Although cryptocurrencies aren’t literally stored in wallets, all the information regarding their actual blockchain storage is. Lose the control of, or access to your wallet, and you lose your cryptos. A secure online Bitcoin wallet is the pillar of cryptocurrency safety.
But how does one choose the most convenient and secure online wallet for their needs? In this entry, we’re going to try and provide an answer to this question.
What Is an Online Wallet?
Before choosing a secure online wallet, you need to understand the basics of an online crypto wallet. There are two main wallet types when it comes to cryptocurrencies: online and offline.
Let’s take your regular (fiat) currency, for example. You can store your money in a bank account or physical form. Your money isn’t actually stored in the bank. They don’t have a personal safe with your money in it. But you can access your balance information online or in person and cash your balance out. Therefore, what’s stored in your account is the information about your balance.
In theory, if a bank goes bankrupt, it may not be able to pay out your money. This has been known to happen throughout history. It is highly unlikely that this will occur, though. Still, keeping your money with you helps reduce the risk.
Now, back to cryptocurrencies. Your finances are actually stored on the blockchain. You can’t cash out Bitcoin in physical form because it doesn’t have one. However, you can store it offline, in paper form or as a hardware wallet. Storing your crypto balance online is much more convenient for trading, exchanges, transfers, purchases, etc.
Be that as it may, online wallets are prone to cyberattacks, so ensuring you use a secure online Bitcoin wallet becomes very important.
Different Online Wallet Types
Online wallets are also known as “hot” wallets. The most basic online wallet type is called the exchange wallet. This refers to storage on an online crypto exchange. You can access your funds here very quickly and perform trades momentarily. However, this is the least safe storage option – exchange-wide hacks have been known to happen in the past, sometimes bleeding users completely dry.
Still, an exchange wallet goes without saying. This is where your first-bought crypto is stored. Other hot wallet types help boost the safety of your crypto storage. The three main online crypto wallet types are: the web wallet, the browser extension wallet, and the software wallet.
Web wallets come in the form of secure websites that you enter the private key into to access your funds. These can be either single-asset or multiple-asset wallets. Compared to their exchange counterparts, web wallets are safer, seeing how you get your private key that isn’t shared with anyone else.
However, if a piece of malware is active on the website, web wallets can be easily hacked. They are also prone to phishing – a hacker can make an impostor web wallet webpage and have you given them your private key.
They are straightforward to use but aren’t the safest option on the market.
Browser Extension Wallet
This wallet type is run through a browser extension. Rather than using a website, browser extension wallets store the user’s private key within the browser, a much safer alternative to web wallets.
Although these aren’t prone to phishing, as long as there’s an internet connection, an experienced hacker can still get to your browser and steal your private key.
These are still hot wallets, and, as such, far less safe than their offline counterparts. That said, software wallets are the safest form of online crypto storage. They are installed on your computer, meaning that the user doesn’t even have to access the browser to gain access to their crypto balance.
As long as you maintain proper security measures and browse the internet in a smart way, your funds should be safe inside a software wallet.
Online Wallet Security
The software wallet is the most secure online Bitcoin wallet option. However, the best way to go, crypto security-wise, is keeping your cryptocurrencies in several different wallets. Ideally, the bulk of your balance should be in an offline wallet. This is the safest way to go.