Cryptocurrencies are becoming more popular among investors. Despite the high volatility of these assets, people buy them because cryptocurrencies might bring quite alluring gains from returns and hedge inflation risks. But not everyone among those who invest in cryptocurrencies knows how to operate their assets correctly. Today, we will uncover a very important topic – how to store cryptocurrencies safely.
This short guide will focus on the safest methods of storing cryptocurrencies. We will try to come up with the best storage solutions and outline the most common mistakes cryptocurrency owners make when storing their digital holdings. Let’s get down to business!
Where cryptocurrencies are stored: Hardware vs Digital Wallets
The most common places to keep digital money are hardware and digital wallets. Let’s discover the peculiarities of each method.
A hardware wallet, aka cold storage, is considered the safest way to keep cryptocurrencies. This is because such solutions are managed and supported by cybersecurity experts. Plus, it allows users to keep their safety keys offline, which makes the storage unavailable for those who physically cannot access these keys.
These keys are completely individual for every user of a hardware wallet. They are automatically generated and kept offline, where no one, except for the account owner, can access them. The account itself is secured by PIN codes. A good hardware wallet will immediately ban access for users who entered the wrong PIN codes several times. This method is used to prevent the theft of data and users’ holdings.
Naturally, the quality of work of cold storage heavily depends on its provider. Different providers can ensure different security levels and implement various safety features. It’s up to you which one to choose. That’s why, before making a final decision, it’s worth making research about your provider and its developments.
There are several important characteristics that must be considered when selecting cold storage:
- A security seed phrase. A security seed phrase for crypto users is a special code that is used to recover the data from your wallet if it’s lost or damaged. For that reason, this code is also known as a recovery phrase. It might consist of up to 24 words. This way, you can safely recover all your coins stored on the hardware wallet through a new wallet.
- The requirements for PIN codes. A PIN code for your crypto wallet shouldn’t be too simple, otherwise, it might get hacked. Look for hardware wallets that impose strict requirements for a PIN.
- Security level. A security chip in your hardware wallet is one of the main elements. Look for certified devices that meet the requirements in terms of quality.
- Ease of use. Good hardware wallets shouldn’t be too complex to use. They should provide simple but highly-secure access and a broad range of crypto services.
Keeping your crypto holdings on a digital wallet is simpler than on a hardware one. Such online solutions are provided by most cryptocurrency exchanges. Alongside being simpler, a digital wallet is also less secure than a hardware one.
If storing crypto coins on a digital wallet seems ok for you, look for a reliable crypto exchange. Some providers might offer only web versions, while other provides desktop and mobile applications, too. The security level isn’t as high as on hardware but digital wallets are more efficient in terms of operating.
Digital applications are all different since their architectures depend on their providers. That is the reason why you should conduct a good research before transferring some of your digital coins to any online wallet.
Advantages of digital wallets include:
- High speed on crypto transactions.
- User-friendly interface.
- Control of private keys (if you’re not using a wallet hosted by an exchange)
Disadvantages of digital wallets include:
- It’s easier to hack a digital wallet than a cold storage solution.
- Lack of direct control over your crypto (if a third party – like an exchange – hosts your wallet)
What steps should I take to store my crypto coins safely?
Not everything depends on the quality of a crypto wallet. You should also be a responsible user to ensure that your storage won’t be hacked. The rules of keeping cryptocurrencies on hardware and digital wallets are quite prosaic. Whatever type of storage you prefer, follow these rules:
- Two-factor authentication is a must-have. Sometimes, it’s not enough to verify your account only through SMS on your phone or email. Use 2FA to ensure that no one who might access your phone or email box will access your cryptocurrency account.
- Make sure to store security seed phrases in safe offline places where no one, except you, can gain access.
- Don’t use the same password or PIN code for all your accounts. Generate different passwords for accounts on different platforms.
- Ensure that your email account is protected against unauthorized access. This account can be used to restore a password to your cryptocurrency wallet on another device.
To keep your crypto coins safe, you should try not to become a victim of the following schemes.
Social engineering is a method that allows hackers to steal your personal information that might be used to access your accounts. Hackers often steal email addresses and passwords, phone numbers, or other data that are required during any registration process. Don’t provide any piece of ID information if you have safety concerns regarding the one who is requesting it.
Phishing attacks are also quite common but it might be more difficult to detect the most sophisticated ones. When doing their phishing attacks, hackers outsmart users and make them enter their passwords or private keys on fake versions of platforms. Before entering your account on any platform, make sure that this is a real one.
That’s it! We hope that not you understand how to store your cryptocurrency safely. Rely on the best providers only and take all the necessary measures to ensure complete security.