Storing cryptocurrencies is challenging and tricky as it involves public and private keys that don’t get controlled by any central authorities but by the users only. Many users have already lost their wallets in all these years because of unanticipated circumstances like misplaced devices or hard drives and lost passwords or private keys. A thorough study has been done around 50% of crypto wallet owners have lost their private keys. There have been multiple stories where users lost their keys and access to their crypto investments. The storing process of cryptocurrencies is slightly different, and investors need to make sure that their wallets are as secure as it is their responsibility.
Some crypto users think that they can recover their lost passwords, but it is impossible. A crypto wallet isn’t similar to a physical wallet; and instead, it is a wallet that stores digital currencies securely. There are two primary keys known as the private Key and Public Key. Private Keys help users connect with other users and transfer funds where the public Key is public, and users can share it with others. Both these keys are cryptographic keys, and these establish a specific identity of every individual that is unique in the blockchain. Some users often misunderstand that the wallet’s device is installed or stored stores the private keys. In simple words, coins are held on blockchain where the users require the private Key to complete the transfers. Users can download the bitcoinup.trade and can trade bitcoins easily.
A user can quickly transfer the crypto assets to other users through a public wallet address, and to make the transfers, the public Key is essential. The blockchain is the distributed public ledger that keeps track of all the coins on the bitcoin network. As the blockchain is decentralised, the option of “reset password” isn’t given to users. This is because it doesn’t involve any central authority, and users’ credentials don’t get saved on the database or ledger of bitcoin.
Two main types of digital wallets
There are multiple digital wallets available where users can store their crypto investments, but the two leading wallets include hot and cold wallets. Cold storage wallets are best for long-term holdings, whereas hot wallets are suitable for everyday transactions or trading purposes. Let’s read about these two wallets in-depth:
Hot storage wallets
Hot storage wallets refer to all those wallets that are internet-connected. Users can easily access these wallets through mobile apps, browsers or other implementations. As these wallets are connected to the internet, it is pretty easy to perform the transactions or check the balance and doesn’t require any effort.
Cold storage wallets
Cold storage wallets are those wallets that don’t require an internet connection for their operations. These wallets reside on self-governing storage solutions like a computer, hard drive or pen drive. There is a password or seed key that is the backup of the wallet in case users lose the operating device. But if users lose the password or seed key, then they will lose all their investments. But if we consider a wallet for the long-term, cold storage wallets are the secure format of wallet. So it is essential to create a backup of your wallet to secure your investments.
Other standard methods to store cryptocurrencies
Desktop wallets are the installable software that gets installed in PCs and can work better with anti-virus software. Anti-virus software helps the users to prevent any risk. Private Key in desktop wallet gets stored locally.
A hardware wallet is a hardware device that can get connected to any device. The hardware devices store the private keys and provide users with control over their keys. It is somewhat difficult for beginners to use this wallet and is known best for advanced users.
The Private Key is stored on the web server by a third party and easily accessible on any app or website in a web wallet. However, these wallets are risky, and there are high chances that your investment can get attacked by hackers. Therefore, it is essential to secure your credentials and never use public Wi-Fi to access web wallets.