UAE: What do you know about cryptocurrency wallets and how safe are they to use?
A walk through risks people should be watching out for when using such wallets
Like how you would invest in a good wallet or purse to keep your physical hard-earned money safe, a quality digital wallet is just as important to keep your digital currency safe, if not more.
But such digital wallets don't actually hold anything, unlike a physical wallet.
For instance, a crypto wallet is simply a secure “window” into the blockchain, so you can view your records and transactions. Think of it like email, where your wallet is your login and password, but you're not actually storing the emails yourself, you're simply accessing them.
A crypto wallet is simply a secure 'window' into the blockchain so you can view your records and transactions.
Similarly, your tokens and transactions are saved on a blockchain, which is distributed across a vast network. So it’s always there, even if you lose your wallet. You just won't be able to access or do anything with the tokens without your wallet.
Blockchain is nothing but digital information (the ‘block’) stored in a public database (the ‘chain’). To know all you need to know about cryptocurrency, how it works and how it can be traded, also read the below story.
This article goes into detail on the popular wallets that are available to store digital currency like cryptocurrency and what people should watch out for when using them.
But first here is a quick rundown of the popular cryptocurrencies out there and then we shall go into what crypto-wallets are popular and why they are vital to a crypto trader.
Bitcoin is considered the gold standard of the cryptocurrency market – but blockchain-based platform Ethereum's rise since 2017 has seen the value of its currency Ether rise quickly.
Ether, or ETH, like Bitcoin, is ‘digital money’ that can be sent over the internet instantly and cheaply, and also be used in many Ethereum-based applications.
Now, what is a cryptocurrency wallet? It is simply a software program that stores private and public keys (unique signatures for each blockchain transaction).
It essentially enables users to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other cryptocurrency, you will need to have a digital wallet.
The blockchain wallet automatically generates and stores private keys for you. This is what allows you to restore access to your funds even if you lose access to your original wallet.
Popular cryptocurrency wallets
Before we get into the popular types, remember wallets are generally of two types – software and hardware.
Hardware wallets present the safest way to store and keep your cryptocurrency.
Hardware wallets present the safest way to store and keep your cryptocurrency. Two of the most popular hardware wallets on offer right now are Trezor and Ledger. They cost between Dh367 and Dh500.
Some wallet service providers in the UAE and some risks tied to them
BitOasis allows transactions in USD and AED as well as the use of local credit cards. It also provides an option for users to store cryptocurrencies on its platform through online web wallets.
Downsides users have widely cited concerning BitOasis was that they have comparatively much higher fees. Another risk a few users have cited concerning Bitex UAE was a delay in processing payments and issues in withdrawing the amounts they have deposited.
BitOasis allows transactions in USD and AED as well as the use of local credit cards, while also providing an option for users to store cryptocurrencies on its platform through online web wallets.
Palmex was recently created by Arabianchain Technology in UAE. It accepts Bitcoin and Ethereum for trading as well as regional cryptocurrencies like DubaiCoin.
The trading tools provided by Palmex are amongst the best in the industry but due to its nascent state, it requires some time to become stable and establish itself along with the top exchanges of the world.
Bitcoin wallet from Copay is also one of the more popular software wallets out there and the Electrum wallet is one of the oldest Bitcoin wallets.
Exodus wallet is another free software wallet that gained some popularity recently. Jaxx is a free software wallet, available in a desktop and a mobile version.
A day later, another transaction with fees north of $540,000 (Dh2 million) was conducted - but this time from a different wallet.
As multiple wallets are now involved, crypto experts are speculating that a poorly designed wallet or even hackers might be the cause of this trouble.
However, this disaster could have been averted by using a sophisticated wallet app that prevents excessive gas prices by default
“However, this disaster could have been averted by using a sophisticated wallet app that prevents excessive gas prices by default,” says AlphaWallet co-founder James Sangalli, who has been developing Blockchain apps for over 6 years.
AlphaWallet recognizes itself as the first Ethereum wallet utilizing a Secure Enclave, a user-friendly key backup and recovery process. Moreover, the company claims that with its wallet such problems are averted.
The biggest risk, however, linked to online or software crypto wallets is them being vulnerable to hacks.
These criminals can break into crypto exchanges, drain crypto wallets, and infect individual computers with malware that steals cryptocurrency.
As transactions are conducted on the Internet, the hackers target the people, the service handling, and storage areas, through means such as spoofing/phishing and malware.
These criminals can break into crypto exchanges, drain crypto wallets, and infect individual computers with malware that steals cryptocurrency.
Investors must rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect purchased cryptocurrencies from theft.
Moreover, cryptocurrency is highly reliant upon unregulated companies, including some that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
Furthermore, the software needs to be regularly updated and may be suspect at times. Sourcing the blockchain technology to vendors may result in significant third-party risk exposure.
Once the bitcoin is transferred out of the account and that transaction has been committed to the blockchain, those monies are lost forever to the original owner.
If you’d just like to hold bitcoin or other cryptocurrencies for the long term and make sure they are secure, it’s best to buy a hardware wallet.
If you’d just like to hold bitcoin or other cryptocurrencies for the long term and make sure they are secure, it’s best to buy a hardware wallet.
This way you are in possession of your private keys and no one else, keeping it safe from being stolen.