Where to Store?
Cryptocurrency belongs to the digital realm and it is thus susceptible to potential hacks and phishing scams. To save your cryptocurrency from being looted by cyber-criminals, where to store it becomes a prominent question.
Keeping your cryptocurrency at an exchange platform is throwing a party for hackers. To safeguard your crypto coins from thefts, you must store them in a wallet.
Amongst the different wallet options, the hardware wallet is considered the safest option.
Let’s find a detailed answer to where you should store your crypto assets.
Exchange vs Wallet
The private key is the most important asset of your crypto space as it can access your crypto coins. One who controls the private key controls the cryptocurrency attached to that address.
When you store your crypto coins on exchanges, they have access to your private keys. Think of it like a bank that has all your banking information. If the bank’s data is compromised, your money is compromised too.
The access to your private keys makes storing your crypto coins on exchange platforms a risky endeavor. Past hacking attacks are evident for its vulnerability.
However, when you store your cryptocurrency in wallets, only you can access your private keys. The wallet is your private crypto bank you have complete control over. Thus, wallets are the safest answer as to where to store your crypto coins.
Hot Wallets
Hot wallets are digital wallets that allow you to store, send, and receive cryptocurrency. These wallets run on internet-connected devices like a computer, mobile phone, or tablet. As hot wallets are network-based, you can access them from anywhere in the world. Most hot wallets are free of cost.
As your public key and private key are generated on an internet-connected device, hot wallets cannot be labeled as 100% secure.
Think of hot wallets as your everyday wallet. You use your wallet to store cash for everyday transactions; it is not used to keep your savings in it.
Thus, apart from just storing your crypto coins, you must know where to store your savings and where to store your daily transactions.
Hot wallets are preferred for storing a small sum of cryptocurrency which is enough for your active transactions.
Cold Wallets
Cold Wallets are more secure as they are offline wallets that are used to store cryptocurrency. These wallets generate your public key and private key in an offline environment, which safeguards your keys from potential hacks.
If you have a significant sum of crypto coins you must store it in cold wallets. Cold wallets are physical entities like USB devices, papers, or wallets installed only on your personal computer.
Desktop Wallet
Unlike hot wallets that can be accessed over the internet, desktop wallets can be accessed only via your personal computer.
Your private key is stored on your machine which reduces the online exposure of your private keys. However, desktop wallets are still vulnerable to thefts as a hacker can route your keys through malware. Chances of this are less if you keep your machine equipped with anti-virus software.
Hardware Wallet
Hardware wallets are the most secure as these are electronic devices like USB drives which do not generate your private keys online.
They provide anonymity for your transactions because no personal information is stored on the device. Your private key is kept secured even if you attach your hardware wallet to a malware-infected device. It is hard for anyone to access your private keys through the hardware wallet even if they steal it, as it can be safeguarded with a PIN code.
You must also not worry about your hardware wallet being damaged or lost. As long as you have your secret backup, you can access your coins.
Paper Wallet
A paper wallet is a physical document upon which your keys and QR codes are printed.
A paper wallet is generated on a wallet generator site. Make sure you generate a paper wallet in an offline environment using a printer that is not connected to the internet. However, setting up a paper wallet is only recommended for highly advanced users as getting a wrong paper wallet can result in a total loss of your crypto coins.
Run a malware check on your computer before you generate a paper wallet. Keep in mind that paper wallets cannot facilitate your crypto transactions. They are a secure medium to store your keys.
You must have an online wallet to facilitate transactions.
As your private key is printed on paper, extra care is needed to protect your paper wallet from damages. You must also protect it from theft as they aren’t protected with a password.
Summary
Your cryptocurrency must be safeguarded by storing it in a wallet. Storing your cryptocurrency on exchanges is a big no as your keys are most vulnerable to exchanges.
The safety of your keys depends on where you generate them. If you are generating them over a network, they are more susceptible to thefts. Generating your keys in an offline environment reduces or completely annihilates the chances of thefts as the keys can't be accessed through a network.
Different wallets serve different purposes. Hot wallets are better when it comes to storing a small amount of cryptocurrency for active transactions. However, if you are storing a large sum of crypto coins, a cold wallet is the safest.
Nevertheless, there is no 'safest storage', it all depends on how cautious your activities are while you deal in the crypto world. Thus, along with where to store crypto coins, how you operate in the crypto space also holds crucial importance.