Do you care about the amounts you invest in cryptocurrency? Cause I sure do, I love my hard-worked money and I don’t want it stolen from me. Cryptocurrency attacks have started to become a thing. I’m sure you at least heard of the fact that all ransomware attacks use Bitcoin as the only form of payment — because of the anonymity it can offer. Let’s look at what are the best options for cryptocurrency storage.
It is very hard to track Bitcoin, therefore hackers started preferring cracking digital wallets instead of bank accounts, especially because wire transfers are a lot more trackable.
I think you get my point. Like everything in life, you have to be cautious and circumspect when handling your cryptocurrencies. Otherwise, you might end up in the news like the guy who lost 7500 bitcoins (see this) – or $100+ million when Bitcoin was at its peak value.
To be able to understand how Bitcoin transfers work, you must understand the tech behind, or at least the big image. Cryptocurrency wallets are much more important than you think. They are the reason why Bitcoin still exists and you and I are investing in it. The best wallets out there support hundreds of cryptocurrencies.
Most of the mistakes made by non-technical people or newbies to the industry are caused by not knowing which are the best options for cryptocurrency storage and which are not.
Think of these wallets as a locked box where you store your most valuable possessions. You will regret losing the key to it. Or if a stranger steals it from you. Cryptocurrencies work similarly. They have a digital key (the wallet’s private key), and whoever has the key and your public address has access to the wallet. Without this key, you are not able to access your wallet or perform any transfers. Treat it as it deserves.
Using this analogy, I think I made you understand why it is important to know what the best options for cryptocurrency storage are. Unless you don’t mind about the risk of losing some money.
Actually, there are several ways to store your cryptos. I will go, together with you, through each and explain why (or why not) it’s a safe option.
Keeping your cryptocurrency in the wallet offered by the exchange is clearly not one of the best options for cryptocurrency storage. In fact, it is the worst for (almost) anyone and it is, of course, the most dangerous. Unless you are day trading, it is not a wise option at all. While you might save up on some transfer fees, you are exposing yourself to some serious risk.
There are hundreds of stories about exchanges getting hacked. What essentially happens is some hackers get access to the users’ private keys and transfer their funds to their own wallets. Now, the anonymity of Bitcoin or other coins makes it hard or even almost impossible for the authorities to track the missing funds.
In order to understand how serious this is, I will tell you about the biggest hack of an exchange: Mt. Gox. Let’s go back to January 2014. This Japan-based cryptocurrency exchange was the biggest in the world, handling over 70% of the transactions of cryptocurrencies. Everything is awesome. Long story short: a massive hack comes and Mt. Gox. loses more than 700 thousand bitcoins (or about 6% of the Bitcoin that existed at that moment). All in all, together with the authorities, they were able to recover 200 thousand. The rest couldn’t be found, and even today the possessor is unknown and untraceable. By the end of February, Mt. Gox. filed for bankruptcy in both Japan and the USA.
So, if you don’t want to wake up one morning to your lost cryptocurrency, check out the other options below.
Paper wallets were very popular between 2011-2016. At first sight, they look attractive. No hacker can get your private key, because it is not stored anywhere digitally: the address and the private key was printed onto paper. Whoever has the paper, has access to the funds.
Although apparently safe, they are an obsolete and unsafe method of storing Bitcoin. Think what happens if you spill something on the paper! Or you simply lose it. You know, it might happen.
Software wallets are technically safer. This, of course, depends on what OS you are using, what antivirus protection you have and what websites or apps you access.
Everything happens on your own computer, after all it’s only your actions which influence what is going on…Right?
Well, this is technically right. But, if your hard drive dies on you, you lost your money. If you get a virus which deletes files, you lose your money. If you accidentally format your partition, the money is gone. There are a lot of ifs but there is also Murphy’s law (I can tell you from my personal experiences that it applies whenever you expect the least): “Anything that can go wrong, will go wrong. “.
So, even though it is not the safest option, it will not affect you if you store small amounts of crypto that you want to have access to very fast when you need to. For this matter, I will recommend what I have been using in the past: Jaxx. It offers support for virtually any operating system and for the most popular cryptocurrencies one might own. You can access your wallet from both your phone and your computer and there are several features which are worth checking out.
If you are careful with the computer you use and you are willing to assume a certain risk, using a software wallet is definitely one of the best options for cryptocurrency storage.
Last but not least, we got to the safest and greatest option of all: hardware wallets. What is special about these is that they were designed to keep your private keys stored in isolation. To access your funds, you have to connect these devices to your computer and from there start making transactions. Hardware wallets often provide extra layers of protection, like a PIN code. All in all, the fact that hackers can’t access a file in your computer with the private keys makes them the best option in order to protect yourself.
I personally use and recommend the best hardware wallet out there, the Trezor Model T. This wallet supports Bitcoin, Ethereum (and ERC20 tokens), Ethereum Classic, ZCash, Litecoin, among others. Even though you pay extra, I believe it is worth it for the extra security it has to offer and for the quality of the product. I find Trezor as the most established brand of hardware wallets. You can see what else they offer in their online shop by going here.
Thanks for reading about my advice on your options to safely store cryptocurrency. Make sure to leave a comment below if you want to add something. I am open to any chats, therefore, don’t hesitate to use this link.