Many can’t get a good night’s sleep because they know their cryptocurrency might be stolen. However, it is easier to store your cryptocurrency safely than it may seem at first glance… This guide teaches you how to store your cryptocurrency safely.
Getting cryptocurrency is one thing, while storing it safely requires completely different skills and knowledge. This guide teaches you how to protect your funds, choose the right wallet and avoid the most common dangers of crypto security.
What is a crypto wallet
A cryptocurrency wallet is a software program designed to store your public and private keys, send and receive digital currencies, monitor their balance and communicate with various blockchains. You must have a cryptocurrency wallet to manage and keep your crypto assets safe.
There are many cryptocurrency wallets out there, but the essential distinction between them is whether they are hot or cold.
– A hot wallet is connected to the internet and can be accessed at any time.
– A cold wallet is not connected to the internet and allows you to store your money offline. You can still receive funds at any time, but no one can transfer them out.
Hot wallets include all online cloud wallets, most mobile and software wallets and exchanges.
Cold wallets are hardware wallets, paper wallets held offline, USB and similar offline data storage devices, and even physical carrier items such as physical bitcoins.
Most cryptocurrency holders use both cold and hot wallets. Hot wallets are handy for regular trading, while cold wallets are better for long-term holding of crypto assets.
But before we explore different wallets, here’s a quick reminder why it’s generally not a good idea to hold your digital assets on exchanges.
Types of Cryptocurrency Wallets
There are five different categories of cryptocurrency wallets: paper, hardware, cloud, multi-signature and online. Let’s look at each of them.
Multisignature wallets
An increasingly popular solution, multisignature wallets are an advanced way to keep your private keys securely distributed among different peers. It is an excellent security solution for businesses, family offices, decentralized organizations and all kinds of individuals.
Multisignature vaults are a setup between multiple parties. For example, you can set up a wallet that can be unlocked with 2-out-3 keys with your most trusted friends, family members or business partners. This way, your funds are safe even if one of the keys is compromised or lost.
Setting up a multi-signature scheme is considered advanced, but it gets easier over time as more tools become accessible to a layman. For example, consider watching this tutorial by BTC Sessions.
If you’d rather not trust yourself to be the creator of your own multisignature scheme, there are numerous Bitcoin multisig services that attempt to alleviate the hassle and pressure. If you are interested in getting professional multisig assistance, please check out:
By combining cold storage and multisignature vaults, both individuals and companies can achieve an unprecedented level of security when it comes to keeping your crypto holdings safe and sound.
Paper wallets
Paper wallets are generally classified as cold storage. The term ‘paper wallet’ usually refers to a physical copy or paper printout of your public and private keys. Other times it means software used to generate a pair of keys along with digital file for printing. You can import your paper wallet into a software client or simply scan its QR code to move your funds.
Although paper wallets are cool, they are extremely risky and outdated technology. As of 2022, it is generally not recommended to hold large, if any, amounts of cryptocurrency on a paper wallet.
Cloud wallets
Online wallets, by definition, are hot. Using a cloud wallet allows you to access funds from any computer, device or location. They are very convenient, but they store your private keys online and can be controlled by third parties. Therefore, they are more vulnerable to attack and theft by design. Popular cloud wallets include:
Guarda Coinbase Metamask Blockchain.info
A more secure version of cloud wallets are non-custodial online wallets. They are accessible via web and apps, but the service provider does not have access to your private keys. In most cases, custodial wallets are not part of the exchange platform, which means that they allow you to trade your coins in a safe and secure way. Examples of non-custodial cloud wallets include wallets by:
Software wallets
Software wallets are downloaded and installed on a personal computer or smartphone. They are hot wallets. Both desktop and mobile wallets offer a high level of security; however, they cannot protect you from hacks and viruses, so you should try your best to stay malware-free.
As a rule, mobile wallets are much smaller and simpler than desktop wallets, but you can easily manage your funds using both. Additionally, some software wallets let you access funds via multiple devices at once, including smartphones, laptops, and even hardware wallets.
