Before you get yourself a crypto wallet, learn about the five common mistakes everyone makes in the crypto wallet and how to avoid them

Nowadays, it has become not just a trend but a prudent financial decision to invest in cryptocurrencies. Everyone is jumping on the bandwagon and realizing the huge potential they have for the future and wants to make the most out of it. One of the most important things that you can do for your cryptocurrency tokens is to keep them safely and securely. This is where crypto wallets come in, and almost everyone that gets into crypto sooner or later gravitates toward them. If you do not know what a crypto wallet is, we will tell you all about it and why you should get one. And before you get yourself a crypto wallet or if are already using one, we will tell you about the five common mistakes everyone makes in a crypto wallet.

What Is A Crypto Wallet

A crypto wallet is exactly what you think it is. Like a regular wallet that you use to keep your money, a crypto wallet is used to store your cryptocurrencies. So even when you buy a cryptocurrency token on an exchange, it is reflected in your wallet, which is a crypto wallet. Now there are various kinds of crypto wallets. But the first major difference between wallets is:

Custodial Wallet

A custodial wallet is a crypto wallet that is under the control of some other entity/third party, such as your crypto exchange. When you store your crypto on cryptocurrency exchanges such as Binance, Coinbase, etc., the wallets they give you are custodial wallets. A lot of you might have heard that an exchange has stopped the withdrawal of cryptocurrencies from it at times. This is because even though the cryptocurrency tokens are yours, the wallet that they are stored in belongs to the exchange and they can control what can be done with the tokens inside it.

Non-Custodial Wallet

A non-custodial wallet is simply a self-custodial wallet. It means that if you have a non-custodial wallet and have cryptocurrencies stored in them, then you are in control of those cryptocurrencies at all times. But at the same time, all the risks associated with it are also yours. Such as, in case you forget or lose your seed phrase or private keys to your wallet, there is no way to recover them ever.

Another major difference between crypto wallets is whether they are Software Wallets or Hardware Wallets.

Software Wallet

A software wallet is one that is connected to the internet at all times and is also known as a Hot Wallet. One of the best software wallets that you can use is the CoinStats Wallet. In addition, Metamask, which is probably the most popular crypto wallet, is also a software wallet.

Untitled design (50)CoinStats Wallet

Hardware Wallet

A hardware wallet is also known as a Cold Wallet as it is not connected to the internet at all times. Instead, it is like a USB drive that can be used to take your cryptocurrency tokens offline and store them safely. Ledger Nano S, Ledger Nano X, Trezor Model T, etc. are some of the best hardware wallets available.

Untitled design (49)

Now that we know the differences, it is time to learn about the five common mistakes everyone makes in a crypto wallet.

Five Common Mistakes Everyone Makes In Crypto Wallet

1. Forgetting Private Key/Seed Phrase

When setting up your crypto wallet, a private key or seed phrase is required, which is to be stored securely. But a lot of people have ended up forgetting or misplacing their private keys resulting in losses of tens, hundreds, or thousands worth of cryptocurrencies. Unfortunately, this is more common than you think, and you should always store your keys where they would not be lost, damaged, or even stolen.

2. Connecting Your Wallet To Malicious Or Spam Websites

The increase in interest in cryptocurrencies has also increased the number of scammers. For example, suppose you are into cryptocurrencies and are an active social media community member. In that case, you will get multiple messages across various platforms asking you to connect your wallet or give out your seed phrase and earn a hefty return on your holdings. Those are, in all probability, a scam and a ploy to steal your tokens, and you should avoid such links at all costs.

3. Storing Cryptocurrencies In Custodial Wallets

Unless you are a day trader and need access to your cryptocurrency tokens almost always, there is no reason for you to keep your tokens in a custodial wallet, such as that of an exchange. It makes your tokens vulnerable to hacks or other forms of cyber attacks, on top of instances where an exchange locks up the funds for some reason or the other.

4. Wrong Wallet Address Or Network

While making transfers over the blockchain from one wallet to another, it is important to enter the correct wallet address and the correct network. Because in case you enter any of the above information wrong, the chances of your tokens being lost or being sent to the wrong address increase dramatically.

5. Accessing Your Wallet On Public Network

If you connect your device or wallet to a public WiFi network, the chances are that it can be hacked, and the hacker can easily make away with all the crypto stored in your device. Hence, as a good rule of thumb, never access your crypto wallet or assets over a public network.

Conclusion

The mistakes mentioned above are more common than you think, and now that you know about them, we are sure you’ll not be making any of them. However, investing in cryptocurrency is risky; on top of that, you would not want all your investment to disappear due to some trivial errors. Thus, always keep your crypto wallet secure and double or triple-check any transactions you do on the blockchain.