Crypto Academy Week 3 Homework Post for [Professor @sapwood]
I'm here to complete the week 3 homework task given by professor @sapwood. If you haven't gone through this week's lesson, here is the link Steemit Crypto Academy- Blockchain Wallet- Chapter-3
Let's move on to this week's task:
(1) Have you ever used a Hardware/software wallet? Which one is having a better security advantage?
(2) What are the important points to consider when you deal with an Exchange(centralized) Wallet & Decentralized wallet. How do you secure/restore both types?
(3) Give an example of a Web 3.0 wallet and what are the distinct uses of a web 3.0 wallet? Have you ever used any Web 3.0 crypto Wallet? Examples?
(1) Have you ever used a Hardware/software wallet?
I am using a software wallet, haven't used a hardware wallet yet.
Which one is having a better security advantage?
|Hardware wallet||Software wallet|
|A hardware wallet is an external drive connected to a computer||Non-physical program which we download or install to our computer|
|Can be accessed only if connected to a computer or online device||The most convenient method to access from any device|
|Digital assets are not stored in online platforms||Assets are stored in the blockchain or in third-party storage.|
|Secured with a private key which you only have access to||Owns the private and public keys and handles your transactions|
|No fear of being hacked or stolen||Even if the wallet is encrypted there is a chance for a hacker to get sensitive information visible on your screen|
When comparing with the above points based on security, a hardware wallet provides the highest security to its users. You can trust your own hardware wallet and store your digital assets safely and securely. The biggest issue of Software wallets is security. It can be easily hacked.
(2) What are the important points to consider when you deal with an Exchange(centralized) Wallet & Decentralized wallet.
Important Points to consider when using Exchange(centralized) Wallet
A middle man or third party is involved during a transaction. As explained in today's lecture centralized exchange wallets are custodian wallets. This means you don't have full control of your assets and all your information is shared with a third person.
Ability to make any type of transaction. Example - From fiat to cryptocurrency or cryptocurrency to fiat. Can trade between any cryptocurrency.
Security infrastructure of centralized exchange wallets are comparatively high, you can choose a trusted centralized custodian service to hold your cryptocurrency. It will be a safer and easier way than taking risks yourself.
Centralized exchange wallets are user-friendly and commonly used these days. Centralized wallets have more trading volumes as many newcomers can join easily.
The freedom of centralized exchange wallets is limited due to security reasons. To perform any transaction you need to get login credentials or OTP.
Important Points to consider when using Exchange(Decentralized) Wallet
No middle man or third party involved during a transaction. You have absolute freedom to control your assets. The keys are owned by you and can access and make transactions whenever needed. It's a non-custodial wallet.
Can hold your own assets and safely secure them on your own. There are no policies such as KYC (Know Your Customer). which makes it more convenient for the user and more secure.
How do you secure/restore both types?
How to secure centralized Wallets?
Same as in real life we need to secure our wallets. It's our responsibility to follow the right practices in order to secure our own assets.
- Centralized wallets can be secured by using two-factor authentication.
- You can also store a small number of your assets in the centralized wallet for daily use and balance amount in a much safer place.
- Keep regular backups and ensure you encrypt all your online backups.
- Keep your E-mail secured and passwords saved safely.
- Make sure to back up the 12-word backup recovery phrase which you create to use if you forget the password.
How to secure decentralized wallets?
- Users hold their own keys, so it's their responsibility to Save the keys (Private key/ Mnemonic key/Keystore file +password) offline to ensure the security of your hardware wallet.
Restoring both types of wallets isn't a hard task if you have backup your keys in a secure way. Centralized wallets can be recovered easily if you have your mobile number unchanged and the same E-mail address. And if you have a backup of 2FA code or the 12-word backup recovery phrase you can easily restore your centralized wallet.
Decentralized wallets can only be recovered if you have saved your keys offline. Access to your decentralized wallet depends on the availability of your keys. If you have the keys you get access to your wallet. Decentralized wallets are not easy to recover as centralized wallets if we lose the keys.
(3) Give an example of a Web 3.0 wallet and what are the distinct uses of a web 3.0 wallet?
An example of a web 3.0 wallet is - Coinbase Wallet
The distinct use of the Coinbase wallet is that the users have complete authority over their assets stored, it is a non -custodial wallet. There is no involvement of a third person when a transaction is taking place.
Users can safeguard their own private keys.
Coinbase has access to a wide range of decentralized innovations.
The Dapp browser in Coinbase wallet allows the users to interact directly with the new emerging web3 applications.
Users can easily link their accounts to Coinbase wallet to experience seamless transfers between applications.
Coinbase allows to send and receive crypto assets to a username rather than using a traditional public wallet address. Which makes it easy for the users and reduces complexity when cross-checking the address.
Have you ever used any Web 3.0 crypto Wallet? Examples?
Yes, I have. I'm currently using Tronlink wallet.