How secure are mobile wallets?
8 minute(s) read
Published on: Jan 27, 2022
Updated on: Mar 26, 2022
Today, it is so popular to use online wallets instead of physical ones because everything will be changed to become online, and carrying a wallet with you seems a bit meaningless. In this regard, we will learn about mobile wallets, how they are getting used, and the level of security of their different types.
What is a digital wallet?
A digital wallet is a software that runs on personal computers, smartphones, and special hardware and stores digital currencies securely. This digital currency software can be installed on your phone or computer through their official website or opened through a browser. All digital wallet software is provided free of charge, and only hardware are costly. The wallet of digital currencies is just as like physical wallets that people use to carry their money. However, the use of these digital wallets is more similar to bank accounts, where people can send money to others by holding their account number or receiving money from them by giving their account number. Of course, there is a major difference between bank accounts and digital wallets. That is the lack of third-party or organizations (such as banks) in sending and receiving cryptocurrencies between different wallets.
How does a digital wallet work?
Before we talk about how digital wallets work, let's get acquainted with the "Public Key" and "Private Key" of these , cryptographic concepts. When a person creates a digital wallet on one of the wallet provider platforms, the private key and the public key are given to them. These private and public keys are some strings of executions. Consider sending and receiving emails as an example. To receive an email, we can share our email address with others without having to worry about unauthorized people logging into our account so that they can send anything they want to the same email address. But you are the only one who knows your account password, and nobody will be able to see your emails and account information. In this example, the email address acts as the public key, and the password plays the role of the private key in digital. A person who intends to deposit or withdraw currency in their wallet must have a public and a private key.
Types of digital wallets
The way that transactions are processed is the same in all wallets, but the digital wallet installed on the mobile is different from the wallet installed on your personal computer. In other words, there are different types of digital wallets.
- Hot and cold
One of the classifications for digital wallets is divided into two types: "cold wallets" and "hot wallets." Warm wallets are like real-world that we use for daily payments, while cold wallets are like safes; this means that picking up and putting money in them is more troublesome than a regular wallet; it is also much more secure. The main difference between hot wallets and cold is that hot wallets are connected to the Internet. In cold wallets, transactions are done completely offline and then announced online to the network. Cold do not store private information on the Internet and are all stored offline to increase security. In hot wallets, private keys are stored on the Internet for convenience and speed, while in cold wallets, these keys are only stored offline on special hardware that does not have an Internet connection. Warm wallets allow users to access their digital currency assets at any time of the day or night using a mobile phone or computer connected to the Internet. But because it is online, there is a risk of hacking and stealing property.
- Software and hardware
Wallets can also be divided into two categories of "Software Wallet" and "Hardware Wallet." As its name implies, A software wallet runs on a computer, smartphone, or the Internet browser itself. A software wallet installed on personal computers is called a desktop wallet. Desktop wallets are considered hot wallets because they require the Internet. Some software wallets do not need to be installed and are running directly on the browser in the form of a website called a Web Wallet. Mobile Wallet is the third type of software wallet installed on smartphones. Web wallets and mobile wallets are also classified as hot wallets. In addition, we have hardware wallets that are designed as special pieces of hardware such as flash memory and are much more secure. These wallets are considered cold wallets due to storing important information in the hardware and not uploading them on the Internet. Unlike other wallets, which are usually available for free to users, hardware wallets must be purchased for a fee, as you will receive a physical product instead.
Increase the security of digital currency
One of the essential principles to paying special attention to in digital currency is to increase the security of the digital currency wallet or any other digital currency. Following the news that the FBI hacked the Bitcoin wallet, many users are looking for a way to increase the security of their digital wallets. A secure wallet is an important principle for the world of digital currencies. Different types of wallets are hacked in different ways and endanger your entire property.
Follow the suggested solutions to secure your wallets:
1. Choose the currency password wallet that suits your needs
Choosing the right wallet for storage and trading is essential. Another important point to consider is the digital wallet provider. Make sure you get your wallet from a reputable source. Some cryptocurrency exchanges, such as Paxful, offer secure Bitcoin wallets to users for free.
2. Select hardware wallets
A cold wallet may be the best option for users who are particularly concerned about cyber threats. One safe way to protect yourself from hacker attacks is to store bitcoins in hardware. Manufacturers such as Treasure and Ledger offer different models of USB-like devices that have security layers and pre-installed encryption features. These devices do not connect to the Internet, so cybercriminals can not easily access your private keys.
3. Enable two-factor authentication for extra wallet security
One way to increase the security of your digital currency wallet is to have a wallet with two-factor authentication (FA2). These wallets require the user to verify their identity before performing any activity such as logging in and withdrawing or sending money, thus providing an extra layer of security to protect their assets. The wallet will ask you for a two-factor verification code in this process, so if anyone wants to access your wallet, you will know immediately.
4. Make regular backups of your entire wallet
Some wallet providers allow you to back up your wallet data. Backing up your wallet allows you to access your data in the event of a computer system failure or software failure. If information is stolen or lost, you can easily recover your information. Be sure to use multiple backup devices for easy account recovery. You can also use different methods such as paper or hard drives such as USB and CD.
5. Keep your wallet software up to date
Software updates enable you to get the latest features and fix your wallet security issues. This way, you will know what features have been added to the recent update, and you will also avoid disrupting transactions due to the automatic installation of updates. You can also wait a few days before installing the update and check for possible problems with the new update.
6. Use different passwords for different accounts
How many online accounts do you currently have? If you use the same password for all your accounts, you are probably at risk. We recommend that you always use sophisticated password combinations and login details for your various accounts. Try combining uppercase and lowercase letters, numbers, and symbols to create long, strong passwords to make them harder to get hacked.
7. Do not click on unknown or suspicious links
Internet scammers often use deceptive links to get access to someone's information. They will do their best to get the attention of their victims and trick them into clicking on weird links that lead to insecure websites that can steal confidential data and damage electronic devices.
8. Use a secure internet connection
It is not recommended to use free and public wifi networks when checking your wallet and doing some transactions online. Make sure you are connected to a secure wifi network, and if you do not have such access, it is better to use mobile data.