Types of Cryptocurrency Wallets
Today, we would like to share an insightful article from Binance Academy. They wrote an excellent explainer on the various types of cryptocurrency wallets available in the market. Crypto wallets can be broadly separated into hot (online) and cold (offline) wallets. Hot wallets are less secure due to crypto-jacking and malware risks. However, they provide you with accessibility not present in cold wallets. Therefore, it is recommended that you store the majority of your crypto-investments in cold wallets and use your hot wallets for payments and transactions.
According to the article, “as a way to protect users’ funds, Binance only holds a small percentage of coins in its hot wallets. The remaining is kept in cold storage, disconnected from the Internet.” We cannot stress enough that you should never keep your investments in an online exchange or custodial wallets. Even well-funded technology companies cannot prevent loss of funds due to hackers. If you intend to be in the game, hardware wallets and crypto wallet backup tools are a small investment to make for your digital assets.
The Importance of Backups
In the article, there is a section on the importance of backing up your crypto wallets as losing access to them can be costly. It’s important to back up them regularly. In many cases, this is achieved by simply backing up wallet.dat files or seed phrases. Essentially, a seed phrase works like a root key that generates and gives access to all keys and addresses in a crypto wallet. Also, if you opted for password encryption, remember to back up your password as well.
We hope you enjoyed learning about the different types of crypto wallets from the explainer video! What are your thoughts on the article? Follow us and leave us a comment on our social media channels!