bluetooth device) that stores your keys. You can sign a transaction by physically clicking a button on the device that thieves can't access. A hardware wallet is the best crypto wallet to store crypto for people who don't need instant access to their crypto assets and feel fine about storing their cryptocurrency offline in a cold wallet. 
  • Most web-based wallets fall into the category of custodial wallets. You can often come across such crypto wallets being offered on exchange platforms. These are especially popular among beginners and are best known for their convenience and ease of usage. The main feature that makes custodial wallets different from paper and hardware ones is that you don't have full control over your tokens, and that's the exchange platform that holds private keys needed to sign for transactions. With that said, you should be 100% confident in the selected service and prevent unauthorised access using strong security measures, like two-factor authorisation, e-mail confirmation, fingerprint verification, etc. 
  • Non-custodial wallets provide you with full control over your crypto assets because the private key is stored locally with the user. When using a non-custodial wallet, you're commonly asked to write down and safely store a list of 12 randomly generated words. This phrase acts as a recovery mechanism that lets you access the funds stored in your crypto wallet whenever you lose access to your device. 
  • Using multi-signature wallets should appeal to everyone interested in how to protect crypto wallets. They authorise transactions using two or more private keys. Such solutions are especially useful for individuals worried about losing access to their wallets and seeking secure ways to sign their transactions. Multi-signature versions are available for all crypto wallet types described above. 
  • An NFT wallet is one of the safest wallets to store cryptocurrency. This is the place to store non-fungible tokens (NFTs). NFT wallets fall into two categories: hardware and software-based wallets. 

Now that we've briefly reviewed all the major types of crypto wallets, let's see how crypto wallets work and how tosecureyour crypto wallet. 

How does a crypto wallet work?

Cryptocurrency isn't stored in a wallet. Instead, crypto coins exist on the blockchain, and the crypto wallet lets you interact with the balances held there. A cryptocurrency wallet is an address that allows its owners to move coins elsewhere and lets others see the balance held at any given address. 

Most used crypto wallets allow users to send, receive and store cryptocurrency. Some of them also have the feature to buy and sell crypto. Furthermore, depending on your wallet type, you can access extra features like decentralised applications (dApps) built on different networks, swapping between tokens, etc.

Each cryptocurrency wallet has its specifications and nuances in how it functions. However, in general, they're used for sending and receiving crypto coins, and it's suggested you take the following steps for sending and receiving crypto assets: 

  • To send funds, you need the public address of the receiving crypto wallet. Find your crypto wallet's "send" feature and enter the receiver's address. Next, choose the amount and type of crypto coins you want to send. Before sending big amounts of money, consider doing a small test transaction. Mind that sending crypto coins requires a fee paid to miners in exchange for proceeding with your transaction. 
  • You must retrieve a public key from your crypto wallet to receive funds. Find the "generate address" feature in your crypto wallet, click it and copy the alphanumeric address or QR code. Share it with the person who wants to send crypto to you.

Important note: When sending a cryptocurrency, always ensure you're doing it to an address of a wallet of the same type of cryptocurrency. For example, when sending Bitcoin (BTC), ensure that you're sending to a Bitcoin Cash (BCH) address. Otherwise, your funds will be lost. 


Choose your wallet
 

How to choose a crypto wallet?

Crypto wallet security

Choosing the best cryptocurrency wallet isn't only a matter of preference. It should also involve a series of pragmatic reasons, including but not limited to: 

  • Costs. Most used crypto wallets are free. However, hardware wallets commonly require a small investment. If you're going to hold your crypto coins for long, it's better to invest in a hardware cryptocurrency wallet and learn how to keep your crypto wallet safe.
  • The volume and type of cryptocurrencies the wallet will hold. If you hold more than one type of cryptocurrency, you'd better consider choosing a crypto wallet featuring multi-currency support. If you're going to use the crypto wallet to send and receive one crypto coin, you should check on the developer's website to see if there's a dedicated wallet for your needs.
  • Crypto wallet encryption.
  • Are you prepared to trade daily?
  • Is it important for you to access the crypto wallet quickly? 

