You understand how cryptocurrency is changing the financial world. You’re confident of adding digital assets to your investment portfolio.

You’re excited about cryptocurrency-related innovations such as NFTs, the metaverse, Web3, and smart contract-driven financial services.

In short, you’re ready to begin your cryptocurrency journey. Now you must find a secure cryptocurrency wallet.

What is a cryptocurrency wallet?

Cryptocurrency wallets use cryptography to secure access to funds. As a result, only the sender and receivers can see the contents of a cryptocurrency transfer.

Using a simple analogy, a cryptocurrency wallet is like a mailbox. Anyone with your public key, in other words, your address, can send cryptocurrencies to you. Still, the only way to use the funds inside that mailbox is to have a private key to open it.

Each key has a corresponding wallet address. Without it, no one can access the cryptocurrency in your wallet. So, it’s essential to keep your private key safe, so you don’t lose it or have it stolen. If that happens, it’s almost impossible to recover your digital assets. Unfortunately, most do not understand the risks associated with self-storage.

Hot cryptocurrency wallet: Perfect for those on-the-go

Hot wallets are directly connected to the internet and are available as free mobile, desktop, and web versions.

They can be accessed anywhere with an internet connection, making buying, selling, sending, and receiving as simple as clicking a button.

Most hot wallets have a simple user interface and are easy to use. However, they pose a potential security risk because they are connected directly to the internet and open to hackers and scammers’ attacks.

Hot wallets are known for their convenience and accessibility. Many people prefer hot wallets to buy or sell cryptocurrencies.

Doing so with a cold wallet would be a hassle and an inconvenience. You would have to find a device to connect your cold wallet, transfer the desired amount to an exchange, then make your trade.

Most reputable digital asset exchanges employ a hybrid approach to storing their customers’ funds. They hold a certain amount of funds offline in cold wallets and store another amount for withdrawals in hot wallets.

Cold cryptocurrency wallet: Ultimate protection against online attackers

A cold wallet is an external device that stores your cryptocurrencies in an encrypted manner.

As long as you keep the cold wallet in a safe place, hackers will not be able to compromise your cold wallet and steal your assets. Generally, cold wallets are more secure because they’re not connected to the internet.

Stealing from a cold wallet would require direct access to it through associated PINs or passwords.

Cold wallets are designed to be immune to hacking. Even when a cold wallet is plugged into your computer or connected via Bluetooth, the funds stored on the wallet would still be safe.

On the other hand, cold wallets are less convenient than hot wallets because they must be connected to the internet to make transactions.

While hot wallets are usually free, cold wallets can cost you between RM200 and RM800, depending on the brand.

If you have a large number of cryptocurrencies, it might be wise to invest in a cold wallet. It’s a small price to pay to add protection to your hard-earned assets.

Hot or cold: Which one should you choose?

Given their strengths and weaknesses, a combination of cold and hot wallets may be optimal.

Both cryptocurrency wallets can achieve an ideal balance between convenience and peace of mind. It also depends on your activity as a cryptocurrency investor — whether you’re holding a small or large amount of funds.

Like any valuable asset, storing cryptocurrency requires making the right decision about how best to keep it secure while striking the right balance between accessibility and safety.

Thankfully, in recent times, there has been an intersection between the world of cryptocurrency wallets: hot wallets are becoming more secure, and cold wallets are becoming more accessible.

Luno goes a step further in securing your cryptocurrency

As the leading regulated digital asset platform in Malaysia, Luno adheres to international standards and local security standards set by the Securities Commission Malaysia to identify risks and manage or eliminate them.

As part of its efforts to ensure customer funds are protected, Luno utilises industry-leading protection such as a deep-freeze storage solution.

Customers’ private keys are stored inside safety deposit boxes in physical bank vaults where multiple-signature keys are required to authorise a cryptocurrency transaction. It is similar to opening a bank vault by turning several keys simultaneously to unlock it.

In addition, Luno uses a multi-signature hot wallet to facilitate instant Bitcoin transactions. Backups of the keys are stored offline in geographically-dispersed safety deposit boxes.

Furthermore, customers’ private keys are stored offline on a machine without access to the internet or other networks. This method significantly reduces potential attacks from hackers since physical access is required. The machine is stored in a secure vault at an undisclosed location.

Now that you understand the differences between hot and cold wallets, and the measures Luno takes in keeping your digital assets safe, sign up with Luno today and experience it yourself.

Additionally, read more about Luno’s Terms of Use and the risks associated with cryptocurrencies here.

Note: No amount of protection measures will secure your assets if attackers obtain your private information like passwords. As such, we recommend you to follow good security practices: use strong unique passwords, enable two-factor authentication (2FA), and be careful when clicking on any links. Further suggested security measures can be found here.

This article is for educational purposes only and you should not construe any such information as investment or financial advice. Investing in cryptocurrency is high risk and may result in the loss of capital as the value can fluctuate. We recommend individuals consult with a licensed financial planner for detailed financial advice on whether cryptocurrency is a good investment option.