Welcome Anon! This is the sequel to the beginners post. I hope you are getting up to speed with this weird crypto stuff you heard about during the last years. Crazy times are upon us with a lot of changes. This means more responsibility. As they say in every Spider-Man movie: “With great power, comes great responsibility” (does that count as a spoiler?). And Crypto is no different. I will try to keep this post at a basic level to not confuse you more than necessary.
Getting involved in this space means that you have started the journey of becoming your own bank. While this is exciting it comes with its own safety risks. Creating your first wallet means that you now can send and receive transactions on your own terms without the need of a intermediary as a bank. This comes with a risk so let’s start by explaining the differences between hot wallets and cold wallets.
Hot Wallet
Hot wallets (software wallets) are simply wallets that are connected to the internet. Most likely, the first wallet you ever create will be a hot wallet. Using hot wallets enables easy access to your digital assets aka computer coins. Considering they are connected to the internet, it means that they are always online. Nonetheless, it enables you to interact with different blockchains and DeFi protocols easily by connecting to protocols and interacting with them.
These wallets store your public and private key on an internet connected device. This entails more risk. Sharing your public key is fine (this is where you receive your transactions). However, never share your private key. This would mean that your wallet has been compromised. Other people would now be able to access your wallet. The same goes for the seed phrase which is a random string of 12-14 words as well. This should never be shared.
Example of hot wallets are:
Exodus
Metamask
WalletConnect
Any of these are fine among with others and can be integrated with your Hardware wallet which we will get to next.
Cold Wallet
Cold wallets (Hardware wallets) are the opposite and are not connected to the internet. They offer a much better security than hot wallets due to the fact that they can take assets of offline and are not connected to the internet. It is the perfect way to store your assets if you don’t need access to it frequently. Cold wallets can still be connected to the internet though. It only does so when you need it by connecting your the device through a USB cable to your computer to send or receive payments. Whenever you remove the plug, it goes offline again.
The most famous Hardware wallets that I would recommend are:
Ledger
Trezor
These are more or less the industry standard and have been gone through the test of time. I am in possession of both and personally I prefer my Ledger but that is nothing against Trezor which is a great hardware wallet as well.
Why do I need to get a hardware wallet?
Security risks! Using crypto comes with extreme risks. Remember if something goes wrong, there is no one to call. You can’t call the “CEO of Ethereum” if something goes wrong. So what are the risks you need to take into consideration?
Phishing - please don’t ever give out your seed phrase. No matter if any customer support or whatever reaches out to you. it is always a scam and too many people lose their funds due to this (BAYC community I’m looking at you). The only reason you might have to do it is if somebody threatens you at gun point and your life depends on it.
Hacks - Your computer or phone gets compromised. Do not save your seed phrase digitally! I can’t state this enough. Store it physically on a piece of paper and hide it somewhere safe.
Malicious links - Be careful with what links you click, some of them might install files on your computer that compromises your wallet (especially if you use a browser wallet)
These risks can be mitigated if you get yourself a Hardware wallet as your transactions has to be signed by it even if you just it together with a software wallet. Nonetheless, take all these security risks into consideration. If you don’t know where to get started, you can buy one here.
I know these things can be tricky so I hope this piece was valuable for you. If you liked it I would appreciate your subscription and feel free to share it with people that it could help. Thank you for taking the time to read this.
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