CLASSIFYING WALLETS AND HOW TO PROTECT ASSETS IN WALLETS

[TradeCoinD2]

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.

[cryptoworld1]

Common classifications of wallets

Hot and cold: The most common way to classify wallets, these heat level descriptors indicate their connection to the Internet. Hot wallets are connected, while cold wallets are not.
Self-custody and third-party custody: This classification segregates wallets based on who has the ability to move one’s funds. Third-party custody wallets hold private keys managed by a third party, which means that an external custodian manages funds. Conversely, non-custodial wallets are private key repositories that are self-managed by the institution or individual. This means that funds are internally managed by the institution or individual themselves.

For for yourself Here https://levain.tech/blog/digital-asset-custody-security#:~:text=Hot%20and%20cold%3A%20The%20most,ability%20to%20move%20one's%20funds.

Share your opinion about CLASSIFYING WALLETS AND HOW TO PROTECT ASSETS IN WALLETS?

[TradeCoinD2]

Common classifications of wallets

Hot and cold: The most common way to classify wallets, these heat level descriptors indicate their connection to the Internet. Hot wallets are connected, while cold wallets are not.
Self-custody and third-party custody: This classification segregates wallets based on who has the ability to move one’s funds. Third-party custody wallets hold private keys managed by a third party, which means that an external custodian manages funds. Conversely, non-custodial wallets are private key repositories that are self-managed by the institution or individual. This means that funds are internally managed by the institution or individual themselves.

For for yourself Here https://levain.tech/blog/digital-asset-custody-security#:~:text=Hot%20and%20cold%3A%20The%20most,ability%20to%20move%20one's%20funds. [nofollow]

Share your opinion about CLASSIFYING WALLETS AND HOW TO PROTECT ASSETS IN WALLETS?

Thank you for your concise and easily understandable feedback

[TradeCoinD2]

There are two subcategories of wallets, hot and cold. A hot wallet has a connection to the internet or to a device that has a connection, and a cold wallet has no connection. Lastly, there are three subcategories of wallets—software, hardware, and paper. Each of these types is considered either a hot or cold wallet.
Hardware wallet are safe.whould you like hardware wallet?

Hardware wallets are genuinely secure if you know how to use them, and of course, I do use a hardware wallet.

[Thyplaymaker]

There are two subcategories of wallets, hot and cold. A hot wallet has a connection to the internet or to a device that has a connection, and a cold wallet has no connection. Lastly, there are three subcategories of wallets—software, hardware, and paper. Each of these types is considered either a hot or cold wallet.
Hardware wallet are safe.whould you like hardware wallet?

Normally cold wallet are not connected to Intern right? But between hardware wallet and paper wallet which more safer, we all know that careless keeping of your seed phrase may put your hardware wallet in great risk. But for paper wallet is not safe from external attacks like water and fire, you can also misplaced it.

[yawar20]

Hardware wallets are genuinely secure if you know how to use them, and of course, I do use a hardware wallet.

  I agree with you as Physical devices designed to store cryptocurrency offline has more security . They are considered highly secure as they are less susceptible to online hacking.

[Aanuoluwatofunmi]

The first thing we should know about wallet's is their category which is into two, we have a custodial wallet and non custodial wallet, aside this, every other classifications fall under the two, it is also expected of us to know that we are to understand their various types under each category, also we must know some of the requirements needed from us to maintain a security practice of the use of wallets a d how we can do them properly.

[ABCbits]

There are two subcategories of wallets, hot and cold. A hot wallet has a connection to the internet or to a device that has a connection, and a cold wallet has no connection. Lastly, there are three subcategories of wallets—software, hardware, and paper. Each of these types is considered either a hot or cold wallet.
Hardware wallet are safe.whould you like hardware wallet?

Normally cold wallet are not connected to Intern right? But between hardware wallet and paper wallet which more safer, we all know that careless keeping of your seed phrase may put your hardware wallet in great risk. But for paper wallet is not safe from external attacks like water and fire, you can also misplaced it.

For paper wallet, you could try laminate it or place it on durable safe to reduce risk of external attack. But FYI, metal seed/wallet also exist where you usually write or stamp seed words on it.

[Aanuoluwatofunmi]

If we are to recommend wallet, then it should be under a non custodial wallet category and we should know them and their various types, using a cold storage is one of the best means of having your cryptocurrency secured because we are in charge of the financial assets we are having, we used to make use of one slogan common in cryptocurrency, not your keys not your coins, if you know the benefits of this, then you will understand that regardless of the crypto asset you're dealing with in your portfolio, you must be in charge of them and not the third party institutions.

[Sim_card]

There are two subcategories of wallets, hot and cold. A hot wallet has a connection to the internet or to a device that has a connection, and a cold wallet has no connection. Lastly, there are three subcategories of wallets—software, hardware, and paper. Each of these types is considered either a hot or cold wallet.
Hardware wallet are safe.whould you like hardware wallet?

Normally cold wallet are not connected to Intern right? But between hardware wallet and paper wallet which more safer, we all know that careless keeping of your seed phrase may put your hardware wallet in great risk. But for paper wallet is not safe from external attacks like water and fire, you can also misplaced it.

For paper wallet, you could try laminate it or place it on durable safe to reduce risk of external attack. But FYI, metal seed/wallet also exist where you usually write or stamp seed words on it.

I prefer using steel plate to write down my seed phrase, because it looks more secured to me than the paper back up, It is better to have three backups in a far location in different places, so that when you don't have access to the first one due to some reasons like natural disaster, you can still have access to your wallet by getting your second back up from where it was kept.

[Zed0X]

Another sub-category or classification would be open-source vs. closed-source wallets. It's undebatable that non-custodial (NC) wallets are better than custodial but let's keep in mind that a lot of NC are closed-sourced. The basic difference between the two is that there are more eyes to check the codes for open-source unlike the other one where only a select few (usually the dev team only).

If you are looking for a list of open-source hardware wallets, here's one https://www.altcoinstalks.com/index.php?topic=314728.0

[surendertakyaan70]

I know of two wallets which are hot wallet and cold wallet. Hot wallets are online and connected to the internet, which keeps our assets safe, whereas, cold wallets are offline and provide increased security but we are at risk of online hacks. But to protect the assets in the wallet, hard PSD has to be used.

[surendertakyaan70]

I know of two wallets which are hot wallet and cold wallet. Hot wallets are online and connected to the internet, which keeps our assets safe, whereas, cold wallets are offline and provide increased security but we are at risk of online hacks. But to protect the assets in the wallet, hard PSD has to be used.

[ABCbits]

Another sub-category or classification would be open-source vs. closed-source wallets. It's undebatable that non-custodial (NC) wallets are better than custodial but let's keep in mind that a lot of NC are closed-sourced. The basic difference between the two is that there are more eyes to check the codes for open-source unlike the other one where only a select few (usually the dev team only).

If you are looking for a list of open-source hardware wallets, here's one https://www.altcoinstalks.com/index.php?topic=314728.0

It's good point. Although few wallet such as Trust Wallet could be classified as partial open-source since they only release code for their "core" library which can be seen on https://github.com/trustwallet/wallet-core. Although few people disagree since there's no way to verify that.

[gulu_khan]

Classifying wallets in the realm of cryptocurrencies is crucial for users to understand how to manage and protect their assets effectively. Wallets, broadly categorized into hot wallets and cold wallets, serve as storage solutions for digital assets.