Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, hundreds of other cryptocurrencies have been created but what is the safest way to store cryptocurrency?
Cryptocurrencies have become increasingly popular in recent years, as investors seek opportunities outside of traditional investments such as stocks and bonds. As with any investment, it is important to understand the risks associated with investing in cryptocurrencies before making any decisions. One risk that should be considered is how best to store cryptocurrencies securely.
There are a number of different ways to store cryptocurrency, each with its own advantages and disadvantages. In this article, we will explore the different storage options and help you choose the safest way to store your cryptocurrency. Let’s get started!
1) Cold Wallets
A cold wallet is a wallet that is not connected to the internet. Cold wallets are considered to be one of the most secure ways to store cryptocurrency, as they are not vulnerable to hacking like online wallets and exchanges.
Cold wallets can take the form of physical devices (such as a USB drive) or paper documents (such as a printout of your private keys). Make a backup copy of your cold wallet in case you lose the original, and keep it in a secure location.
Cold wallets are not as convenient to use as online wallets, as you will need to import your private keys into a hot wallet in order to send or receive cryptocurrency. However, they are much more secure, so it is worth the inconvenience for long-term storage or large amounts of cryptocurrency.
Some of the most popular cold wallets include the Ledger Nano S, Trezor Model T, and ELLIPAL Titan Mini.
2) Custodial Wallet
The next best way to keep your cryptocurrency safe is to use a custodial wallet. These wallets are provided by exchanges or other third-party service providers. They hold your private keys for you and allow you to use their platform to buy, sell, and store your coins.
The main benefit of using a custodial wallet is that you don’t have to worry about losing your private keys or managing them. It is also usually easier to use than a non-custodial wallet.
However, the downside is that you are trusting a third party with your private keys and your funds. If they are hacked or go out of business, you could lose everything.
If you decide to use a custodial wallet, make sure to only use a reputable provider that has a good security track record. Some popular custodial wallets include Coinbase Wallet, Blockchain Wallet, and Xapo.
A ledger is a digital or physical record of all cryptocurrency transactions. Ledgers can be used to store any type of data, but they are most commonly used to store financial data.
Most cryptocurrency exchanges and wallets use ledgers to track their users’ balances and transactions. The advantage of using a ledger is that it is very difficult to alter or delete data once it has been recorded. This makes ledgers an extremely secure way to store information.
The downside of using a ledger is that it can be difficult to use if you are not familiar with them. Ledgers also require you to trust the third party that is providing the service. If you are looking for a secure way to store your cryptocurrency, then a ledger may be the right choice for you.
4) Hardware Wallets
A Hardware wallet is a physical device that stores your private keys offline. Hardware wallets are considered the most secure way to store your cryptocurrencies, as they cannot be hacked or infected with malware.
The most popular hardware wallets are the Ledger Nano S and the Trezor. Both of these wallets support a variety of different cryptocurrencies and are very user-friendly. It is important to note that you should never lose your hardware wallet, as it is the only way to access your coins.
Get your Ledger Nano S today and secure your cryptocurrency.
5) Paper Wallets
Another option for cold storage is paper wallets. Paper wallets are simply pieces of paper (or other offline material) that contain your private keys and public addresses. You can generate a paper wallet by using a service like BitAddress or Bitcoinpaperwallet.
Paper wallets are easy to use and very secure, as long as you take precautions to ensure that your paper wallet is properly stored and not exposed to the elements.
Best Security Practices for Storing Cryptocurrencies
Now that you know the different types of wallets available, let’s discuss some best security practices for storing cryptocurrencies.
1) Use a combination of wallets
The best way to keep your cryptocurrency safe is to use a combination of wallets. For example, you could store your everyday spending money in an online wallet and your long-term savings in a cold wallet. This way, even if your online wallet is hacked, your savings will be safe.
2) Use a reputable wallet provider
When choosing a wallet provider, make sure to choose one that is reputable and has a good security track record. There are many scams in the cryptocurrency world, so it’s important to do your research before choosing a provider.
3) Keep your software up to date
Another important security practice is to keep your software up to date. This includes your operating system, browser, and any cryptocurrency wallets or exchanges you are using. Hackers are always finding new ways to exploit vulnerabilities, so it’s important to make sure your software is up to date.
4) Use a strong password
When creating a password for your wallet or exchange account, make sure to use a strong password. A strong password should be at least 8 characters long and include a mix of uppercase and lowercase letters, numbers, and symbols.
5) Enable two-factor authentication
Two-factor authentication is an extra layer of security that can be used to protect your accounts. With two-factor authentication, you will need to enter a code from your phone or another device in addition to your password. This makes it much harder for hackers to gain access to your account.
6) Be Aware Of Phishing Sites
Phishing is a type of online scam where hackers try to trick you into giving them your personal information. They do this by creating fake websites that look like the real thing. For example, they might create a fake website that looks like your wallet provider’s website. If you enter your username and password on the fake website, the hackers will then have access to your account.
To protect yourself from phishing scams, make sure to only enter your personal information on websites that you trust. You can also install anti-phishing software on your computer.
7) Use a Secure Wi-Fi Connection
When logging into your wallet, always use a secure Wi-Fi connection. Hackers can set up their own Wi-Fi network at public places like airports and coffee shops to try and steal your login information.
The best way to protect yourself is to only log into your wallet on a private connection that you trust. If you must use public Wi-Fi, make sure you’re using a VPN to encrypt your traffic.
8) Whitelist IP and Withdrawal Addresses
If you have a static IP address, you can whitelist it in your wallet settings. This will prevent anyone from accessing your account from any other IP address.
You can also whitelist specific withdrawal addresses. That way, even if your account is compromised, hackers won’t be able to send your coins to their own wallets.
The most important thing you can do if you want to invest in Bitcoin is to keep your coins safe. If you have crypto that is worth more than the cost of a hardware wallet, it’s usually a good idea to purchase one. You may also make a paper wallet on an air-gapped computer if you feel comfortable using Bitcoin.
By following the steps above, you can make sure that your Bitcoin investment is as safe as possible. Keep in mind that no system is foolproof, and there is always a risk of loss when investing in any asset. However, if you take the necessary precautions, you can minimize those risks and maximize your chances of success.
We hope this guide has helped you better understand how to keep your Bitcoin safe. If you have any questions or feedback, feel free to leave a comment below!
Moritz Pindorek (Moritzpindorek.com)
Social Media, Marketing & Blockchain
Crypto/Web 3 Advisor, Top 10 Crypto Influencer 2022(Forbes Monaco) & Top 10 Entrepreneur 2022 (Forbes Monaco)
Owner and writer for Cryptouserguide.com