Crypto Micro Wallets
What are Micro Wallets
Cryptocurrency Micro Wallets aren’t true wallets, most if not all transactions are stored in a database. However there is a link to the blockchain to withdraw or deposit coins or tokens from/to a Micro wallet. The concept of it’s existence is fairly simple. It is mainly used to reward, incentivize users of websites without the need to go through the blockchain and pay transaction fees on ‘dust’ amounts in cryptocurrencies. An example of Micro Wallet use is by faucets who often send fractions of 1 dollar cent per task the user has done.
Why using Micro Wallets
We have made an article about the cost of transaction fees and especially if lots of dust transactions have been sent. This could work out negative for website owners that incentivize their users. By using a different method (old database usage) this can be avoided.
What are Micro Wallet risks
Back to the number one rule in cryptocurrency, if you don’t own the private keys then you don’t own the coins. A Micro Wallet can fold any time with or without announcement. Most often the micro wallet operators/owners simply shut down their site and/or services without any notification or reason why.
Another risk is that funds are pooled into single addresses and that attracts hackers or other people with malicious intent. We have seen over the past years numerous micro wallet sites that closed due to being hacked.
And foremost, though security wise websites have gone a long way and this is far less chance it can happen is old fashion MySQL injection. So hackers could alter the database of the Mirco Wallet and withdraw more funds than have been granted or deposited.
Finally, a reason we see now and then, with or without initial intention, exit scams. Money can sometimes do weird things to people often non-intentional. For example, the site owner that uses his user funds, if due to any reason there are a lot of withdrawals the site owner can not honor those requests anymore.
Red Flags for Micro Wallet sites
Sudden increase of withdrawal limits, an example from 10,000 satoshi BTC to 100,000 satoshi BTC
Demand for deposits, offering a bonus % on deposits, etc.
No transparency, in other words, a ledger of the data based funds on the micro wallet website, deposit fees, transaction fees, withdrawals done, etc.
Power abuse, a site owner that bans a user(s) for one or another reason, this can be justified but also not. When banned often the funds are not accessible anymore and the user can’t retrieve them. Some reasons can really be ridiculous, a recent example of a not to name micro wallet service was that a user posted a negative reply on a review site the site owner banned his user and user can’t get his funds …
Regulations, if operated in some countries micro wallets have to follow certain regulations and/or licenses, example the UK = FCA License, now that doesn’t say that the site owner has to be UK resident if the servers are located at the UK, UK law applies. So micro wallets with no valid licenses of the country they operate from are in fact ‘illegal’ websites and can even be closed by governments.
List of Micro Wallet websites
This is a basic list of currently known websites that are or use a Micro Wallet and offer related services of holding and processing of user coins/tokens. If you own a Micro Wallet and want it listed in this article contact us.
Warning: HostingForBTC does NOT endorse any of the Micro Wallet sites listed below. Always do your own research and due diligence.
Past Micro Wallet websites
A list of Micro Wallets that stopped its services due to various reasons, regulations, hacks, exit scams, … is nearly impossible, most vanished from the net with being hacked reasons.
The sole on due to another reason is: Faucethub – Stopped its services due to UK regulations – This was by far the market leader in the cryptocurrency faucet world.
Regulations for Micro Wallets
There is no single international body or regulatory framework to treat cryptocurrencies. That’s the reason that many Micro Wallet services are acting in their fractured way in their native jurisdictions and most even operate without any valid license.
Below some known regulations:
USA – In the U.S., Micro Wallet regulations are on the state level for non-banks and fin-tech companies. This regulation is similar to the MSB state-by-state approach used by crypto exchanges. So any crypto company which aims to do holding and processing of users’ Bitcoin/Cryptocurrencies must adhere to this.
United Kingdom – Crypto companies that offer micro wallet services in the UK are considered crypto exchanges they need to comply with and obtain a license from the FCA.
Do you operate a Micro Wallet ? What is your prefered Micro Wallet service ? Did you lose funds with Micro Wallet services ? Let us know in the comments below.