Nowadays it has become not just a trend but a prudent financial decision to invest in cryptocurrencies. Everyone is jumping on the bandwagon and realizing the huge potential they have for the future and wants to make the most out of it. One of the most important things that you can do for your cryptocurrency tokens is to keep them safely and securely. This is where crypto wallets come in and almost everyone that gets into crypto sooner or later gravitates toward them. If you do not know what a crypto wallet is, we will tell you all about it and why you should get one. And before you get yourself a crypto wallet or if are already using one, we will tell you about the five common mistakes everyone makes in crypto wallet.
What Is A Crypto Wallet
A crypto wallet is exactly what you think it is. Like a regular wallet that you use to keep your money, a crypto wallet is used to store your cryptocurrencies. Even when you buy a cryptocurrency token on an exchange, it is reflected in your wallet, that wallet is a crypto wallet. Now there are various kinds of crypto wallets. But the first major difference between wallets is:
- Custodial Wallet
A custodial wallet is a crypto wallet that is under the control of some other entity/third party such as your crypto exchange. When you store your crypto on cryptocurrency exchanges such as Binance, Coinbase, etc., the wallets they give you are custodial wallets. A lot of you might have heard that an exchange has stopped the withdrawal of cryptocurrencies from it at times. This is because even though the cryptocurrency tokens are yours, the wallet that they are stored in belongs to the exchange and they can control what can be done with the tokens inside it.
- Non-Custodial Wallet
A non-custodial wallet is simply a self-custodial wallet. It means that if you have a non-custodial wallet and have cryptocurrencies stored in them, then you are in control of those cryptocurrencies at all times. But at the same time, all the risks associated with it are also yours. Such as, in case you forget or lose your seed phrase or private keys to your wallet, there is no way to recover them ever.
Another major difference between crypto wallets is whether they are Software Wallets or Hardware Wallets.
- Software Wallet
A software wallet is one that is connected to the internet at all times and is also known as a Hot Wallet. One of the best software wallets that you can use is the CoinStats Wallet. Metamask, which is probably the most popular crypto wallet is also a software wallet.
CoinStats Wallet
- Hardware Wallet
A hardware wallet is also known as a Cold Wallet as it is not connected to the internet at all times. It is like a USB drive that can be used to take your cryptocurrency tokens offline and store them safely. Ledger Nano S, Ledger Nano X, Trezor Model T, etc. are some of the best hardware wallets available.
Now that we know the differences, it is time to learn about the five common mistakes everyone makes in a crypto wallet.
Five Common Mistakes Everyone Makes In Crypto Wallet
1. Forgetting Private Key/Seed Phrase
When setting up your own crypto wallet, a private key or seed phrase is required which is to be stored securely. But a lot of people have ended up forgetting or misplacing their private keys resulting in losses of tens, hundreds, or thousands worth of cryptocurrencies. This is more common than you think and you should always store your keys in a place where they would not be lost, damaged, or even stolen.
2. Connecting Your Wallet To Malicious Or Spam Websites
With the increase in interest in cryptocurrencies, the number of scammers has also increased. If you are into cryptocurrencies and are an active member of the social media communities, you will get multiple messages across various platforms asking you to connect your wallet or give out your seed phrase and earn a hefty return on your holdings. Those are in all probability a scam and a ploy to steal your tokens and you should avoid such links at all costs.
3. Storing Cryptocurrencies In Custodial Wallets
Unless you are a day trader and need access to your cryptocurrency tokens at almost all times, there is no reason for you to keep your tokens in a custodial wallet, such as that of an exchange. It makes your tokens vulnerable to hacks or other forms of cyber attacks, on top of instances where an exchange locks up the funds for some reason or the other.
4. Wrong Wallet Address Or Network
While making transfers over the blockchain from one wallet to another, it is important to enter the correct wallet address and the correct network. Because in case you enter any of the above information wrong, the chances of your tokens being lost or being sent to the wrong address increase dramatically.
5. Accessing Your Wallet On Public Network
If you connect your device or wallet to a public WiFi network, the chances are that it can be hacked and the hacker can very easily make away with all the crypto stored in your device. Hence, as a good rule of thumb, never access your crypto wallet or assets over a public network.
Conclusion
The mistakes mentioned above are more common than you think and now that you know about them, we are sure you’ll not be making any of these. Investing in cryptocurrency is risky as it is, and on top of that, you would not want all your investment to disappear due to some trivial errors. Thus, always keep your crypto wallet secure and make sure to double or triple-check any transactions you do on the blockchain.