Digital wallets: How do I keep my crypto money?
- Von Welt der Wunder
Gold under the bed, bills in the purse or credits on the bank account - there are different ways to keep your wealth. New are so-called wallets, digital purses, to deposit your crypto money. But how safe are they from outside access and what should be considered?
The A and O: the encryption
The private key works like a login or code for a safe – anyone who knows it can open the safe and transfer or take money. Therefore, only the owner should know this key. Generally spoken, the public key is there to encrypt and the private key to decrypt something. You should keep the private key so that no one else can access it and of course it must be protected from fire or water damage at the same time (more about this later). Above all, caution is required when generating the keys – because this can also be done online or offline. Therefore, at this moment there is already the danger that the key comes into the hands of hackers. To avoid this, you have to understand the different ways to generate wallets.
What types of wallets are there?
- Online/ Cloud wallets: Users open an online account at a provider/ an exchange and have access to it from any device connected to the internet. Attention: the private key is stored online.
- Desktop/ Mobile wallets: Desktop wallets are downloaded to your own PC (examples: MultiBit, MetaMask, Armory and Jaxx) or installed via smartphone app (examples: MyCelium and CoPay). So you can only access the wallet with the respective device.
- Multi-signature wallets provide more security by assigning a number of keys to a wallet that different users receive. They work like a kind of backup, because you need the consent of others to carry out transactions. This type of wallet is suitable for e.g. for companies with multiple directors who want to decide on transactions together.
Paper wallets are the safest way to hold your digital wealth because you just have to take care of a piece of paper. In that case you write or print your two keys on one or more papers that you keep safe. The disadvantages: The keys can be stolen in a burglary, external influences can damage paper quickly and of course you can easily forget where you have stashed the keys. If you want to set up a paper wallet, you have to generate your keys online (for example, via MyEtherWallet) - of course there is also a risk here that the program that creates the keys will be hacked. Anyone who is experienced, can read in html code to see if the program is hacker-free. Those who want to be sure, generate their keys offline, make a note of it on paper and uninstall the program. Detailed instructions on how to generate secure paper wallets can be found here.