Cryptocurrency wallets can be divided into two main categories: Soft and Hard. A soft wallet can be downloaded onto devices such as computers, tablets or mobile phones while hard wallets are physical devices that must be kept safe at all times. Security is always a trade-off and various wallet types exist that balance convenience with safety; for instance a hot wallet may be ideal for frequent transactions while cold ones provide long-term storage (hodling).
Though not essential, most experts advise using a hardware wallet to safeguard cryptocurrency investments against hackers and other potential threats. Hardware wallets store user private keys offline until a transaction occurs – making them significantly less vulnerable to hacking or malware than software or web-based wallets which remain “hot” at all times.
Hardware wallets provide both additional security and functionality over software wallets. For instance, they usually support multiple cryptocurrencies so users can invest in multiple digital assets at the same time. Plus, many come equipped with additional security measures like PIN codes or biometric authentication that protect against hacking or physical damage.
Hardware wallets are designed to be easy-to-use so even novice or casual crypto investors can confidently utilize them. Many resemble USB drives in terms of size and have one or two buttons and a small display for ease of use, yet most also boast multi-layer encryption and anti-malware protection features for extra safety.
Hardware wallets provide another major benefit by protecting your private keys even if the hardware itself is lost or stolen, due to most requiring PIN codes or biometric authentication to gain entry, making it extremely difficult for hackers to gain access to your assets.
As with any wallet, whether software or hardware, ensuring you can recover your assets should they become lost or stolen is of critical importance – especially for those using a hardware wallet to safeguard their crypto investments.
Some users opt to avoid the hassle of backing up their wallets by leaving cryptocurrency with exchanges that take custody. Although this option might sound appealing, leaving your coins on exchanges increases their vulnerability to hacking and other types of threats because they hold your private keys instead of you; so it is crucial that when making this choice you do your research and select an reputable exchange like Kraken.