Buying, selling, or trading cryptocurrencies might seem like a simple process. But since you’re dealing with real money, you must be extra careful, or else you might lose it all. Being digital currencies, it is practically impossible to recover your coins once they are gone. A cryptocurrency wallet, just like your regular wallet or purse, plays a critical role in the security of your coins.
A crypto wallet is basically a software solution that stores all your crypto keys. You must keep your wallet safe at all costs. In fact, a crypto wallet is more like a vending machine in a public place. Anyone can deposit or withdraw money from the machine, but only those with the private key (PIN number) to the vending machine can access the money.
Now, choosing the right cryptocurrency wallet is the difference between a safe crypto experience and a terrible one that sees you lose your hard-earned money. The best crypto wallet ensures the security of your coins at all times while enabling seamless transactions. First, you need to choose between different types of wallets: offline wallets or web-based wallets. Secondly, you need to avoid these 8 mistakes when choosing a crypto wallet:
Mistake 1: Failure to evaluate security features
The worst mistake you can make when choosing a crypto wallet is the failure to check the security features it offers. Over the recent past, virtual currencies have become a top target for cybercriminals. Some popular cryptocurrency exchanges have suffered hacks that resulted in the loss of digital coins worth billions of dollars.
In early 2018, hackers attacked Coincheck and stole over $500 million in NEM tokens. The same trouble hit again in June 2018 when two South Korean-based platforms (Coinrail and Bithumb) were attacked. In both cases, hackers made away with coins from users hot wallets (online wallets).
Such shocking revelations just indicate how much a wallet provider should emphasize on premium security. Regardless of the wallet you choose, it should provide a multi-sig protocol or two-factor authentication (2FA) for enhanced security. Multi-sig and 2FA are extra security layers that help to secure cryptocurrencies stored in the wallet.
Mistake 2: Choosing a wallet that is difficult to use
A crypto wallet should be relatively easy to use. The ability to store multiple coins and optimized UI can make a wallet easy to manage. Choose a wallet with clearly-marked buttons like “Buy” and “Sell.” Since virtual currency transactions are immutable, you don’t want to make a mistake that you cannot reverse. Your wallet should not be the reason for errors when sending or receiving coins.
Long-term coin holders and frequent traders require different wallet features. While long-term investors will value features like email buying and selling, traders often require features like real-time price info and built-in exchange.
Mistake 3: Failure to verify company reputation
Cryptocurrencies are valuable assets. You don’t want to entrust a little-known entity with your valuables. Consider how long the wallet provider has been in operation, how securely they keep their data, who’s running it, and who keeps your private keys. It is also important to work with an insured wallet provider just be sure that you’ll be compensated if something goes wrong. Investigate whether they have suffered any prior incident of cyberattack or insider hacking that resulted in the loss of cryptocurrencies. Seek customer reviews and find out whether they use glitch software or engage in poor data management practices.
Mistake 4: Choosing wallets that use flimsy technologies
Naturally, crypto users feel insecure when using wallets with a proprietary code as they don’t see what lies under the hood. Open source wallets enable third parties to entirely review their code. So, if anything is amiss, it can be widely reported. Many crypto wallets out there are buggy and are not quite ready for mass adoption.
Always find out how the wallet keeps your private key. Do you hold it or the wallet provider keeps it in their server? Avoid wallets that keep your private key to avoid risks of losing your coins. Additionally, choose wallets that enable 2-factor authentication.
Mistake 5: Choosing wallets that lack backup features
The fact of life is that laptops, smartphones, and other computing devices can fail at the most unexpected times. As long as you spend your time close to liquids, say a cup of coffee or a bottle of beer, your laptop is deemed to grasp some moisture. Having said that, ensure that your prospective wallet has put in place a backup mechanism. Great wallets come with a rescue link, passphrases, and passwords to help you get everything back up and running in case of a hardware failure.
Mistake 6: Failure to consider multiple cryptocurrencies
If you make a mistake of choosing a purpose-built crypto wallet that only supports one cryptocurrency, you’ll be limited to the scope transactions you can achieve with the same wallet. A good wallet should accommodate a wide range of cryptos like Bitcoin, Litecoin, Ethereum, etc. Before verifying your account with a crypto wallet, be sure to check which cryptocurrencies they support.
Mistake 7: Wallets that don’t support cryptocurrency conversion
Converting one crypto into another can be a handy integration to have in your wallet. Wallets with an in-built system make cryptocurrency arbitrage very easy. For traders, this is a very crucial feature as you won’t have to send coins to third-party exchanges every time you want to convert your coins.
Mistake 8: Choosing a wallet provider with poor customer service
Crypto markets can widely fluctuate within a few minutes. You need a wallet platform that responds quickly to your queries and resolve issues fast. Customer service is an important feature to look at when choosing a wallet. The same applies for crypto exchanges. Always ask for customer reviews to see what other users say about the wallet provider.
Crypto wallets hold your valuable coins in either a digital platform or offline. Always trade carefully when choosing a crypto wallet to avoid losing your investment. It is important to go for wallets that put a premium on their security features. By avoiding these costly mistakes, you will avoid falling prey to hacks that can wipe out your hard-earned money.