I. Some Common Types of Wallets
1.Centralized Wallet
*When people participate in cryptocurrency trading on centralized exchanges like Binance, Kucoin, OKEX, they create a trading account on the exchange. Within this account, the exchange provides wallets for all listed coins/tokens. Users simply need to select the correct coin/token they want to deposit, copy the wallet address, and send their funds.
*Example: On Binance, go to Wallet ⇒ Fiat and Spot ⇒ Choose the coin/token you want to deposit/withdraw and proceed with the transaction. In this type of wallet, users don't need to save a private key but only need to remember their exchange account password. However, the security level is lower compared to decentralized wallets, as the exchange has full control over your assets, and there is a third-party risk (the exchange) in case of issues.
2.Decentralized Wallet
Hot Wallet: This type of wallet allows users to trade anytime through an internet connection. It's free, offers more diverse options, and can be accessed through mobile apps or browser extensions. However, it's more susceptible to hacking because the Private Key data is stored directly in the app or extension and is constantly connected to the internet.
Cold Wallet: Typically in the form of a USB device, it functions similarly to a bank account. It automatically receives funds when someone sends them to you without needing an internet connection. However, if you want to check your balance, you need to connect the cold wallet to the internet, similar to internet banking. Cold wallets offer high security but come at a higher cost and lack the flexibility of hot wallets.
3.Other Types of Wallets
Smart Contract Wallet: These wallets are accessed and controlled through smart contracts. There are two types—those owned by external accounts accessed through a private key or seed phrase, and contract accounts controlled through smart contracts. They resemble traditional financial apps more and include features like multi-signature authorization, account freezing, transaction limits, 2FA, and permission for listings and custodianship.
Examples: Argent, Gnosis Safe.
II. Reasons for Asset Loss and How to Handle Them
Below are some common reasons for losing your assets and how to deal with them:
1.Approving Unknown NFTs/Tokens.
2.Forgetting to disable automatic downloads in Telegram.
*Many crypto groups and projects are on Telegram, but to avoid scams and malicious code, it's essential to disable automatic downloads.
To do this:
*Go to "Settings" in the Telegram app.
*Scroll down to "Chat Settings."
*Toggle off "Save to Gallery" for added security.
3.Visiting fake or scam project websites.
4.Signing messages on Metamask through non-legit websites.
5.Approving Smart Contracts on various projects.
6.Failing to revoke high-risk tokens when participating in DeFi projects.
7.Being a victim of browser extension wallet hacks.
8.Having keywords or private keys captured by attackers.
III. Ways to Protect Your Wallet
In this article, we will focus mostly on Metamask since it's widely used:
1.Secure Private Keys and Passphrases
When creating a wallet, you receive a 12-word secret passphrase. Write it down on paper and store it in two different places or save it on a USB drive. Avoid taking pictures or storing it on internet-connected devices.
2.Use Multiple Wallets for Different Purposes
*Create multiple wallets or accounts within Metamask for various purposes. For example:
*One wallet for Airdrops.
*Another for long-term asset storage (not staking or farming).
*Separate wallets for different DeFi activities.
3.Avoid Interacting with Unknown Tokens
Your Metamask wallet address is public, and anyone can send tokens to it. Over time, you may accumulate unknown tokens. Resist the temptation to interact with them. Use blockchain explorers like Etherscan to track and review your transactions.
4.Regularly Check and Remove Unnecessary Website Connections
Periodically review and remove unnecessary website connections in Metamask to enhance security. You can do this by going to Metamask > Click on the three dots > Connected Sites. Delete any unnecessary connections.
5.Revoke Permissions
During usage, you often grant permissions for third-party applications to use tokens in your wallet. Be sure to review and revoke permissions for apps you no longer use. This prevents unauthorized access to your funds.
6.Use Revoke Websites
*Some websites can help you revoke permissions easily:
Revoke.cash
Approved.zone
Tac.dappstar.io
Beefy.finance
7.Avoid Accessing SCAM Websites
On your computer, create bookmarks for legitimate cryptocurrency websites like CoinMarketCap or CoinGecko. Avoid clicking on random links and always access cryptocurrency-related sites through these bookmarks.
8.Protect Your Browsing and Email
*Use secure operating systems like Windows 10 or higher.
*Enable virus protection and firewalls.
*Avoid using devices for entertainment and accessing potentially risky websites on the same device where you store your assets.
*Consider using a separate device for asset storage.
9.Prevent Browser Hacks
*Use a separate Chrome profile solely for syncing, saving, and storing login credentials.
*Enable two-factor authentication for your Google account.
*Regularly check your Google account security settings, including device access.
*Be cautious when clicking links in emails and verify the sender's email address.
10.Protect Against Network Attacks
*Avoid using public Wi-Fi networks, as most asset losses occur on them.
*If necessary, use a paid VPN service to encrypt your data.
*When outside, use your mobile data (4G) instead of public Wi-Fi.
*Disable all sharing features on your mobile device.
11.Verify Contracts and Charts
Before participating in DeFi projects, double-check the contracts and use links from trusted sources rather than searching for them independently.
12.Use Audited and Trusted Wallets
Opt for wallets that have been audited by reputable organizations and regularly update their features and fixes. Examples include Metamask, Trustwallet, and Coin98.
Remember that security is paramount in the world of cryptocurrencies. By following these precautions, you can significantly reduce the risk of losing your assets.
