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About LinkBacksSo I'm trying to get to the bottom of wallets, or at least a more complete understanding.....
Here's the current understanding (and obviously may/will be wrong/heavily over-simplified in places, which is what I need the help with)...
- An exchange has a wallet (or you have a wallet on an exchange when you use it, into which your coins go).
- But this is a custodial wallet, so the Exchange really 'controls' it (ie has the keys, your coins are least secure here)
- You can use a soft wallet (that's not an exchange/is non-custodial) where you can transfer back and forwards to an exchange as needed, and this is more secure than the exchange wallet (because you hold the keys)
- Then there is a hard wallet. Assume you could transfer to this from any other wallet (custodial or non-custodial) or from this to any exchange .....and this is the most secure (assuming you don't lose it....although what happens if it 'breaks/stops working/gets corrupted??)
If all this is correct...where I'm trying to get to is......
Is there any possibility that one day there is just one exchange...that offers a custodial and a non-custodial wallet....that handles all coins....and all other exchanges/soft wallets are then effectively dead/pointless?
So the option is this one exchange...no one needs to go elsewhere....with the option of a hard wallet if you want it.
Why can't that happen? (I know there will be reasons, just don't know what they are)
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12 November 2021, 6:04 am #1
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some potentially idiotic Crypto questions..........
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12 November 2021, 6:18 am #2
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1) You have a wallet on exchange. This is your personal wallet and you can send and transfer crypto from it.
Originally Posted by chaumi
2) If its a centralized exngange like Binance or Kraken, you are right. it is safer to store the crypt on a personal wallet.
That's right Originally Posted by chaumi
That's correct Originally Posted by chaumi
I highly doubt this will ever happen Originally Posted by chaumi
If there is only one exchange, the industry will stagnate. Also, there will always be people who want to create something of their own. There are many more reasons why this is not possible Originally Posted by chaumi
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12 November 2021, 9:05 pm #3
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Yes - the exchange wallet is susceptible if the exchange is hacked - although most big exchanges are fairly robust now - so the hacking is far more likely to be if you personally expose your exchange password. If you use two factor authentication (2FA) to move coins and stake/unstake then you are well protected. Originally Posted by chaumi
Soft(ware) wallet that is store on your computer or tablet or phone is considered more secure. The less connected that your wallet is to online access then the more secure it is - as long as you keep your passwords and keys safe and secure as well.
Accordingly, a hard(ware) wallet that only is accessible when you plug the USB into your computer is considered more secure. Although if you leave it lying around, and/or don't keep your keys safe and secure then it is at risk as well.
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Just be aware that other having your own wallet means also having to keep a set of recovery phrase keys safe - for both hard and soft wallets. a Ledger or Trezor is just a piece of hardware (with software) and a soft wallet is just a piece of software. If a person gets access to these keys then they can recreate a new wallet somewhere else and access your coins.
Also - even with a hardware wallet or software wallet, the coins/tokens are never actually moved onto your machine or hard wallet - that's a misunderstanding. It's a blockchain. All transactions are recorded. All addresses are available to see. All token balances are known. On all copies of the blockchain that all the miners and validators have.
You can access these addresses easily via your software / hardware wallet, but that's not the only way. Someone else can access these addresses if you give up your keys or expose your keys to someone else. These keys help you recover your coins if something breaks - or they can help some one else steal your coins.
Well anything is possible - but buying and selling tokens is NOT the only / main use for most of these tokens. So there are many, many reasons why people may have tokens stored in multiple forms. Originally Posted by chaumi
- At an exchange for buying and selling centrally, and or staking.
- In a software wallet for storing, exchanging via defi, staking, quick purchases and interacting with smart contracts (loans, swaps)
- In a hardware wallet for storing.
As to whether one organisation could dominate so that they become a main or only centralised exchange? It seems unlikely - as unlikely as seeing just one bank - or just one insurance company - or one social media platform. And even if that happened there are all the other use cases where people will want access to small amounts of tokens within browsers to access services and interact with smart contracts.
The history of cryptocurrency has been about decentralisation, more options, more validators, more innovation. So it's extremely unlikely that on organisation could provide such a stunning service or value proposition that all it's competitors gave up because they couldn't compete. Competition in this space is fierce.
If you imagine the near future having crypto purchases in store, possibly using Bluetooth or Near Field Communication (NFC), then that would likely be with a balance of tokens in a LOCAL software wallet on your phone meaning the internet wasn't even required - not being logged into a central exchange at all times.
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13 November 2021, 7:12 pm #4
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Wallets can not be ranked by security easily. As cars can not be rated by speed. It is always a question for whom. There are regular cars that can run maybe 180km/h. Then there is Golf R, that is faster, but still a normal car. Then there is Bugatti, that can be still run on normal roads, but barely anyone is doing it because it is too costly. Then there is F1, that is even faster, but it is not even allowed to run on normal roads. Then there are the cars with rocket engines that even are not physically able to run on normal roads. So - no one knows what is the fastest car. But more or less anyone knows what is a fastest car that he can get and use.
With wallets it is the same.
Easiest solution is the custodial wallet that anyone can use and for most people it actually IS the most safe solution, because most people do not know anything about seeds or security and they do not bother.
Then there is the HW wallet that is safer, but there is a need to be able to secure the seed which is a very hard thing to learn.
Then there is the SW wallet that is even safer than HW wallet, because anyone can check what is inside of that piece of program, which is not possible by HW wallet. But one needs to be able to secure the seed AND to use the software in a safe way, which is even harder.
