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!
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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.