Safely Storing Your Crypto in 2021 – A Beginner’s Guide
Tossing and turning at night because you’re worried about your precious crypto investments is no way to live, and some of you may even fear that your funds will be stolen. While the chances are incredibly slim, there are instances of an exchange shutting down while tons of crypto was still present on their servers.
You’re basically at the will of your exchange when it comes to storing cryptocurrency as a newcomer, but there are plenty of other ways to go about doing it as well. You’ve likely heard the phrases “wallet” and “keys” in the past, but we’re going to dive even deeper into that today.
What Are Crypto Wallets?
Wallets are a piece of software that was specifically designed with the intent to store cryptocurrency. You can store both public and private keys in these wallets, allowing you to send and receive digitalized assets (crypto) with ease. You can even monitor your current balance, as well as interact with the blockchain; having the right cryptocurrency wallet is ultimately the key to your success.
There are many different wallet types out there, but the two major distinctions would be “cold wallets” and “hot wallets”.
Cold wallets are not connected to the internet, and as the name would suggest, allow you to disappear into the shadows with your money (and without a trace). Storing your funds offline is simple when you’ve got a cold wallet, and you can even receive funds at any time, but you cannot send them out.
These are pieces of hardware that you keep like a regular wallet, except handled with much more care.
Hot wallets are always connected to the internet, and can be accessed at any time – there are no limitations (but you’re also still connected to the web, which some people like to avoid). This includes all cloud wallets available, as well as mobile/software wallets and exchanges.
Which One is Better?
Hot wallets are often reserved for people who are frequently trading and need access to the market consistently, while cold wallets are perfect for individuals who plan on holding onto their crypto for a very long time.
Cloud wallets are simple to use but are considered a hot wallet by definition. You can access your funds from any computer or smart device, regardless of where you’re located. These are an incredibly convenient option to work with, but it also means you’re storing the private keys online (where a third party is responsible for keeping it safe). Some of the more popular providers of cloud-based crypto wallets would be:
The safer version of a cloud wallet is called a “non-custodial online wallet”. This means that while you can access them via the internet, the company providing the cloud servers will never gain access to your private keys. Most of the time, you’ll notice that these non-custodial wallets are based on a popular exchange platform (allowing you to trade your coins, as well as store investments, with ease).
Software wallets will generate the private and public keys for your personal computer or smartphone, allowing you to store the cryptocurrency on a device that you keep closest to your heart. We’re never far from our phones these days, so this is a viable option for anyone who wants to keep tabs on their balance and transactions.
Mobile software wallets will always be simpler and “straight to the point” when compared to desktop software wallets, but they both operate in the same sense. Managing your funds with them is a breeze, and you can even access your keys using multiple devices! The most reputable companies currently developing software wallets would be:
- Fino Wallet
- Electrum Wallet
If you want a simple and effective way to store your crypto, going with a software wallet is likely your best bet (especially if you’re new to it all).
Hardware wallets are physical items that you keep with you to ensure their safety. Nobody can gain access to your public or private keys unless you willingly hand them out, or they strong-arm you in real life for them! As terrifying as that thought may be, hardware wallets are arguably the safest storage method for common crypto investors.
Hardware wallets are developed to work seamlessly with your computer, so all you’ve got to do is plug it in and connect to the internet – as long as the device has a USB 2.0 port and internet connection, you can use your crypto.
Once you’ve connected the wallet to your device and unlocked it, you can send crypto and confirm transactions with haste. The only negative trait that hardware wallets have is they aren’t free, but it’s a small price to pay for crypto security. If you plan on buying one, look out for brands like:
- Ledger (my favorite!)
Paper wallets are what we consider “cold storage”, meaning you have a paper print-off that includes your public and private keys. This likely means that you’re pairing the “paper wallet” alongside the software used to generate your keys, so this is basically a hybrid option.
You can import paper wallets into other software wallets by scanning your keys, typing them in manually, or converting them to a QR code (which can in turn be scanned). Oftentimes, people will laminate their paper wallets so that they can stand the test of time.
It’s also highly recommended that you don’t keep electronic copies of your paper wallets on the computer, as that can be hacked and they’ll have direct access to your cryptocurrency funds.
Now that you understand how to store crypto, you can go about purchasing it with confidence. You don’t have to worry about it being stolen or lost, so long as you do your due diligence. Remember, you’ll want to think about your personal preferences and pick your wallet type accordingly.