As a crypto investor, you know that security is of the utmost importance. Whether you store your coins on an exchange or in a wallet (this should never be the case, to be honest), it’s essential to ensure they are safe and secure. Especially in the wake of several recent episodes of hacking and thefts that drained millions from users’ wallets.
This blog post will provide a quick guide to help you store your crypto safely and conveniently. We’ll discuss some of the options available to you and the pros and cons of each. So read on to learn more!
What are crypto wallets?
Cryptocurrencies are saved in a crypto wallet, just like we keep cash or credit cards in a physical wallet. There are different types of crypto wallets to choose from, and which one is best for you will depend on your needs.
Hardware wallets: If security is your primary concern, you’ll want to use a hardware wallet. These wallets are physical devices that store your private keys offline, so they can’t be hacked. However, someone might steal them, or you can lose them, so you’ll need to keep them in a safe place.
Software wallets: If you’re looking for convenience, a software wallet might be right. These wallets are stored on your computer or mobile device and are easy to use. However, they’re not as secure as hardware wallets since they’re connected to the internet.
Custodial wallet: These wallets are for those who don’t want to worry about losing their coins. With this type of wallet, a third-party provider will hold onto your coins for you. However, this means you’re not in control of your private keys, so you must trust the provider to keep your coins safe.
Hot and cold wallets: Hot wallets are connected to the internet and convenient for transactions. However, they’re less secure since they’re vulnerable to hacking. Cold wallets are offline and more secure, but they’re not as convenient since you can’t access them when you’re not at home.
If you really care about your privacy, we made this list of the best anonymous crypto wallets. Make sure to check it.
Many crypto wallets use a seed phrase, also known as a mnemonic or recovery phrase, to generate private keys. This is because a phrase is easier to write down and save. The phrase and keys are not tied to any particular software or device. You can access the same phrase from numerous hardware and software wallets. As a result, anybody who knows the phrase may access the wallet and related crypto assets, so keeping your crypto safe boils down to keeping the phrase and keys private.
Is hardware wallet the safest option?
A hardware wallet is a way to go when it comes to keeping your cryptos safe and secure. A hardware wallet is a cold wallet. Unlike an online wallet, which can be vulnerable to hacks if not adequately protected, a hardware wallet stores your private keys offline in a secure physical device. This makes it impossible for hackers to access your Bitcoin, even if they have your computer or offline wallet. Ledger and Trezor are two famous examples of hardware wallets.
Essentially, cold wallets are the safest storehouses of Bitcoin or other cryptocurrencies. However, they frequently require a little more expertise to set up.
In addition, if you lose a hardware wallet or are locked out of a software wallet, you may retrieve the wallet by entering your seed phrase. However, in case you lose your seed phrase, you may never be able to re-access your cryptocurrency. Hence, you must be cautious while storing your hardware wallet.
Here is where custodial wallets gain an edge over non-custodial or offline wallets.
Custodial wallets offer convenience and safety
Custodial wallets are offered by a third-party custodian, such as a crypto exchange. Custodial wallets offer convenience because users don’t have to worry about losing their private keys or managing their security. These are also generally considered safer than non-custodial wallets since the custodian is responsible for securing the private keys. Moreover, custodial wallets offer other features such as two-factor authentication and multisig support that can further improve security.
However, custodial wallets also come with risks, like losing access to your funds if the custodian goes out of business or is hacked. Overall, custodial wallets offer both convenience and safety, but it’s essential to understand the risks before using one.
How to protect your crypto
Here are a few things you can take to help safeguard your cryptocurrency:
- Never give out your seed phrase.
- Learn how to recognize phishing emails and texts, which may be how a fraudster first contacts you.
- Keep your seed phrase away from any device or cloud backup service that is typically linked to the internet.
- Cold storage is ideal for long-term holdings.
- Never reveal your multifactor authentication (MFA) code if you use a cryptocurrency exchange.
Scammers are always devising new techniques, and many crypto frauds do not require hacking into your wallet at all. They could, for example, involve duping you into making a dubious investment. If you want to participate in crypto investment, you need to stay up to date on the current dangers.
We hope these recommendations help you store your cryptocurrency in the safest possible way.