While you don’t always need a cryptocurrency wallet to trade blockchain assets, using a good wallet to facilitate exchanges is a matter of common sense. Wallets don’t just provide a convenient way to manage your crypto funds, but they also help keep your tokens safe from the malicious parties that are all too commonplace in the world of blockchain currencies.
Because there is such a clear need for the security they offer, it’s unsurprising that there is a dizzying number of crypto wallet options out in the market, ranging from popular software solutions to more exotic custom hardware storage. Unfortunately, choosing a safe wallet isn’t always a straightforward affair, especially if you have complex or very particular needs. For instance, if you have a trading strategy that leans heavily on private coins like Monero (XMR), you’re probably best served by a specialized XMR wallet solution rather than a more generalized storage option.
In any case, the increasing prevalence of cyber threats targeting cryptocurrency holders means that you must choose a wallet with credible theft protection features. Cybercriminals can be extremely crafty these days, and failing to spend a few minutes picking a secure wallet can lead to an agonizing loss down the line. Whichever cryptocurrencies you’re trading in, make sure to look for these security features in your next crypto wallet:
1) Multifactor Authentication (MFA)
Multifactor authentication adds extra layers of security in addition to the typical username password. Turning on this feature helps foil the automated brute force attacks that hackers often employ to breach the accounts of uninformed or tragically insouciant wallet owners. Common additional authentication factors include biometric scans and one-time passwords, both of which should be considered since they are especially challenging for hackers to spoof.
2) Hierarchical Deterministic (HD) Wallets
HD wallets protect your coins by generating a new public address for each transaction. This can make it more difficult for hackers to trace transactions back to you. The added anonymity provided by such wallets can help prevent phishing and other humancentric attacks that could compromise your funds or personal data.
3) Transaction Confirmation Settings
Customization is good to have if you need to balance your fund security and ease in facilitating transactions. A decent level of personalization will give you more control over your funds and help mitigate damage from unauthorized transactions.
In particular, look for wallets that let you customize transaction confirmation settings. Choose one that allows you to require manual confirmations for large transactions. If you have serious security needs or share an account with other parties, shortlist the ones that need multiple private keys to authorize a transaction to prevent any unauthorized access.
4) Offline Storage (Cold Wallets)
Cold wallets store cryptocurrencies offline, making them practically invulnerable to online hacking attempts. Hardware solutions are especially popular for traders who want a cold wallet since accessing them requires both physical possession and access to the necessary private keys. If this sounds like the kind of security you want, make sure to pick a solution that also securely stores private keys offline to further reduce your security risks.
5) Backup and Recovery Options
Robust backup and recovery options can mitigate losses from theft and, more importantly, help keep your blockchain funds secure in case of device failure or damage from commonplace events like coffee spills and the like. Recovery is often facilitated through mnemonic phrases or backup seeds that you can use to restore access to the wallet.
6) Regular Software Updates
Contrary to how pop culture portrays them, cybercriminals are not just ragtag groups of talented individuals working out of bedrooms and basements. In fact, most attacks are likely attempted by large organizations funded by criminal gangs or rogue governments that spend massive amounts of resources to compromise global financial systems, including emerging crypto networks.
Fortunately, most wallet developers take malicious actors seriously. As a result, it can take some time for hackers to find holes in new systems. This also means that wallets that have frequent security updates are especially difficult for them to breach. If you’re concerned about cyberattacks, only choose wallets with active development teams and avoid ones that have not received updates in over a year.
7) Open Source Code
Open-source wallets allow users to inspect the code for potential security vulnerabilities and verify that the wallet is operating as intended. Though that seems like it would open these solutions to attacks, it also allows these wallets to benefit from wider community scrutiny and feedback. Community members with a sizable stake are also incentivized to audit the solution for any backdoor vulnerabilities.
Your Crypto Wallet Developer Matters
In addition to all the features recommended above, try to look up your prospective wallet provider’s history, as well as user reviews. The wider crypto community is quite vigilant, and you will uncover anything fishy within a few minutes of searching. Be sure to maintain a healthy amount of skepticism and exercise common sense when shopping around for wallets, and you’ll eventually end up with a wallet that can properly keep your blockchain funds both secure and accessible.
