How to store Cryptocurrency safely is a common question every new investor has while they are learning the ropes of digital currency. Let us have a look at the various ways to store Crypto safely so that you can properly protect your investment.
1. Cold Wallet
Cold Wallets are Cryptocurrency Wallets that are stored offline. A Hardware Wallet is the most popular sort of Cold Wallet. Ledger, Trezor, CoolWallet Pro, KeepKey, and Ellipal are some popular Cold Wallets providers.
Hardware Wallets are small Cryptocurrency storage devices that connect to your PC. When transmitting and receiving Cryptocurrencies, they connect to the internet, but otherwise, your cash is kept offline.
Following are the ways Cold Hardware Wallets work:
- Each form of Cryptocurrency that a Hardware Wallet may hold is different.
- You can generate an address to receive Cryptocurrency after connecting the Hardware Wallet to a computer and send Cryptocurrency from your Wallet to another Wallet.
- A Recovery Phrase is stored in each Hardware Wallet. If you lose your device, this phrase helps to recover the Crypto Assets. It’s critical to keep this secure because any person accessing it has the ability to steal your Cryptocurrency.
Offline storage for Crypto Assets is often regarded as the most secure solution, and many platforms utilize it to preserve the majority of their own Cryptocurrency. Hackers cannot steal your Crypto when it is offline.
A disadvantage of Cold Wallets is their lack of convenience because a connection(between Wallet and Computer) is required to move Cryptocurrency, which makes the process longer than maintaining everything online.
2. Hot Wallet
- They give complete control over your Cryptocurrency.
- They are simple to use. This form of Wallet allows you to send and receive Cryptocurrency rapidly.
Hot Wallets, like Hardware Wallets, have a Recovery phrase. If you ever lose access to your Hot Wallet, you can use this phrase to recover your coin.
There is only one issue with Hot Wallets, which is the risk of being hacked because they store Crypto online. Despite the fact that the chances of this happening are slim to none, and many individuals use Hot Wallets, the risk is high in the case of large Crypto holdings.
3. Custodial Wallet
For Crypto storage, a Custodial Wallet may be considered the default solution where your Crypto Assets are held by a third party(Cold storage, Hot storage, or a combination of both). Free Wallet, Binance, Bitgo, and BitMex are some popular Custodial Wallets.
When you buy coins via Cryptocurrency Exchanges or applications, they usually deposit them in a Wallet under their control. You can save it in your own Hot or cold Wallet if you choose but this option is seldom available.
Your Crypto, on the other hand, is controlled by a third party. You’re trusting the company’s security procedures and hoping it won’t shut you out of your account. Although not as secure as using your own Wallet, Custodial Wallets are a far more convenient way to invest in Cryptocurrencies.
Many investors have no problems using Custodial Wallets, and there are some benefits to using this form of Wallet:
- It necessitates the least amount of effort on the side of the user.
- If you wish to exchange your Cryptocurrency, it’s easy to do so because it’s stored in your account.
- If you opt to keep your money in a Custodial Wallet, ensure that the platform you use meets rigorous security standards.
4. Paper Wallet
Although Paper Wallets appear to be the most simple option, they require more knowledge of digital currencies than any other alternative and can be created online or offline.
Paper Wallets, which are essentially a seed phrase scribbled on a sheet of paper, allow for perfect anonymity in a small amount of space.
There are some Disadvantages of Paper Wallets:
- Ink can fade and paper can be misplaced, damaged, or smudged.
- If the user is printing their paper Wallet, they must account for any potential security issues with their printer’s network.
- Another concern is address reuse; if you don’t reuse the same address, each transaction will need the creation of a new paper Wallet. However, because reusing the same address makes tracing the private key signature easier, the safest method, generating a new Wallet for each transaction, is also the most time-consuming.
Cryptocurrency is a relatively new phenomenon that can be lost, stolen, or forgotten about. It is not a surprise that not many people know ways to plan for this important volatile asset. A Digital Estate Plan can help an Executor of your choice to access your accounts following your death. You can plan the future of your Digital Assets and help your family manage all finances when you’re no more.