When you’re new to the world of cryptocurrency, it’s easy to feel like you know nothing. Even the basics like how you get cryptocurrency and where you store it can be confusing. Fortunately for you, we’re here to help! Everybody starts from somewhere and here we’ve explained where and how you store cryptocurrency, so you can get started.
Below you’ll find where you can store cryptocurrency, including the different storage options that are available to you, and then how you store that cryptocurrency. If you want to learn more about cryptocurrency and have a place where you can buy cryptocurrency for yourself, you can find more here.
Where Is Cryptocurrency Stored?
The predominant way of storing cryptocurrency is in digital wallets. Those are exactly what they sound like, wallets that handle their contents in a digitized format instead of a physical one, just like the wallet in your pocket.
While hardware digital wallets exist, so they function as an external hard drive but they store your cryptocurrency, many of them are software that can easily be downloaded to computers or handheld devices. The safety of each of these options depends on how safe you are and which precautions you can take.
Each wallet is protected by private keys that must be activated to enter its storage. If you lose or forget your private keys, you won’t be able to access your cryptocurrency! Some print out their private keys and relevant wallet addresses so that they never forget this vital piece of information. Hardware wallets can also be crashed by computer malfunctions or hacked if you’re irresponsible with what you click on when on your desktop.
Wallets are split between hot wallets and cold wallets, so let’s take a look at what those terms mean.
Hot wallets are often called online wallets. They are the software-based wallets that are connected to the Internet and installed on consumer electronics, so that’s your phones, tablets, and computers. This creates a vulnerability because hackers can use scam tactics to gain access to your wallet through the Internet. That said, they are the most convenient and popular way to store cryptocurrencies and they are perfectly safe if you avoid scams.
It’s a good idea to use hot wallets to store small amounts of cryptocurrency. This is because they are naturally more vulnerable than cold wallets. Hot wallets can be personal or exchange wallets, which are owned by the exchange and can become compromised if the exchange is hacked. That’s why you should avoid storing cryptocurrency in exchange accounts.
Cold wallets are the physical ones that aren’t connected to the Internet and so they have less risk of being compromised. The wallets store the user’s address and private key information without connecting to the Internet and risking exposure to hackers or compromised exchanges. They often have their own software that allows you to view your cryptocurrency holdings without using private key information and putting it at risk. Hardware wallets can be USB drives or look like external hard drives.
Some cold wallets are paper wallets, which are where you print off public and private keys that enable access to the wallet. Laminate that paper and keep it very safe, it’s as secure as a cryptocurrency wallet can get.
How To Store Cryptocurrency
Storing cryptocurrency is easy when you know how. Here are the most common steps that you should take to store cryptocurrency.
- Don’t keep cryptocurrency in your exchange for too long.
- Always enable two-factor authentication, often called 2FA, where possible.
- With a hardware wallet, choose a pin code and keep your recovery phrase/sheet away from everybody else.
- Don’t tell anybody about your cryptocurrency holdings, especially under your real name or your address.
- Verify any information that you get, trust only what you see on your hardware wallet software.
- Protect any devices that are related to cryptocurrency storage, they can get compromised at any time!
To avoid losing your cryptocurrency, avoid Wi-Fi that isn’t secure or publicly accessible. WPA-2 encryption protocols are most preferable for security reasons. Check any sites you access have HTTPS too, which means they have a more robust site certificate. Avoid sketchy and phishing sites too and unsolicited emails related to the crypto sphere, and double-check cryptocurrency addresses that you’re working with to make sure they’re legitimate.
You can also separate your crypto funds into several wallets. Many prefer a cold wallet for long-term holding and a hot wallet to trade with.