If you already have some cryptocurrencies at your disposal, there are a few options of storing them safely. Let’s see what type of storage there are and what their main features and risks are.
The safest way to store cryptocurrency is to not have them on an exchange or a third-party operated platform, but in our own wallet. The designation “wallet” might be misleading, since these are not devices that actually store our money, but rather a kind of window to the financial operations we make on the values stored in the blockchain records.
A wallet consists of two lines of code: one of them is called a public key, the other one is a private key. The public key is like your bank account number, while the private is like your PIN number. These allow you to receive and initiate transactions or check the balance of the account.
There are three types of wallets: software (desktop, mobile, online), hardware and paper.
Desktop: these wallets are installed on a personal computer and can exclusively be used on the computer they were installed on. It is usually very simple to use, but it’s only as safe as the computer they are installed on. If it’s hacked or gets infeccted, we can even lose the cryptocurrency we have in that wallet. Currently, Exodus is one of the most popular desktop wallet.
Mobile: you can install them on your phone and they are almost identical to those on the desktop, featurewise. Enjin is claiming to be the safest mobile wallet now.
Online: on the internet, we can have access to your cryptocurrency from basically anywhere; however, the fact that these services have access to our private keys is a serious security risk. The safest choice for online wallets i MyEterWallet.
Hardware wallets: these may remind you of USB storage devices, and they were specifically built to store cryptocurrency on them. While the vulnerabilities of a software wallet is the fact that they connect to the internet, a hardware solution makes an online hack impossible. It isn’t difficult to use them, either, since you can handle them through computer programs. You need to pay for hardware wallets, but it is an investment worth making if security is of any importance to us.
Paper wallets: contrary to what the name suggest, it is not necessarily a paper-based solution — you can print your private and pubilc keys and even have it carved somewhere, i.e. store them in a tangible format. You can do this in your home, or in a bank office, but you can bury them if you wish. It is not difficult to use, for beginners, it’s worth selecting another type of wallet before we understand exactly how these keys work.
How secure are the wallets?
The level of security for these wallets depends on their type and manufacturer. Software wallets have an inherently higher risk, but you can overcome most of them through careful usage. Nonetheless, if your private keys become public, no matter what storage means you have opted for, you can say goodbye to all your savings. E.g.: you can use the best hardware wallet, if you store your private key in a text file, it can easily be hacked and obtained.
If you are not planning to use your cryptocurrency every day, you may want to store them offline (or “cold”). You can do this with a hardware or paper wallet, or a USB drive that’s not in use.
Wherever possible, use two-factor authentication and unique passwords. there are wallets where you’ll need multiple verification before a transaction (multi-signature). Such wallets allow you the option of sharing private keys among multiple users and then the wallet becomes accessible only if all parties give the permission.
Can I choose any wallet I want?
Choosing the right wallet is, unfortunately, not only up to our financial means or technical expertise. Cryptocurrencies, in some cases, have very different specifications and won’t allow to be stored just anywhere. With the most common currencies, this won’t be a problem, fortunately, since most of the wallets support them and manufacturers update their wallets regularly, so they can add more and more currencies, and, in turn, users as well.
If there is a currency that is not supported by third-party manufacturers, those that are worth investing into have their own wallet for storage. Storing them this way is somewhat more complex, however, it offers an additional layer of security: if somehow one of them gets hacked, they still won’t have access to the other kind of cryptocurrency.