There are several risks associated with cryptocurrencies.
Some of these risks are direct, while some are indirect.
Indirect risks are things like government regulations or some kind of ban on cryptocurrencies. Direct risks are things like carelessness with your private keys or using an un-tested wallet.
This article is focused on the latter risk- a direct risk. There is no point in discussing the former because governments will do whatever they want anyway.
One main direct risk is the wallet in which you choose to store your Bitcoin, Ethereum, etc. This decision actually matters a lot because this is where your coins exist. You wouldn’t want to put your paper money in a wallet that had a big hole in it, right?
There are trade-offs, too. Some wallets have special features but may be less secure than others that don’t have those special features.
In this article, we will be discussing some of the risks associated with using mobile wallets, desktop wallets, and web wallets. I am writing this because I want to give a heads-up to lazy investors who don’t mind keeping their funds somewhere they shouldn’t (like on an exchange).
Risks Of Mobile Wallets/Desktop Wallets/Web Wallets
Mobile wallets are hot wallets that are always online.
Some mobile wallets provide the functionality of exporting private keys which actually makes them even riskier.
Suppose you have lost your mobile and not set a PIN for your mobile wallet… This makes it very easy for anybody to fetch your keys and liquidate your bitcoins/cryptocurrencies.
In a mobile wallet, your mobile device (or the app) actually stores your private keys. So if your software is buggy or can be cracked, then it can be exploited and your private keys can be extracted. This has already happened, so be aware of this.
Another way through which you could lose your Bitcoins/cryptocurrencies is when someone has access to your mobile device and knows your mobile’s PIN number.
Let’s suppose somebody in your office has noticed your PIN number’s keystrokes and you happen to leave your phone in the office by accident… Now, the attacker can simply use your PIN and send your coins to another public address which is in his/her control.
Web wallets like Coinbase are equally problematic. If you lose your mobile number which you are using or lose your phone, then you can lose all of your money in minutes.
Desktop wallets make everyone think they’re safe, but that’s not always true.
Unencrypted hot wallets are another threat to your Bitcoin and altcoin holdings.
Also while using any hot wallet (i.e. mobile/web/desktop wallet), your IP can be traced and your data packets on the internet can be analyzed, leaving ample amounts of digital footprints to make you a target.
How To Keep Your Bitcoin/Altcoins Safe And Secure
Wait! This is not to scare you!
All I am trying to do is to make you aware of every possible scenario that could happen so that you don’t make any mistakes.
If you want to use these hot wallets (i.e. mobile/web/desktop wallets), do the following:
- Check if your wallet keeps your private keys in an encrypted form.
- Always keep 2-factor authenticator ON.
- Be aware of your mobile number, because that too can be hijacked, lost, or changed.
- Use a fingerprint authenticator on your mobile device.
- Use a strong password for your web wallet and/or desktop wallet.
- Always keep a contingency plan ready in case you get even a hint of being hacked.
They don’t exist online and they come with secure OTG cables in order to safely connect to your mobile device. Even if you lose this hardware wallet, no one can break into them.
So then what’s the use of a software wallet (mobile/web/desktop)? Well, they’re actually very useful…
But we’ll save that for another article… 🙂
Until that time, happy reading, learning, and sharing with the CoinSutra Cryptocurrency community!
Now I want to hear from you: Which wallets are you using? Which ones do you like the best? Do you have a question about Bitcoin/altcoin wallets and how to make them secure? Let us hear your thoughts/comments/questions/concerns in the comments below!
Here are a few hand-picked articles that you should read next:
- The Top 5 Best Bitcoin Wallets That You Should Use For Storing BTC
- Which Cryptocurrencies Are Supported By The Ledger Wallet?
- What Is A Brain Wallet & How To Create One For Yourself?
- What Is Mnemonic Phrase & Mnemonic Passphrase?
- Bitcoin Wallets That Support Custom Transaction Fees
Creatonics is the Crypto exchanges contributor for CoinSutra.
He has a background in both finance and technology and holds professional qualifications in Information technology.
Join us via email and social channels to get the latest updates straight to your inbox.