Cryptocurrency wallet safety

Security plays a significant role when you need to choose the best crypto wallet for your needs. It's important to carry out plenty of research about the crypto wallet's security features before making the final decision. If you need to ensure all your funds are safely stored, you'd better opt for a hardware crypto wallet. 

With that said, let's see how to keep your crypto wallet safe. 


Choose your wallet
 

How to protect your crypto wallet

The following tips should give you clear guidelines on the best way to protect your cryptocurrency and keep your crypto wallet safe. You may not need all of them. However, this list should help determine whether the crypto wallet is safe and what works best for you. 

  • Store your crypto assets in a cold, hardware crypto wallet. You may not need all the crypto assets that you own. It's always wise to store a small number of crypto assets in a hot wallet for transactions and keep the rest of those offline. 
  • Use reputable exchanges. Do your research to determine which cryptocurrency exchanges have ever been hacked. Don't put your investments at risk when choosing an exchange that can potentially put your crypto assets at the risk of a cyberattack.
  • Set a complex password. Never reuse a password you already have on any other website or app. 
  • Avoid phishing attacks. Never log in to your cryptocurrency exchange unless you're sure you are on the correct website. Save the URL address to favourites and consider using it rather than clicking on the links randomly sent to you. This is one of the best ways to protect your cryptocurrency.
  • Don't use public Wi-Fi to access your cryptocurrency exchange or your crypto wallet. Instead, maintain your online privacy by using a VPN service.
  • Make sure that your device and all software installed on it are always updated.
     

Safety of StormGain crypto wallet

StormGain gives you access to free, multi-currency wallets right after the signup. Our built-in crypto wallets make trading and exchanging cryptocurrency faster and safer than before. It takes seconds to get started and access 10 secure crypto wallets right after the registration. Thanks to the two-factor authentication, strong encryption and industry-leading security protocols, you may rest assured your crypto assets are always kept safe.


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FAQ

How to secure your crypto wallet

Take the following steps tosecure your crypto wallet: 

  • Be cautious with online services and use two-factor authentication.
  • Keep small amounts for daily use. Store the rest in a safer place.
  • Regularly back up your wallet and encrypt the backups.
  • Use multiple secure locations for backups.
  • Set a strong, unique password and remember it.
  • For savings, consider an offline wallet or hardware wallet.
  • Keep your software updated for security.
  • Use multi-signature features for added protection.
  • Plan for your assets' inheritance to ensure recovery.

How to keep your crypto wallet safe

Consider using a paper wallet to ensure your crypto wallet is safe. This type of wallet is a physical version that includes your private key and/or seed phrase. It's considered one of the safest wallets to store cryptocurrency. Keeping it in a secure place minimises the risk of hacking. However, be cautious of the possibility of physical theft.

Why keep crypto in a wallet?

You should keep your cryptocurrency in a wallet for security, control and protection against exchange failures. Wallets give you ownership of your private keys, reduce the risk of hacks, and safeguard your assets in case an exchange encounters issues. It also provides privacy and access to forked coins and is ideal for long-term storage and portfolio diversification.

How to protect your crypto wallet from hackers

Here are some clear guidelines on how to keep your crypto wallet safe:

  • Store your crypto assets in a cold, hardware crypto wallet. Keep a small amount of assets in a hot wallet for transactions and store the rest offline.
  • Use reputable exchanges. Research the history of cryptocurrency exchanges to avoid those that have been hacked.
  • Set a complex password. Avoid reusing passwords from other websites or apps. Create a unique and strong password for your crypto accounts.
  • Beware of phishing attacks. Only log in to your cryptocurrency exchange if you are certain it is the correct website. Save the URL in your favourites and avoid clicking on random links.
  • Avoid using public Wi-Fi to access your crypto exchange or wallet. Protect your online privacy by using a VPN service.
  • Keep your device and software updated. Regularly update your device and all installed software to ensure maximum security.
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