How to Store Crypto Currency?
When you own cryptocurrency, one of the most important things to consider is how to store it. Cryptocurrency doesn’t have the same types of protection as money in a bank account or investments made through a broker. As the owner, crypto storage is your responsibility.
If you lose access to your crypto, it’s most likely gone. This is a very common issue that has been happening since Bitcoin first launched. It’s estimated that 3.7 million Bitcoin have been lost forever.You have several different options to store cryptocurrency, including hardware devices, applications, and even a simple piece of paper. Once you know more about each storage method, you can choose the wallet (or wallets) that will keep your crypto safe.
Storing cryptocurrency in a hot wallet
A hot wallet is an application that stores cryptocurrencies online. Hot wallets are typically available as desktop and mobile apps, and there are also web-based hot wallets.
Hot crypto wallets have a few notable good points:
- They give you control over your crypto.
- They’re almost always free.
- They’re easy to use. You can send and receive crypto very quickly with this type of wallet.
Like hardware wallets, hot wallets come with a recovery phrase. You can use this phrase to get your crypto back if you ever lose access to the hot wallet.
There’s one problem with hot wallets, but it’s a big one. Because they store crypto online, they carry the risk of being hacked. Even though the odds of this are low and plenty of people use hot wallets with no issues, it’s probably not a risk you’d want to take with significant crypto funds.
Storing cryptocurrency in a cold wallet
Unlike hot wallets, cold wallets do not connect to the internet therefore, they are not prone to cyberattacks. Storing your private keys in a cold wallet, also known as a hardware wallet, is the most viable option as these come encrypted, keeping your keys secure.
In 2019, the Japanese exchange BITpoint discovered an unauthorized withdrawal of $32 million from its hot wallet in different cryptocurrencies targeting more than 50,000 users. The exchange held five cryptocurrencies in its hot wallet: Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ripple. However, BITpoint clarified that its cold wallet and cash holdings were not affected in the incident.
Storing cryptocurrency in a hardware wallet
hardware wallet is a physical device, about the size of a thumb drive, that stores the private keys to your crypto offline. Most people don’t use hardware wallets because of their increased complexity and cost, but they do have some benefits — for example, they can keep your crypto secure even if your computer is hacked. However, this advanced security makes them inconvenient to use compared to a software wallet and they can cost upwards of $100 to buy.
How to set up a hardware wallet:
- Buy the hardware – The two most well-known brands are Ledger and Trezor.
- Install the software. Each brand has their own software that’s needed to set up your wallet. Download the software from the official company website and follow the instructions to create your wallet.
- Transfer crypto to your wallet. Similar to a non-custodial wallet, a hardware wallet typically doesn’t allow you to buy crypto using traditional currencies (like US dollars or Euros), so you’ll need to transfer crypto to your wallet.
Storing cryptocurrency in a Web wallet
The private key is stored by a third party on a web server, and it can be accessed via a website or app — crypto exchanges like WazirX, CoinDCX, and more leverage this method to store your holdings. Here, your crypto exchange account password matters the most and switching on 2FA (two-factor authentication) is highly recommended. It can help thwart hacking attempts, or in case the primary credentials are compromised in an attack.
Storing cryptocurrency in a Paper wallet
It is a physically printed QR coded form wallet. These codes can be used to execute digital money exchanges. They are not prone to hacking but pose a significant risk of being misplaced. A major flaw is, they cannot be used for partial transactions. These are being actively phased out since users prefer hardware wallets and their flexibility.
The cryptocurrency industry is constantly evolving, and it is your sole responsibility to protect your digital funds by securing your wallet with essential safety precautions. Update yourself with the latest security news, attack techniques, and prevention strategies.