With the meteoric rise in the popularity of cryptocurrency, more and more people are looking to invest in digital currencies. As with any investment, it is important to store your assets securely. In this guide, we will walk you through the best ways to store your cryptocurrency safely and securely.
Why is Safe Storage Important?
When you invest in cryptocurrency, you are essentially buying a piece of digital code that represents a financial asset. This code is stored on the blockchain, a decentralized ledger that keeps track of all transactions. Because there is no government regulation of cryptocurrencies, they can be volatile and susceptible to theft. That is why it is so important to store your cryptocurrency in a safe place.
How to Store Cryptocurrency Safely
There are two main ways to store your cryptocurrency:
- Custodian wallets
Non-custodial wallets are wallets that you control. This means that you are the only one who has access to your private keys. A private key is a piece of code that allows you to access your cryptocurrency. Because you control your own private keys, non-custodial wallets are the most secure way to store cryptocurrency.
A private key is usually a long string of random words or characters. It is important to keep your private keys safe and secure. If you misplace them, someone else can use them to access your crypto. You do not want to be sharing this information with anyone. The public key is the address that people use to send you cryptocurrency.
With non-custodial wallets, if you forget your private key or lose it, there is no way to recover your cryptocurrency. That is why it is so important to keep a backup of your private key in a safe place. But make sure only you have access to this backup!
Storing your private keys on a digital document is not a good idea. This is because hackers can easily access these files if they gain access to your computer or device. The best way to store your private keys is offline, in a physical location such as a safe deposit box. You can also consider making a poem or story that only you can decipher using the seed phrase.
Custodian wallets, on the other hand, are managed by a third party. This third party has control of your private keys and can freeze or even lose your funds. The term “Not your keys, not your coins” is derived from the fact that you do not have control over your cryptocurrency if it is stored in a custodian wallet.
While custodian wallets are not as secure as non-custodial wallets, they are still a good option for those who are new to the world of cryptocurrency. However, if you want to lower your risks, you can begin storing a portion of your long-term holdings in a non-custodial wallet.
So, which type of wallet should you use?
The answer is: it depends. If you are a long-term investor or HODLer, then a non-custodial wallet is the best option for you. These wallets are much more secure because you are in control of your private keys. However, if you are new to cryptocurrency and want an easy way to store your coins, then a custodian wallet may be a better option.
The most important thing to remember is that you are the only one who is responsible for the safety of your cryptocurrency. Be sure to do your own research and choose a storage option that you are comfortable with.
Is There a Better Alternative to These Two Options?
Cryptocurrency storage is constantly evolving and multi-signature is a common solution to some of the problems with traditional ‘safe’ storage methods of cryptocurrency.
Multi-signature, also known as “multisig”, is a type of technology that allows more than one person to control a cryptocurrency wallet. This means that you can have multiple people sign off on a transaction before it is processed.
This solution is often used by businesses or organizations that want to ensure that all members agree before a transaction is made. It is also a good option for those who want to add an extra layer of security to their wallet.
To use multi-sig, you will need two or more people who each have their own private keys. To make a transaction, all parties must sign off on it using their private keys. This makes it much more difficult for someone to steal your cryptocurrency, as they would need to have access to all of the private keys.
Multi-sig is not perfect, as it requires all parties to be online and agree on the transaction. However, the Linen Wallet has unlocked this technology for individuals. By including a multi-sig in an innovative app, Linen is making it easy for anyone to add an extra layer of security to their cryptocurrency storage.
Rather than having multiple people sign to transact, multiple points of recovery are provided instead. This means as an individual crypto investor, you don’t have to worry about a single point of failure.
For example, if you forget your seed phrase, you can still recover your holdings via your iCloud. This differs from traditional non-custodial wallets, where if you forget your seed phrase, there is no way to recover your funds.
The app is also user-friendly which helps prevent mistakes that could lead to the loss of your cryptocurrency. The interface has a design to help you easily and securely store your crypto.
If you are looking for a safe and user-friendly way to store your cryptocurrency, the Linen Wallet is a great option. They also use Gnosis Safe’s smart contract which is as safe as it gets as some of the largest crypto funds use it to store their assets.
Cold vs Hot Storage
The next question you may be asking is: what is the difference between cold and hot storage?
Cold storage refers to the offline storage of cryptocurrency. This can be done on a physical device, such as a USB drive or a paper wallet. Hot storage, on the other hand, refers to online storage. This can be done on an exchange or in a software wallet.
Both cold and hot storage have their own advantages and disadvantages. Cold storage is more secure because it does not connect to the internet. However, it can be difficult to access your cryptocurrency if you need to use it for a transaction.
Some of the most popular cold storage wallets are the Ledger Nano S and the Trezor. These wallets allow you to store your cryptocurrency offline on a physical device.
Hot storage is less secure because it connects to the internet. However, it is much easier to access your cryptocurrency if you need to use it for a transaction.
The best option is to use a combination of both cold and hot storage. This way, you can have the security of cold storage and the convenience of hot storage. However, the decision to manage risk is ultimately up to you.
Best Practices For Storing Crypto Safely
Now that we’ve gone over the different types of storage, let’s talk about some best practices for storing cryptocurrency safely.
Privacy: When it comes to storing cryptocurrency, privacy is key. You don’t want anyone to know how much cryptocurrency you have or where you are storing it. The less information you share, the better.
Security: As we mentioned before, security is one of the most important considerations when it comes to storing cryptocurrency. There are a few different things you can do to make sure your cryptocurrency is secure. For example, you would want to do your research to find a reputable and secure wallet.
Avoid Leaving Crypto On Exchanges: Exchanges are a prime target for hackers because they hold large amounts of cryptocurrency. If you must store your cryptocurrency on an exchange, only store the amount you need for trading and withdraw the rest to a secure wallet.
Keep your software up to date: Security vulnerabilities are often fixed in new software updates. Hackers will take advantage of these vulnerabilities to try and access your cryptocurrency. By keeping your software up to date, you can help prevent this.
What You Need to Know Regarding How to Store Cryptocurrency Safely
Storing cryptocurrency can be a daunting task, but it doesn’t have to be. By following the tips in this guide, you can help ensure that your cryptocurrency is safe and secure. It takes some time to get used to this new world of cryptocurrency storage, but it’s worth it to know that your investment is safe.
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