8 Crazy Things You Should Know About Crypto Wallets
- Crypto wallets do not store crypto, and crypto stays on blockchain, even if it’s burnt.
- Many web extensions store private keys on users’ computers, which is risky.
- Being able to access crypto ≠ owning it.
- Hardware wallets and two-factor authentication may be insecure.
Need more mind-blowing facts and explanations? Check out the OneArt article.
1. Your wallet is just an interface and doesn’t store crypto
Crypto wallets work differently from digital wallets we’ve got used to. Actually, it doesn’t store your assets. It records your transactions stored on the blockchain and proves you have assets. And wallet’s interface allows users to interact with the blockchain, i.e., send, receive, swap, etc. So, it’s a way to access your crypto.
2. Crypto never quits blockchain
Since your wallet doesn’t store crypto, it can never actually be withdrawn from the blockchain. It’s just moved from one address to another. Even when burnt, coins don’t truly disappear. They’re removed from circulation and can’t be used. These tokens are sent to a burn address (also, “burner” or “eater”) that doesn’t have private keys and can only receive tokens.
Can you imagine a cemetery of burnt coins? This one is a good example.
3. Crypto wallet and address aren’t the same
It may sound confusing because creating a wallet = also getting an address.
- The address is a long string of characters indicating a “place” to direct your crypto to and from.
Like this one:
- A wallet, as we mentioned earlier, is an interface to let you access your crypto. You can add as many crypto addresses as you want to your wallet via importing a seed phrase or private key.
4. Many browser wallets store your private keys locally
In June 2022, more than ten extension-based crypto wallets faced a critical vulnerability so that tens of millions of users could have lost their funds. The providers solved the issue before the vulnerability was exploited. But the problem with most browser-based wallets remains the same: they rely on an operating system that can be compromised.
The point is these extensions store private keys locally on the user’s computer. It means if hackers access your computer file system ➡️ they can access your crypto. The most popular case is downloading malicious Windows activators that let criminals get credentials for crypto wallets, credit cards, etc.
That’s why at OneArt, we don’t store sensitive data in the file system. Instead, the OneArt extension will use the data from your mobile wallet.
5. Having access to your crypto doesn’t necessarily mean owning it
Over 1/5 of all BTC has already been lost for good. And we bet those who can’t now access their assets wish they had remembered one of the main crypto rules — “Not your keys, not your coins.” It means you can’t be sure you truly own your tokens if you don’t own a private key.
What if your exchange or custodial wallet provider suspends your account, gets hacked, or changes its terms and conditions? They keep control over your keys = control your funds and technically can do whatever they want with your assets. Entrusting your money to a third party means you agree to the changes that party makes. You’d better be your own bank, so when it comes to security non-custodial wallets are the #1 choice.
6. A piece of paper can also be a crypto wallet
If you store your mnemonic and/or private key on a piece of paper, it becomes your cold wallet. It’s a great way to safeguard your crypto if no one else can access the data and you don’t lose it.
Paper wallets might be rather sophisticated like the one from the Winklevosses brothers (those depicted in “The Social Network” movie as Zuck’s covetous antagonists). They cut up their key printouts into multiple pieces and put them into deposit boxes across the country. To have the key, fraudsters would have had to steal all the pieces and find out the right combination.
7. Fake hardware wallets can steal your crypto
One more so-much-effort idea. Last year, fraudsters gathered Ledger users’ data from a breach to send them fake hardware wallets with a scam letter and a manual to set up a device. If a user had entered a recovery phrase, he might have lost his assets. Fortunately, he hadn’t.
8. 2FA might be not secure at all
Actually, you can find a bunch of ways to hack 2FA:
Two-factor authentication via SMS, which is the most popular, is also among the most vulnerable. To reach your sensitive data, fraudsters can hack your mobile provider app, exploit Signaling System 7 protocol, duplicate a SIM card, etc. To secure your wallet, consider installing apps such as Google Authenticator or using a hardware key for 2FA like Yubikey.
What struck you the most about crypto wallets? Do you have more crazy crypto facts to add? Let us know! And stay tuned for more kicky facts, stats, and how-tos!