How hardware wallet can safeguard your cryptocurrency ?
What is a Wallet?
When you buy cryptocurrency in Malaysia like Bitcoin, Ether or ERC20 token, you need to store it at some place.
A cryptocurrency wallet is a medium that allows you to store, receive, and send cryptocurrency.
Wallets can be referred to as either “hot” or “cold”.
A. “Hot”wallets are connected to the internet in some way, making them more vulnerable to cyber attacks. For example
1. Exchange hot wallet like Bittrex, Coinbase or Binance.
-These companies, which hold your funds within their own infrastructure, can be considered as hot wallet service providers.This means that if an attacker gains access to the Binance servers and infiltrates their customer accounts, you might suffer a loss.
2. Software hot wallets like Mycelium, Electrum,Exodus
-These are downloadable applications that aren't linked to particular exchanges. You maintain control of your private keys, so the cryptocurrency assets in the hot wallet remain under your control. However, your money remains vulnerable to hacking, as a malicious person or group which gains access to your computer would theoretically also be able to drain your wallet via the software application.
Important Note : Savvy cryptocurrency investors will only keep a small portion of their holdings in their hot wallet, perhaps even only what they plan to spend /trade. The remaining assets will likely stay in cold storage until they are needed for specific transactions. This procedure can ensure the safety of crypto-assets even the cryptocurrency exchange was hacked.
B. “Cold” wallets are generally more secure as they are not connected to the internet, thereby, protecting the wallet from unauthorized access, cyber hacks, and other vulnerabilities that a system connected to the internet is susceptible to. Cold wallet typically require some sort of compromise to the physical device in order to be hacked. For example
-A type of “cold” storage wallet that allows you to store your funds on a device (often a USB). Hardware wallets generate their own private key (that even you don’t see) and store it right on the device. The beauty of cryptocurrency hardware wallets is that, using pin access, they can connect to your computer and internet to allow you to easily exchange and manage your assets. However, when you are done managing your funds, you can disconnect your wallet from the internet and store it in a physically safe location – making your private keys off-limits to cyber hackers.
2. Paper Wallet
-The most basic form of cold storage. A paper wallet is simply a document that has the public and private keys written on it. The document is printed from the bitcoin paper wallet tool online with an offline printer. The paper wallet or document usually has a QR code embedded on it so that it can easily be scanned and signed to make a transaction. The drawback to this medium is that if the paper is lost or destroyed, the user will never be able to access his address where his funds are.