Wallet – the purse of the future?
The Pantercon Crypto One-Time One – Part 3: What is a Wallet?
The term „wallet“ comes from English and means purse, purse, purse – as you might call it.
A wallet is an application with which the private key, the access or security key to access the crypto coins and make transfers, etc., is secured.
The coins are never stored on the wallet, they are only on the blockchain. The wallet only gives access to them. With a bank account, for example, the money is not stored on the ATM card, but at the bank.
What types of wallets are there?
There are different types of wallets that can be used at will. There are also two types of storage – Cold Storage and Hot Storage.
Cold Storage:
Cold Storage – Cold storage refers to the offline storage of the Private Key, which is neither stored in Apps nor anywhere else on a PC or the Internet. It is a somewhat cumbersome solution, but the most secure.
– Brain Wallet
The Brain Wallet is the safest variant, but requires a very good memory. A private key or a seed with a mnemonic generator is created beforehand. This is a sequence of a certain number of words from which the Private Key is derived. These words can be learned by heart and remembered in the head, it is not written down anywhere. If the word sequence is forgotten or only one letter is wrong, the access to the crypto coins is lost.
– Paper Wallet
The Paper Wallet is not a digital wallet in the true sense of the word, yet it offers the possibility to store crypto currencies securely.
For this it is also necessary to create a private key. This works with certain programs e.g. with a mnemonic generator. There are also programs, where e.g. only the mouse has to be moved back and forth a few times and a random key is calculated from these movements. For this process it is advisable to disconnect the computer from the Internet, so that you can work completely offline.
The calculated key consists of different characters, or the seed of words, which should be noted on a piece of paper. A pencil is best suited for this, it does not bleach even after years. In addition, the piece of paper should be stored in a plastic bag so that no humidity is added, preferably in a safe.
Those who manage a large amount of coins can also store this paper wallet in a safe.
In the case of a paper wallet, only incoming money is usually booked. As soon as an outgoing transfer is made, an Internet connection is necessary, which represents a security gap. For this reason, a new private key should be created and the remaining coins sent to the new public address.
The paper wallet is usually used when coins are left lying around and no transactions are to take place.
Personal tip: Write and laminate a private key or seed with a pencil, firmly pressed on 2 small index cards. Then keep the paper wallet in 2 different places.
Hot Storage:
Hot Storage – Hot storage means that the Private Key is either stored somewhere online, or secured in software that has access to the Internet. This method is convenient, but also riskier than cold storage.
– Soft Wallet
The Soft Wallet is a software application that is available in different versions for the computer or smartphone. They all work according to the same principle, they remember the private key. To log in, you need a password that you can assign yourself. This is the insecurity of the matter, because many use date of birth or similar, easily remembered combinations of numbers or letters.
It is important to choose a secure password that no one can guess. It is also necessary to always use new operating system software and an up-to-date anti-virus program that protects against unwanted access.
If the private key is entered in the wallet software, crypto currencies that are available can be transferred or bought.
Soft wallets are usually limited to certain crypto currencies and, if several currencies are used, several wallets must also be used. Our future Pandora Wallet will be a universal multiwallet that will allow you to manage many different coins and tokens.
– Crypto Exchange (Online Wallet)
It is also possible to store the private key in so-called online wallets. Newcomers to the crypto sector in particular often make use of this convenient offer, as these online wallets are offered directly by trading exchanges where coins are purchased. They offer a particularly friendly user interface. It is practical and simple, but also the most insecure variant. The private key is not managed by the exchanges themselves, but is cryptographically encrypted. You don“t know your own Private Key!
The risk of such a stock exchange being hacked or otherwise losing your coins is given.
You also don“t give your bank card with secret code to anyone, so that he takes care of it and takes over the withdrawal of money.
The mixture does it:
– Hard Wallet
The Hard Wallet is a combination of Cold Storage and Hot Storage. Although it is connected to the PC and the Internet for use, the private key always remains stored offline on the hard wallet.
There are different types of Hard Wallets e.g. LedgerNano S, which we can recommend from personal experience. There are alsoTrezor, KeepKey and others.
They are small devices that are connected to a PC to store the Private Key or several Private Keys on it. They are only connected during use to the PC that has an Internet connection. Otherwise they are offline, the PC never accesses the Private Key, which makes them very secure.
It is definitely worth buying a Hard Wallet, but you should make sure to choose a reputable manufacturer to ensure security. There are enough scammers who pass fake hard wallets off as real ones.
Important: The Private Key must never be given to third parties and must not get lost! The loss of the Private Key means the complete loss of the coins!
To be on the safe side, a large fortune of coins should always be divided between several Private Keys.
Conclusion: The simplest and most common variant is certainly the Soft Wallet. If a reputable wallet software is used, the virus protection is always up-to-date and you always have an eye on it, this is definitely recommended. If higher amounts are involved, or if transactions are rarely carried out, the Paper Wallet is advisable. With the Hard Wallet, constant inputs and outputs are possible, it is in principle recommended for every krypton user.
Previous articles:
Pantercon informs – Gold, Money,Crypto, Bitcoin, Gold-2.0
The Pantercon Crypto times table – Part 1: What is Money?
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