Jaxx Freewallet Exodus Electrum Wallet Infino Wallet
Hardware wallets
Unlike software wallets, hardware wallets store your private keys on an external device such as USB. They are completely cold and safe. They are also able to make online payments. Some hardware wallets are compatible with web interfaces and support multiple currencies.
They are designed to make transactions easy and convenient, so all you have to do is plug them into any online device, unlock your wallet, send currency and confirm a transaction. Hardware wallets are considered the safest way to store crypto assets. The only downside is that they are not free to use.
Popular hardware wallets include devices by:
Getting a hardware wallet directly from a manufacturer is the safest way. It is unsafe to buy it from other people, especially those you don’t know. Remember that even if you get a hardware wallet from a manufacturer, you should always initialize and reset it yourself.
Typically, your wallet choice depends on your portfolio. Every serious project should have its own wallet, which should be found on its website, but sometimes it can be more convenient to have a multi-currency wallet.
Keep in mind that not all multi-currency wallets support all coins. Even hardware wallets have a limited amount of coins they support. On the other hand, there is no shortage of wallets for popular cryptocurrencies such as Bitcoin or Ethereum.
Hardware wallets. Source: Jaro Larnos / Flickr.
Once you get a (hardware) cryptocurrency wallet, you’ll also need to protect your private recovery seed phrase. One of the most reliable seed word protection tools is CryptoTag which allows you to store them on virtually indestructible titanium plates.
Crypto Tag device. Source: Cryptotag.io
Security best practices to prevent stolen private keys
So you’ve decided to take control of your crypto assets and keep everything in a private wallet. Well done! However, with great power comes great responsibility, and now it all rests on your ability to stay secure and keep your private keys private.
The most common security steps to take are:
Do not hold cryptocurrency for an extended period of time or longer than necessary in exchange. Always enable the two-factor authentication (2FA) feature. If you’re going for a hardware wallet, choose a hard-to-guess PIN and never post your 24-word recovery page online. Don’t flaunt your crypto holdings in public under your real name or identifiable address. Some hackers manage to steal crypto funds even if you keep them in cold (offline) storage. Only trust what you see on your hardware wallet screen and verify all the information on the device. Always assume that your devices can be compromised at any time, so always treat your computer or smartphone screen with care.
Also follow these tips to reduce the chances of losing your crypto.
Be aware of phishing sites. Whether you are connecting to exchange or online wallet, confirm that you are logging in to the correct address. Many fake websites impersonate exchanges with the sole purpose of stealing your login data. Always check that the website address is correct.
HTTPS. Only sign in to secure websites with a valid HTTPS certificate. Most legitimate sites have one. For extra security, try browser plugins like HTTPS Everywhere.
Use a secure Wi-Fi connection. Never connect to your online wallet, exchange account or any other critical security point via public WiFi. Even when you’re in a supposedly safe place, make sure your WiFi access point uses strong encryption like the WPA-2 protocol.
Separate your funds. Don’t keep all your crypto assets in one place. The best way to handle this is by using one or more cold rooms for long-term holding and at least one hot wallet for trading and transactions.
Two-factor authentication. Always secure your accounts with 2FA. Whenever possible, use software or hardware 2FA tools rather than SMS.
Whitelist IP and extraction addresses. If you have a static IP address, use it for your safety. Make sure that only you have access to your accounts and funds.
Double check the Crypto addresses. Some malicious programs can edit and paste an incorrect transaction address when you send a transaction. Typically, the new address belongs to an attacker. It is better to be safe than sorry.
Use security measures you can handle. Some people never feel safe and go to extreme lengths to secure their cryptocurrency. However, they forget that they can also lose crypto to their security tools.
Losing access to your accounts, funds or wallets is as common as hacks. Don’t overcomplicate your security if that’s not what you’re after anyway. Strive for an appropriate balance between complexity and security.
The art of keeping your cryptocurrency safe and secure is a critical skill to master on a journey to becoming your own bank. The sooner you learn it, the better.
You may also be interested in – Guide: How to choose the best cryptocurrency exchange?
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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