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In modern digital finance, using multiple crypto wallets is an effective means of diversifying a cryptocurrency portfolio and protecting assets. As the new mainstays of decentralised finance, cryptocurrency wallets can take the form of a device, a physical product, a program, or a service that stores public and private keys for cryptocurrency transactions, providing a secure means of storing, sending, and receiving cryptocurrencies such as Bitcoin.
However, cryptocurrencies have increased in popularity, resulting in a higher risk of fraud; crypto hacks accrued losses of $1.9 billion in 2020. The market has been flooded with competitive crypto wallet options for discerning investors to utilise; however, it is beneficial to diversify risk through multiple wallets. Moreover, opting for a reputable and secure option such as a Monero wallet with additional security features can be beneficial. This article presents an introduction to crypto wallets, investigating why possessing multiple wallets can be advantageous.
Introducing crypto wallets
Put simply, a crypto wallet is a digital wallet that stores cryptocurrency. It acts as a bank account for digital currency, accommodating investors to store, send, and receive coins and tokens. They can take the form of desktop wallets, mobile wallets, web wallets and hardware wallets – each with advantages and disadvantages.
For example, desktop wallets are installed on a computer or laptop and provide full control over funds; mobile wallets are apps downloaded to a smartphone or tablet and facilitate access to funds on the go; web wallets are hosted online by third-party providers and offer convenience but potentially fewer security features; finally, hardware wallets are physical devices that store cryptocurrency offline in a secure environment.
Diversifying risk through multiple wallets
Storing diverse cryptocurrencies across multiple wallets can be beneficial, facilitating investors to spread risk in the outcome of one currency losing value. Additionally, numerous wallets facilitate users to efficiently transfer funds between each without an exchange or third-party service, making the process more manageable and instantaneous.
Furthermore, numerous wallets allow investors to monitor spending more closely through multiple transaction histories and accommodate more control for users over their security. Each wallet is assembled with a set of private keys for authentication purposes – if one is compromised, the others remain unaffected.
Factors to consider when identifying a wallet
- User-friendliness: Identify a wallet that is straightforward to operate and accessible across multiple devices.
- Security: Identify wallets with additional features such as 2FA and multi-signature features that further preclude the possibility of fraud.
- Additional features: Many wallets have extra features that streamline the experience for investors, such as exchange integrations and tethering (linking to a credit or debit card).
