The past few years have seen digital assets begin to cement their place in the global economy. This makes the question of their safe storage one of the most important questions of the decade for investors. The most commonly used method of storing digital assets currently is mobile wallets, which are applications on smartphones used to hold and manage cryptocurrencies. They provide a mix of security and convenience for storing your digital assets. However, you might find yourself wondering how viable they are for long-term storage, years instead of weeks.
Also Read: Best Hardware Wallet vs Software Wallet: Key Differences & What to Choose
The Advantage Over Exchanges
The strongest benefit of using a mobile wallet as opposed to a centralized exchange(CEXs) is the non-custodial storage. This helps avoid the platform risks and vulnerabilities that come with storing your digital assets on CEXs. Investors have been known to lose their assets when an exchange faces insolvency, regulatory crackdowns, or experiences technical failure.
With mobile wallets, you can be sure that you are the only one with access to your private keys to access your wallet. This removes the middleman third-party risks that come with custodial storage.
The “Hot Wallet” Vulnerability
Even though they offer more control than centralized exchanges, there is a reason mobile wallets are called “hot wallets”. This is because the device requires frequent internet connection, and this connectivity is a strong obstacle to long-term safety. The internet opens up the smartphone, the wallet is installed in to many attack vectors, including:
- Malware and Phishing: Malicious apps or links can compromise a phone’s operating system to log keystrokes or export seed phrases.
- Physical Theft or Loss: If a phone is stolen and the user hasn’t properly backed up their recovery phrase, the assets are effectively gone.
- SIM Swapping: While this primarily affects exchange accounts with SMS-based 2FA, sophisticated attackers can sometimes use compromised device access to gain entry to wallet apps.
Also Read: MetaMask vs Trust Wallet: Full Comparison
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
What are Crypto Wallets?
Crypto wallets are software that help keep your private keys for one or more blockchain networks safe. They are akin to vaults in the physical world.
What are Paper Wallets?
Paper Wallets are cryptocurrency wallets that are just pieces of paper with seed phrases or private keys written on them for quick recovery.
What are Cold Wallets?
A cold wallet is a cryptocurrency wallet that holds private keys offline, without any direct internet connectivity.
