How to safely and securely store your cryptocurrency

Cryptocurrency has been gaining a lot of popularity and attention in recent years, and as a digital currency that operates on blockchain technology, many see it as the most secure place to hold their wealth. But this is only true if the holder takes the necessary steps to ensure their digital currency is stored as safely as possible.

Blockchain technology may be secure in terms of the unchangeable transaction history and the technology behind securing assets to your wallet. But, the crypto space has seen various losses and thefts on a major scale since its inception. So it’s by no means an online Fort Knox for crypto.

It’s important to know, however, that this is not because of the unreliability of the technology, but instead, the fact that some cryptocurrency holders fail to securely store their crypto assets. There are various factors that can affect the security of your crypto funds and in this article we're going to go through the top tips for keeping your crypto safe.

Non-Custodial vs Custodial Wallets

A Custodial Wallet is defined as a wallet in which the private keys are held, in “custody”, by a third party. This means that the third party has full control over your funds, while you only have to give permission to send or receive payments. A Non-Custodial Wallet on the other hand is a type of Blockchain wallet that essentially lets you be your own bank. This means that users have full control over their funds and on the private key associated with them. This is perhaps the most important distinction to be aware of when trading or investing in cryptocurrencies. 'Not your keys, not your crypto' has become a very popular phrase in this space, and it's a vital thing to remember when choosing which online platform or storage system you want to use. There's a big difference in the security of your assets when storing your keys publicly compared to storing them privately.

Hardware Wallets

A hardware wallet, otherwise known as “cold storage”, is the safest option for storing your crypto. A hardware wallet is a physical device, such as a hard drive or USB drive, that stores cryptocurrency securely offline. It works by storing your private keys within the internal memory of the device, which is encrypted and also protected by a password for additional security. The private keys are never exposed to the internet or any cloud-based systems, making it almost impossible for hackers to access them.

Due to their offline nature, cold wallets are the perfect solution for storing long term holdings securely. If you are looking to trade regularly with your cryptocurrency, then this option probably isn't for you. Having a physical storage option does come with some downsides, however, such as the possibility of it being lost, damaged or stolen, so this is important to remember when considering using a hardware wallet to store your crypto. 'Hot wallets' on the other hand, are fully connected to the internet and information is stored online, so it can easily facilitate cryptocurrency transactions. Hardware wallets come in various forms and shapes, but they all operate on the same principle of secure offline storage.

Why are hardware wallets good for securely storing crypto?

Hardware wallets are considered one of the best ways to store cryptocurrency safely for a number of reasons, including;

• Protection against hacking: Hardware wallets are designed to be tamper-proof and resistant to hacking attempts. They use advanced security features such as enhanced encryption, two-factor authentication, PIN codes, and biometric authentication to protect your assets
• Offline storage: Hardware wallets store your private keys offline, rather than in a cloud or on a server, making it difficult for hackers to access them. This means that your cryptocurrency remains secure, even if your computer or phone is compromised to a hacker.
• Compatibility: Hardware wallets are compatible with most cryptocurrencies, making them a versatile and convenient storage solution. You can also store multiple cryptocurrencies on a single device, making it easier to manage your portfolio in one place.
• Ease of use: Hardware wallets are easy to use and navigate, even for those who are completely new to crypto. Most devices come with a user-friendly interface and easy-to-follow instructions, making it simple to send and receive cryptocurrency securely.
• Portability: Hardware wallets are portable and can easily be carried around with you wherever you go. This means that you can access your cryptocurrency safely and securely anywhere, anytime, as long as you have your physical storage device with you.

Software Wallets

Software wallets are a digital form of crypto wallet that can be accessed through a mobile or desktop application. They are not as secure as hardware wallets, but they are a popular choice for many cryptocurrency investors because they are easy to access, easy to use and are still able to offer a high level of security. They are designed to be user-friendly, making them accessible to all levels of experience, from novice all the way up to expert. There are several types of software wallets available, each with its unique features and advantages.

Here are the most common types of software wallets:

• Desktop Wallets: Desktop wallets are installed locally on your computer or laptop and are accessible through a user interface. They offer a high level of security as they store your private keys on your computer (similar to a “cold storage” device). Desktop or laptop wallets are also ideal for traders and investors who frequently buy and sell cryptocurrencies or are more likely to find themselves trading on the go.
• Mobile Wallets: Mobile wallets are mobile applications that can be downloaded on your phone. They are ideal for users who want to access their cryptocurrency on the go. Mobile wallets are easy to use and allow for quick and convenient transactions.
• Online Wallets: Online wallets, also known as web wallets, are digital-only wallets that are permanently connected to the internet and can be accessed from any device with an internet connection. They are easy to use and are ideal for beginners. However, online wallets are considered to be less secure than other types of wallets, as they are susceptible to hacking and cyber-attacks which are not an uncommon occurrence in this particular area. So if you are going to use an online wallet, be sure to do your research and choose the one that offers the best security possible.

Why are software wallets good for securely storing crypto?

• Easy to Use: Software wallets are easy to use and can be installed in a matter of minutes on a device. They offer a user-friendly interface that is accessible to all levels of experience.
• Secure: Software wallets offer a high level of security as they use advanced encryption to protect your private keys. They also offer two-factor authentication, which adds an extra layer of security.
• Quick Transactions: Software wallets allow for quick processing, making transactions easier to complete. You can send and receive cryptocurrencies in a matter of seconds, which is ideal for users who want to frequently trade or buy cryptocurrencies.
• Portability: Software wallets are portable, and you can access them from any device with an internet connection. They are ideal for users who want to access their cryptocurrency on the go as the software can be installed on mobile, tablet or laptop devices.

Multi-Signature Wallets

A multi-signature wallet is a wallet that requires multiple signatures before a transaction can be processed. It means that either multiple people or multiple passcodes, must approve a transaction before it can be completed. Multi-signature wallets are considered very secure because it adds an extra layer of security to your cryptocurrency. Many different softwares and platforms require two-factor authentication (2FA), which usually requires that you log in via your password, passcode or seed phrase, and follow it up with a second log-in stage.

This could be a code sent to your mobile number or email, or one generated by specific apps that serve as a secondary authenticator of the user. The most popular 2FA apps are Google Authenticator and Microsoft Authenticator, both of which generate random codes that only last for a short-period of time. Incorporating 2FA on all of the cryptocurrency platforms you use is a great way to add an extra layer of security to protect your funds.

Top Tip: Keep Your Private Keys Secure

Your private keys and their associated recovery phrases are the most important aspects of your cryptocurrency, arguably more so than the crypto itself. They are what gives you ownership of your cryptocurrency, so they must be protected as much as possible. Keeping your private keys secure is essential to safeguarding your cryptocurrency, so it's essential to never share your private keys with anyone and always keep them in a secure location, using one of the most popular forms of storage that we’ve outlined in this article.

Securely storing your private keys can be as simple as printing them out in the form of a paper wallet and storing them in a combination-locked safe, or buying specifically made devices for securely storing your private keys and recovery phrases. If you follow these rules, you should be able to keep your crypto in whatever reputable wallet you choose, without the worry of being hacked, but of course, this can never be a guarantee. Besides the back-up storage of your private keys and seed phrases, the biggest thing to remember when it comes to owning cryptocurrency is - NOT YOUR KEYS, NOT YOUR CRYPTO.