Are Software Wallets Safe? 

With all of the recent panic about FTX and the resulting downstream avalanche that’s yet to unfold, (Voyager, Celsius, BlockFi, AAX, and more to come) investors are rightly pulling off their assets into self-custody. 

Here is the latest chart on Netflows to centralized exchanges: 

It seems that the time of panic has passed, or perhaps investors just cannot process withdrawals or transfers from these centralized exchanges. Regardless, any outflows from a centralized exchange is almost certainly going to either a hardware or software wallet, or some form of cold storage. 

I’ve used a hardware wallet for years, and I despise using them. They are buggy and you have to dive into your tech background to get them to work, as drivers change over the years. It’s always a challenge and rarely a smooth process. I had looked at software wallets as well but never trusted them because they were just another form of centralized exchange…you still didn’t own your keys. So what about the latest round of software wallets? Let’s look at a couple, Trust Wallet and Arculus Wallet. 

Trust Wallet

Trust Wallet is based on an iOS/Android app downloaded to your phone, or can be a chrome extension on your desktop. Trust Wallet supports over 160+ assets and blockchains and allows traders to stake their crypto coins to earn interest. The wallet was originally designed to hold the ERC20 and ERC223 tokens only but has now been developed to hold other leading cryptocurrencies like Bitcoin.

The wallet has a built-in Web3 browser that allows users to buy cryptocurrencies through the native DEX (decentralized exchange) that operates on the Kyber Network. It also allows users to access the various DApps (decentralized applications) built on the Ethereum platform directly through the Trust Wallet app.

It acts as a bridge connecting individual blockchain networks through their nodes. Crypto assets are stored and encrypted through the public key..

Trust Wallet does not hold any cryptocurrencies in its servers; it only gives users access to its wallet.

It is a free-to-use app that does not earn anything when users use it. All the accrued gas fees (transaction processing fees) are paid to the validators or miners.

Trust Wallet helps users to manage their public addresses for sending and receiving cryptocurrencies. The app also allows users to execute other crypto transactions, like trading and crypto staking.

Privacy and Security – Though Trust Wallet, by its nature (being a software wallets), cannot ensure security measures as strong as hardware wallets, the platform tries to make sure that the clients’ funds are safe. It conducts regular audits via the leading security firm Stateful.

Security Factors – The app also employs other security measures like pin code scanning or fingerprint scanning to add an extra layer of security. These measures can be manually activated by the user by customizing the “Settings” function in the app as soon as he signs up into his wallet.(this is two-factor authentication)

Never Stores User Information on Its Servers – Trust Wallet allows users to store the keys of their wallets in their personal computers rather than storing them on the Trust Wallet servers. This puts the users into sole responsibilities to securely store private keys.

Arculus Wallet

Arculus is a Web3-enabled cold storage wallet that lets you securely store crypto and manage NFTs. CompoSecure, the company that developed Arculus, is a company that develops secure payment solutions and manufactures metal payment cards for major banks. The Aculus Wallet retails for $99. 

One advantage of using Arculus over software-based wallets or keeping your crypto on an exchange is that your assets are held in cold storage. This means your assets and private keys aren’t stored online. Rather, your private keys are encrypted and stored on your Arculus Key Card, which you use to access your wallet.

Using a cold hardware wallet means that you can’t get hacked or lose account access like you can with a software wallet or exchange. Your key card is the only way to access your private keys, so you’re always in control of your crypto. And if you lose your card, you’re still safe since Arculus relies on three-factor authentication, which I’ll explain below.

Arculus lets you view and manage your crypto and NFTs through its Android and iOS mobile apps. But to unlock the app and transact, you have to complete Arculus’ three-factor authentication process: (something you have, something you know, and something you are)

Biometric Lock: To unlock your phone in the first place, you have to enter your passcode, use facial recognition, or scan your fingerprint (if your phone supports this feature), which isn’t something a thief would likely be able to accomplish.

Numeric Pin: After unlocking your phone, Arculus requires entering a six-digit pin that you create when you initially set up your card to unlock your wallet.

Arculus Key Card: You tap your key card to the back of your smartphone to complete the three-factor authentication process. This enables you to buy, sell, swap, and manage your crypto and NFTs within Arculus’ mobile app.

As you can probably tell, the odds of someone being able to steal your crypto is practically zero. And even if you lose both your smartphone and key card, the person who finds it would need to know your six-digit Arculus app PIN and have your biometric measurement.

At the time of writing, Arculus supports 40 cryptocurrencies. This includes popular cryptos like AAVE, BTC, BCH, LINK, Compound, MANA, DAI, ETH, SHIB, UNI, USDC, USDT, XRP, etc.