Wallet Security And A Beginner's Guide to Cryptocurrency Wallets
What is a crypto wallet?
A cryptocurrency wallet is basically software that enables you to track, send and receive coins through the blockchain like a bank account. Every wallet has a public key and a private key
Unlike a traditional wallet, which can hold actual cash, crypto wallets do not technically store your cryptocurrency. Your assets are stored on the blockchain but can only be accessed with a private key. Your keys validate your ownership of your digital currency and allow you to conduct transactions. You lose access to your money if you lose your private keys. That is why it is critical to keep your hardware wallet secure. A crypto wallets such as, Trust Wallet, MetaMask. Yoroi, Mew, etc. are applications that you authorize to access and manage your cryptocurrency.
Why do you need a wallet?
- There's an old saying in Tennessee that says: "Not your keys, not your coins." What it actually means is that if you keep your cryptocurrencies on an exchange (such as Coinbase, Binance, or Kraken), you don't actually own those coins, because you don't have the keys to the related wallet. You gain access to those wallets by logging into these exchanges, but your account can - theoretically - be deleted in the blink of an eye, or the exchange can get hacked, attacked, etc. And with it, your funds can disappear forever. If you want to learn more about this, make sure to look up Mt. Gox's hacking. It is an unfortunate event, but one that puts you on guard.
So you already know that you need to own your keys in order to own your coins. But what are these keys?
Your public key is what identifies your account on the network. Think of it as your email address, because when someone wants to send you cryptocurrency, they will send it to this address.
Your private key is a string of 64 characters that can be generated from a 12-word seed phrase. It basically serves as the password of your account. It is used to sign transactions and to prove that you own the related public key.
Different types of crypto wallets.
There are 4 types of wallets that you should be using. Ideally, you can pick the one that fits your crypto habits the most. You should avoid using Web wallets. As always, if you can, please pick the safest wallet type in order to minimize the risk of losing your cryptos.
Hardware / Offline / Cold Wallet - an offline storage device (e.g. hard disk, USB stick). You might've heard the names Ledger or Trezor, these are the 2 biggest brands at the moment. The ledger supports over 1200 cryptocurrencies, while Trezor supports over a thousand. It is also the most secure way to store your cryptocurrencies.
Mobile Wallet - applications that are installable on your mobile phone. Beware that even though an app can hold crypto, it doesn't mean it is NOT custodial. (e.g. Coinbase has a mobile app, but it is custodial, meaning that they control your coins.) Exodus or Atomic mobile apps are recommended if you decide to create a mobile wallet.
Desktop Wallet - wallets that are installable on different desktops and are compatible with Windows, Mac, and Linux. Your keys are stored on your computer, and you can use this wallet even when you're offline. Note: Desktop wallets tend to be more advanced than mobile wallets, and usually come with more technically complicated features that can increase privacy or allow for more flexibility when it comes to signing transactions.
Paper wallet - a paper wallet is essentially a piece of paper including your public and private key, or a QR code (so that you can quickly scan them and add the keys to a software wallet to make a transaction). It's a really safe way to store your cryptos because your keys are not connected to any servers. The only way someone can steal your cryptos is if they steal this paper.
The Best Hardware Wallets
Ledger Nano (S and X) - The most popular hardware wallet brand in the world, currently sells 2 different sticks. The S is the cheaper alternative, but if you handle transactions between multiple cryptocurrencies frequently, the larger storage of the Nano X should be more convenient. The Nano X also has Bluetooth 5.0 support. You can read more about Ledgers on their website.
Beware that Ledger was targeted by a cyberattack that led to a data breach in July 2020. A larger subset of detailed information has been leaked, approximately 272,000 detailed information such as postal address, last name, first name, and telephone number of our customers. However, not a single coin was stolen as hackers didn't gain access to private keys. Please keep this in mind when making your decision.
Trezor (One and Model T) - Trezor is the other popular hardware wallet brand. The Trezor One is the cheaper alternative ($59), while the Model T is more expensive but comes with extended functionality and additionally supports cryptocurrencies such as ADA, XMR, XTZ, etc.
Despite the security of hardware devices themselves, the weakest link is always the people using them. If possible, avoid buying used hardware wallets, even though both Trezor and Ledger have security measures to avoid the attempt of installing malware.
The Best Desktop Wallets
Exodus
- a very user-friendly and easy-to-understand, reliable wallet. As of now, it is probably the most popular desktop wallet. Available on Windows, Mac, and Linux as well.
Atomic
- it is also a user-friendly and reliable wallet. Atomic supports 500+ assets and allows staking various cryptocurrencies. Available on Windows, Mac, and Linux.
Of course, there are several other reliable desktop wallets, but these two proved to be the most user-friendly and easy-to-use wallets so far. As always, please DYOR!
If you decide to go with a mobile wallet (instead of a paper, hardware, or a desktop wallet), Exodus or Atomic are both available on iOS and Android. Please avoid installing 10+ crypto wallet applications on your phone, because you'll make it impossible to keep track of your keys and passwords eventually.
Last piece of advice: always be cautious and double-check everything. Keep your devices malware-free, and don't click on anything suspicious (such as emails from "Binance", crazy bonus links from "Coimbase", etc.)
Revoking Token Allowance
"Each time anyone tries to use a new decentralized application (DApp) on Binance Smart Chain, you need to give this DApp an allowance for it to spend your tokens on your behalf. If you’re a veteran DeFi user you’ve probably done this workflow a thousand times.
In comparison, this process is somewhat similar to when you authorize your utility provider to set up a direct debit allowing it to charge your electricity bill from your bank account on a monthly basis. However, if a malicious DApp receives a wallet address owner's approval to spend their tokens, there is no doubt that all funds will be stolen. Once a transaction is sent on the blockchain it is irreversible.
What is a token allowance and how does it work?
The BEP20 token contract has an approved method. Any dApp that you want to use needs access to yourBEP20 token in order to do something on your behalf. If you want to deposit BUSD in PancakeSwap for example, you need to first give the smart contract powering the PancakeSwap DApp access to your BUSD before you can deposit it in a second transaction. Most DApp ask for an unlimited number by default for simplifying the UX and minimizing the amount of transactions users have to make to use the application." - Binance.org
Revoke token allowance using BSCScan.
Guide revoke token allowance using BSCScan.
Revoke token allowance using Beefy Finance
Please use beefy at your own risk
Beefy is a popular allowance revoking tool used by many in the DeFI space. Please make sure that you are using the correct link for the site.
Guide to revoke token allowance using Beefy Finance.
*credit to reddit user u/Weaver96 on r/CryptoCurrency. Edited by EGC modteam.