Online and hardware wallets are two of the most common options for storing and accessing your cryptocurrency. With security being more of an issue now than ever before, it’s important to know which one is the most secure bitcoin wallet.
In this article, you will discover:
According to a recent study on cryptocurrency fraud, 13,000 victims were scammed out of $11 million dollars over a four-year period from 2011-2015. Security must be taken seriously now more than ever. Your choice of wallet is extremely important, since it will determine the security and accessibility of your currency.
If you are still unsure of what exactly a Bitcoin (BTC) wallet is, read this step-by-step wallet guide. If you want to learn about the differences between online and hardware wallets, and which is more secure, continue reading this article.
The Most Secure Bitcoin Wallet Type
Difference between Online and Hardware Wallets
Bitcoin wallets range from bulletproof storage devices that fit in the palm of your hand to user-friendly websites with seamless UI. The only difficult thing about them is determining which one is right for you.
Two of the most common options are Online (web-based) and hardware (offline devices). But to gain a better understanding of the two, it’s vital you understand the fundamental difference between “hot” and “cold” wallets first.
Hot Storage Vs. Cold Storage
Whether or not a wallet is hot or cold is determined by its internet connection. A hot wallet is connected to the internet and can be used at any time to make a transaction. A cold wallet is offline and does not directly connect to the web, meaning that if you want to make a transaction you must connect it somehow.
Pro Tip: Moving money from a hot wallet to a cold one is relatively seamless. It’s best to receive money via your hot wallet and move it offline to a cold one for safe storage, keeping only a small balance online for regular transactions. Think of it like being paid in cash and depositing the majority of your paycheck into your savings account while keeping some cash on hand for the weekend.
Visualize a hot wallet as your checking account and a cold wallet as your savings account (or even a safe hidden in your basement!). The former you can use to buy items at any time whereas the latter is more for safe keeping.
Online vs. hardware crypto wallets
An Online Bitcoin wallet is run completely from the web (surprise!!!). These web-based wallets operate in the cloud and offer unparalleled accessibility. You can access your money from anywhere in the world with an internet connection. Online wallets are a great solution for people who want to store small amounts of Bitcoin for regular purchases.
The downside is that your keys are stored on another company’s servers, meaning they are more vulnerable to theft or hacking. In general, however, most wallets have stout security measures in place.
Market Tip: Blockchain Wallet is the world’s most popular digital wallet. It’s simple, seamless, and secure. Over 20 million have chosen this wallet for these reasons. For more information, visit Blockchain’s website and read more on their services.
An Online cryptocurrency wallet involves a third party controlling your funds, meaning that trust and security are paramount. The Mt. Gox Bitcoin hack resulted in the loss of $450 million dollars worth of Bitcoin ($3 billion at today’s evaluation!). Make sure to do your research and choose a reputable name.
Unlike Online wallets that are in the cloud, hardware wallets store your private keys offline in a piece of hardware (surprise again!). This is the prime example of cold storage. They offer a degree of security that can’t be matched by Online, mobile, or paper wallets.
Even though your currency is stored offline, making transactions is still easy. Hardware wallets are equipped with a secure chip or equivalent device that allows you to make transactions. You connect it to your computer, input a pin, and send your currency.
If an Online or mobile wallet is like the wallet in your back pocket used for cash, a hardware wallet is like an impregnable Swiss bank account used for your life savings. Since they are not connected to the web, there is no threat of hacking.
When you purchase a piece of hardware, you are given a string of “seed words”. If your hardware is ever lost, stolen, or broken, you can restore access to your currency on a new device using these words (Write. Them. Down!).
The only downsides are that you must take extra steps to make a transaction and the hardware is a bit expensive; however, this is a small price to pay. We’ll let the top Amazon review for “Trezor”, a leading hardware wallet, sum it up for us:
I have been investing in Cryptocurrency for a while and if you want the highest level of security for your Crypto then a hardware wallet is the way to go. Even though 100 dollars may seem like a lot of money it is much better to be safe than sorry in the long run.
What is the Most Secure Bitcoin Wallet
Your level of security depends on the type of wallet you choose and the service provider you partner with. Each kind is secure to varying degrees. Although the best Bitcoin wallet for you depends on your unique circumstances, the most secure Bitcoin wallet is by far a hardware wallet.
Online wallets are inherently riskier due to the fact that they are connected to the web and in the hands of a third party. Any time you are online, you leave open a slight possibility of hacking.
To sum it up: hardware wallets offer a degree of security that is unattainable via an Online, mobile, or paper wallet.
Read: The Best Hardware Bitcoin Wallets 2018
How to Choose an Online Wallet
Even though hardware wallets are the most secure Bitcoin wallet, Online, mobile, and paper wallets still serve a purpose. If all of your money is in a safe hidden in your wall, how would you pay for your meal at a restaurant (Visit this website to find a restaurant near you that accepts BTC!).
Knowing how to choose the right cryptocurrency wallet is a skill in itself. There are a ton of options to choose from, and getting the right one is a critical step toward making money in the Bitcoin world safely. Follow this checklist to ensure you setup a Bitcoin wallet, which is the best for you.
Tip: Ask 100 Bitcoin experts which one is most important, and the majority would say multisignature is a deal breaker.
If you lose your BTC or send them to a scammer, it is gone forever. Transactions are final!
Choosing the most secure Bitcoin wallet is vital to protecting your investment. In the end, some combination of online and offline storage is best.
Balancing enough money in your hot storage for purchases and cold storage for savings is the safest and most convenient way to store your Bitcoins.