CRYPTOCURRENCY STORAGE, WALLET SECURITY, AND SAFETY
The crypto industry is totally different from the traditional finance industry in the sense that you are directly responsible for the security of your funds. Being your own bank means that there are no restrictions on where you can send money to, or how much you send; however, the responsibility comes with storing your crypto and managing your wallet private keys.
There are basically two categories of crypto storage: cold storage and hot storage. These two differ in their security level and ease of use.
1. Cold storage
Cold storage wallets can be either hardware wallets or paper wallets. They allow you to store your crypto without connecting to the internet.
Hardware wallets: these are pocket-friendly hardware devices that store your crypto offline. To transfer funds, you’ll need to plug them into an internet-connected computer. The Ledger Nano S and Trezor are very good examples. It is advised to buy directly from the companies’ official websites.
Long-term investors might prefer hardware devices.
Paper wallet: paper wallets are one of the oldest methods of storing cryptocurrencies. They have printed versions of your public and private keys on it. Safe to say this method is antiquated.
2. Hot storage
These include digital crypto wallets that are stored on an internet-connected device. Hot wallets are much easier to use than cold wallets. Different types include desktop wallets, exchange wallets, and mobile wallets.
Desktop wallets: these are software you download and install on your personal computer. You cannot access your funds from any other computer but this one. If there is a security hack, your funds will be lost. Atomic, Exodus, and Electrum are some examples.
Exchange wallets: these are cloud storage/ web-based wallets that store your cryptocurrencies. They are known as custodial wallets. Access to fund is not limited to a particular computer or location. An exchange (third-party) is in control of your wallet private keys and security. There is still a likelihood of theft or hack with such wallets.
Mobile wallets: these are virtually the most popular type of wallets (non-custodial) that beginners can use on both Android and iOS devices. They are software applications you can download, with which you store, send, receive, trade and invest in cryptocurrencies on the go. With mobile wallets, you are responsible for the security of your private keys and back-up seed phrases.
Wallet security
Your wallet security measures will be determined by the type of wallet you use.
If you make use of an exchange wallet, the option for a two-factor authorization (preferably Google Authenticator) will be made available to help secure your assets.
For mobile wallets, you have to store your private keys and seed phrases in a thick safe book. Duplicate and keep them in different locations known only to you in case of theft, water or fire outbreak.
Some people have found creating ways of securing their seed phrases and keys by etching them onto stones or metals. You can think of just anything!
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