And there is a special kind of SW wallet, that is called non-SPV wallet (so the SW wallets from above are SPV or light wallets) and that is even more demanding, because one has to run his own node, which obviously brings even more problems.
Wallets are no fit for all. But If you are doing something with crypto, you should at least advance to the HW wallet level.If you talk to God, you are praying; If God talks to you, you have schizophrenia.
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14 November 2021, 9:23 am #5
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If you are going to be holding big amounts then go for a hard wallet like trezor, easy to use interface and just move what you need as you need to an exchange,
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14 November 2021, 6:07 pm #6
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The HW wallets somewhat create an impression of false security. With non custodial wallets the main problem is always how to store the seed.
Too little security for seed storage (e.g. the stupid ideas to write it down to computer that is connected to the internet) is bad. But too much security is not good either because it is hard to recover the seed when it is too safely stored.
I am sorry, but anyone saying that storing crypto is "easy", should not be trusted. Storing crypto, or your own encrypted information, is never easy and can not be easy. If seems to be easy it is not done right.If you talk to God, you are praying; If God talks to you, you have schizophrenia.
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15 November 2021, 1:42 pm #7
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Ledger has been hacked twice, spilling personal details of everyone: names, house addresses, emails. People have had guns put to their heads (real loaded guns, not figurative guns) because of it. Be aware of this when using Ledger or Trezor. You are only as safe as their dangerously sh1tty systems. Originally Posted by wonderpunter
You don't need Trezor or Ledger. For most coins you can use trusted wallets (not online 'wallets'!) , like electrum for bitcoin. You can remove them from your PC entirely (make sure you delete any wallet files left too) when not in use. Just keep the seed very safe and secure, but then that advice applies to the Ledger and Trezor seeds anyway.
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18 November 2021, 5:24 am #8
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Thank you everyone, all useful info.
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18 November 2021, 5:54 am #9
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For the record it was just a database of Ledger that was hacked. Because the HW wallet as it is more secure in one vector (it prevents viruses in your computer to steal the coins), it is more unsecure in other vectors (the database of buyers somewhere exists and now it was hacked; also with HW wallet everyone knows what is inside of it; also there were successful attempts to really hack the HW wallet and crypto was extracted of it). Originally Posted by tufty
So in this limping analogy HW have 3.5 stars from 5 for security and SW wallets have 3 stars, but each one protects against something else and does not protect against something else. But this is valid only for average and sub-average users.
For someone who really DYOR and spends some time with learning, there is a solution close to 5 stars. And that is really the Software Wallet in air-gapped computer in hands of experienced user.If you talk to God, you are praying; If God talks to you, you have schizophrenia.
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18 November 2021, 7:01 am #10
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Just read something I didn't know existed...browser wallets (in this case, Brave)
So, I assume these are similar to any other soft wallet.....
But instinct tells me likely to be less secure. Is that a correct assumption?
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18 November 2021, 7:52 am #11
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There exist(ed) also something like online wallets. Simply a custodial wallet, where your coins were stored at 3rd party, but somehow you could generate your own seed. Not a safe enough solution.
And same applies to the browser wallets. Not that I am expert, but the big problem is simply that the computer with that wallet is PROBABLY directly connected to the internet.
Any wallet that is directly connected to the internet simply has 0 stars. It does not mean it must be hacked. But it is like using "abcdefgh" as password for email.
SW wallet can be used offline, this is why is safe (most people do NOT do it, because they think it is too complex; but if you already have Electrum and you can use it, then only 5% of extra effort is needed to bring it into offline mode). SW wallet on the top can be and is independently verified (= the code is checked).
HW wallet can be used even online and it is safe. But the HW wallet itself can not be independently checked and that is the problem.
The browser wallets must be used online and they do not have the protection as HW wallet. However! Some browser wallets like Metamask and likely also the Brave wallet can be secured by HW wallet. Then the level of security is the same as any other HW wallet. Simply the HW wallet does not use as interface software its native SW, but is using the Brave (I guess).
I am not fan of HW wallets, but I am using Metamask and Binance chain wallet secured by Ledger HW wallet. I am using it mainly for alts, defi and collecting my BTC commissions and paying my employees from it. It is very practical especially out of home. I think for alts and defi it is safer than using some SW wallet and it is one wallet, one system and same confirmation process for all alts and defi transactions. So I can farm my tokens (in human speech: collect interest from my investment) securely in few seconds anywhere from my normal computer instead of doing some crazy things with many computers for hours.
TL;DR Browser wallets are much much more insecure than SW wallets, unless you secure the browser wallet with HW wallet: then the security will be on level of HW walletIf you talk to God, you are praying; If God talks to you, you have schizophrenia.
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22 November 2021, 2:47 am #12
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I learned interesting information for myself
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24 November 2021, 3:08 pm #13
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Binance Chain Wallet (without "smart").
There is a confusion. There is Binance Chain (BC) with BEP2 tokens and Binance Smart Chain (BSC) with BEP20 tokens. 2 different chains, both using BNB as fuel.
Usually is used the BSC where all the NFT madness is happening.
But I am talking about BC chain where exists Binance [Chain] Wallet: https://chrome.google.com/webstore/d...dcngcnapndodjp
This is what I am using in browser, but secured by Ledger. Staking BNB but not on BEP20/BSC; on BEP2/BC.If you talk to God, you are praying; If God talks to you, you have schizophrenia.
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16 February 2024, 4:41 am #14
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If you are worried about your funds, you need to use a decentralized wallet and dex exchanges. In this case, you will have full control over your finances, but the cost of a mistake with sending funds will be high.
From non-customized wallets I single out: exodus, metamask.
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