Buying something online always satellite with some risks, and it is not a secret. Although today we have safe technologies and systems to protect our data, there are still some frauds. In 2022, Chainalysis found, that about $US1.9 billion in crypto has been stolen. People lose money every day, and in this article, we are going to find out how to store cryptocurrency safely and finally sleep well at night.
Why Does Crypto Need Storage?
Even though crypto uses a blockchain system, it still needs to be stored securely. In our previous articles, we were talking about public and private keys. These are important for storing crypto securely, and here is why.
Unlike physical cash or traditional assets that can be stored physically, crypto exists solely in digital form on a decentralized ledger. The ownership and access to these digital assets are managed through cryptographic keys: a public key for receiving funds and a private key for authorizing transactions.
Storage in the context of cryptocurrencies involves securing these keys, typically stored in digital wallets. These cryptocurrency wallets come in various forms – software storage, paper, and hardware wallets. To sum up, the need for proper storage methods arises from the security risks associated with digital assets. Factors such as hacking, unauthorized access, malware, or hardware failure pose threats to cryptocurrency holdings.
Types of Crypto Storage
Let’s proceed and talk about crypto storage type. Where to store, and what are the benefits? Let’s find out what is the best way to store cryptocurrency.
Crypto Exchange
Popular crypto platforms, such as ENON , offer their platform to store cryptocurrency safely. Reputable exchanges employ various security measures like encryption, two-factor authentication (2FA), and regular security audits to protect users’ funds.
Exchanges are suitable for active trading but may not be ideal for long-term storage of large amounts of cryptocurrency due to potential security vulnerabilities. Before using an exchange platform, consider splitting holdings across multiple exchanges or wallets to reduce risk. This minimizes the potential loss if one platform experiences issues. Enable all available security features, including 2FA, email confirmations, and withdrawal confirmations, to enhance account security.
The last advice is to periodically review your account, balances, and transaction history to ensure no unauthorized activities have occurred. While crypto platforms and exchanges offer storage solutions, their security measures may not be infallible. Conduct thorough research and take necessary precautions to mitigate potential risks associated with storing crypto on exchanges. So where to store Bitcoin?
Hot Crypto Wallet
Hot wallets are convenient for frequent trading, quick transactions, and accessing funds on the go. They are accessible through web interfaces, mobile apps, or software, enabling immediate access to funds for trading or spending. Due to their ease of use and accessibility, they also are user-friendly and suitable for daily transactions.
Hot wallets are more susceptible to hacking attempts and cyber threats due to their online nature. As these wallets are often managed by third-party providers like exchanges, users are subject to the security measures implemented by these services. There are two types of hot storage wallets:
Exchange Wallets: Convenient but carry higher security risks.
Software Wallets: Mobile, desktop, or online software wallets are another type of hot wallet.
While hot wallets offer convenience, their online nature exposes them to higher security risks compared to cold storage solutions (like hardware wallets). Users should consider their risk tolerance and the amounts they’re willing to store in hot wallets versus more secure alternatives.
Cold Storage
This type refers to the offline storage of cryptocurrencies, keeping the private keys or seed phrases disconnected from the internet. This method is known for its enhanced security, protecting digital assets from online hacking attempts or cyber threats. So it can be a good way to keep your crypto safe. Cold storage can be of two types:
Hardware storage: resemble USB drives and are considered highly secure, as they require physical access to access the stored cryptocurrency.
Paper wallet: involves printing the private keys or seed phrases on a physical piece of paper. This method keeps the keys completely offline, adding an extra layer of security.
Cold storage solutions are immune to online hacking attempts since they aren’t connected to the internet, making them highly secure against cyber threats. They significantly minimize the risk of theft, hacking, or unauthorized access since the keys are kept offline. While cold storage is highly secure, it’s less convenient for frequent transactions compared to hot wallets, as accessing funds involves a more deliberate process. So since hardware wallets and paper wallets are physical items, they must be kept in secure and safe locations to prevent damage, loss, or theft. And this is one of the answers to how to store cryptocurrency.
To sum up, cold storage is highly recommended for long-term storage of significant amounts of cryptocurrency due to its robust security features. But don’t forget to regularly check for firmware updates or best practices for using hardware’s safest crypto wallets to ensure they remain secure against emerging threats.
How to Compare the Types of Cryptocurrency Storage
Now you know what is the best way to store crypto. When comparing hot wallets and cold storage, it’s crucial to consider the trade-offs between accessibility and security based on your specific needs. For everyday transactions and smaller amounts, a hot wallet might be suitable, while significant amounts of cryptocurrency are better stored in cold storage for long-term security. Let’s compare these two types of crypto storage:
Hot Wallet Cold Storage Convenience More user-friendly and suitable for day-to-day transactions. Less convenient for regular use but offers heightened security for long-term storage. Security Vulnerable to hacking and cyber threats as they are connected to the internet. Highly secure against online threats due to offline storage of private keys. Risk of Loss Prone to potential loss or theft in case of hacking or security breaches. Less susceptible to online threats, minimizing the risk of theft or unauthorized access. Recommended Use Cases Ideal for frequent transactions, smaller amounts, and day-to-day use. Recommended for long-term storage of significant amounts of cryptocurrency due to robust security features.
Balancing accessibility and security is essential in choosing the most suitable storage option for your cryptocurrency.
In the Conclusion
So what is the safest way to store cryptocurrency? Cold storage, such as hardware crypto wallets and paper wallets, is generally considered more secure than hot storage options like software wallets or exchanges. It is recommended for storing larger amounts of cryptocurrency that you plan to hold for the long term. However, hot storage is more convenient for everyday transactions but comes with higher inherent cybersecurity risks due to its online accessibility. Ultimately, how to store cryptocurrency depends on the balance one seeks between security and accessibility for cryptocurrency holdings.
What is crypto storage? Crypto storage refers to securely holding and managing cryptocurrencies using various methods such as hardware wallets, software wallets, or exchanges.
What is the best way to store your own crypto? The safest way to store your cryptocurrency is by using a hardware wallet for long-term holdings and a reputable software wallet for smaller, more frequent transactions.
How should I store my cryptocurrency? Use a hardware wallet for maximum security or a trusted software wallet for convenience, depending on your crypto storage needs.
