Best Way To Store Crypto

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Contributor, Benzinga
November 18, 2022

One of the biggest appeals of cryptocurrency is neither banks nor governments control it. In many ways, it offers people greater financial freedom. However, with freedom comes a responsibility to keep your assets safe.

Crypto can only be stored on a crypto wallet. It can’t be held in a bank account, so the insurance and regulation that protects your bank deposits against losses doesn't cover your crypto, so holders must take care to personally secure their assets. Check out the best way to store crypto safely to protect your finances.

Is a Crypto Wallet Safe?

There are different types of crypto wallets, each with different levels of security and risk. As a result, researching the best wallets, figuring out how they work and taking the proper precautions in setting them up is key. 

What are Crypto Wallets?

The name wallet is misleading. A crypto wallet doesn’t technically store your crypto. Instead, it holds your private keys, which allow you to access your crypto stored on the blockchain. Keeping your wallet safe and following best security practices is extremely important. If a hacker gets ahold of your personal keys, you could potentially lose all your assets. Similarly, losing your private keys makes it nearly impossible to recover your assets.

How Should You Store Your Crypto?

When a crypto transaction is made, it’s recorded and posted on the blockchain. Therefore, your crypto is stored on the blockchain. Your personal keys give you access to the data and ownership rights of your crypto, allowing you to deploy it in trades and transactions. 

Crypto wallets range in security coverage and ease of use. The best way to store crypto varies from trader to trader. It’s important to note that crypto does not have the same level of consumer protection as a bank account. Many people like crypto because it’s not centralized or backed by a government, which also means there are greater risks. Money in a bank account is protected by insurance. If the bank gets hacked or robbed, the money is still protected. But if a crypto wallet is hacked or stolen, then that person’s assets are often lost forever. Crypto investors need to keep that in mind when they decide what type of wallet to use.

On the other hand, many investors prefer to be responsible for their own finances, free from banks interfering. People who elect to take full ownership or custody of their crypto assets without a third party are likely to to use hardware wallets. Investors who don’t want to secure their assets themselves can use a broker platform that stores crypto for its clients.

4 Types Of Cryptocurrency Wallets

There are four main types of crypto wallets. They all have different levels of security and convenience and each represents the best way to store crypto depending on different investors' circumstances. As a result,  traders must know what their options are for storing cryptocurrency.

Custodial Wallet

In the traditional investing world, a custodian is an institution that holds a person’s assets for them. The custodian takes on all responsibility for keeping, protecting and allocating them. Similarly, a custodial crypto wallet sees an institution hold a person’s cryptocurrency for safekeeping. This is typically used by high-net-worth individuals or entities with large crypto portfolios.

Cold Wallet

A cold wallet can also be referred to as a hardware wallet. A cold wallet is often a physical object that could be anything from a piece of paper, to a USB, to a thumb-drive device -  the latter being the most common form hardware wallets take. These are a bit more inconvenient to use because they don’t have access to the internet, but this also makes them one of the safest options, reducing their vulnerability to a hack. Hardware wallets can be plugged into a computer when you need to make an online transaction. Cold wallets are the best way to store crypto off exchanges

Hot Wallet

A hot wallet stores your personal keys on a device that remains connected to the internet, such as a phone or computer. These wallets are convenient because they are easy to access and link-up to platforms for crypto purchases, but they are more susceptible to hackers than cold wallets.

Exchange Wallet

A cryptocurrency exchange is where traders can connect with other traders to buy, sell and swap crypto assets. Many exchanges will store their users’ crypto for them. This is typically the least secure way to store your assets because exchanges are often the victims of hackers.

Which Wallet is the Safest Option?

Many traders want to know what is the safest crypto wallet, but that depends on the trader’s experience level and the volume of assets. Different traders also have different opinions on the safest wallet. However, most crypto experts agree that cold wallets are the best way to store crypto off exchanges and other platforms because they are the least likely to get hacked.

The reason some crypto traders don’t choose a cold wallet is inconvenience. As they aren’t connected to the internet, they are more secure, but the trade-off is the extra time it takes to use them to complete transactions. However, some brokers offer the best of both worlds by providing cold storage. Crypto brokers will take custody of your assets and execute all transactions, so you don’t need to worry about conveniently accessing your assets. Your trusted broker will do that for you. But before you trust your assets to a broker, you must ensure they have secure storage options and are reputable in the industry.

Best Practices for Storing Cryptocurrencies

It’s important to know how to safely store crypto to protect your assets and your data. The following tips can help protect your crypto.

Store Offline 

The most commonly asked question from beginner traders is, “What is the safest crypto wallet?” Storing offline in a cold wallet is the safest way to keep your assets secure. However, if you’re worried about convenience, you can keep a small amount in a hot wallet to make transactions or use a broker that offers secure, cold storage.

Multi-factor Authentication

The login process should be more than a password when you access your crypto wallet. Passwords can get stolen, but a multi-factor authentication system makes it harder for hackers to access your assets. For example, you can get a code sent to your smartphone to verify your identity in order to log in. 

Encrypt Data

You should always encrypt any data related to your crypto assets. For example, if your computer or phone gets hacked, it will be harder for the hacker to access your crypto data if it’s encrypted. It’s another worthwhile measure that works to protect you, your data and your assets.

Have Physical Copies Of Recovery Phrases

If you lose your personal key or password, you’ll lose all your assets. That’s why keeping a copy of your recovery phrases on a physical piece of paper is a good idea. Paper can’t get hacked, so it’s one of the most secure ways to keep your data safe. Be sure to place it somewhere safe where it won’t get thrown out, damaged or lost. This will help ensure you have access to your assets.

Never Share Your Info

Finally, never share your info with anyone or give them access to your wallet. Your assets are yours and yours alone. The more people who have access to your wallet, the greater the risk of your information and assets getting stolen. The best way to protect your assets and data is to keep them to yourself. 

Prioritize Safety With Your Crypto Wallet

Your crypto wallet is the only way you can access your crypto holdings. If something happens to it, you could lose all of your assets. Whether you purchase a thumb drive/hardware wallet or use a broker who offers cold storage, you should do your research and make sure you are confident about your decision. And always practice caution when making a crypto transaction.

Frequently Asked Questions

Q

How do you store crypto long-term?

A

Crypto needs to be stored in a crypto wallet. An offline, cold wallet is the best way to store crypto for an extended period.

Q

Where can I store all my crypto?

A

All of your crypto can be stored in a crypto wallet.

Q

What happens if you lose your cold wallet?

A

If you lose your cold wallet or access to your cold wallet, then you can lose all your assets. That’s why it’s important to be careful with your wallet and personal keys. You may choose to store your crypto assets on multiple cold wallets, so as not to have a single point of failure.

About Savannah Munholland

Savannah Munholland is a dynamic author and communications professional known for her captivating storytelling and expertise in public relations. With a passion for YA fiction, Savannah explores themes of sexuality and acceptance in her writing, resonating with diverse audiences worldwide. Alongside her literary pursuits, she excels in verbal and written communications, social media management, and customer service, showcasing her multifaceted talents. As a dedicated advocate for the LGBTQ+ community, Savannah’s work reflects her commitment to promoting inclusivity and representation. Whether crafting compelling narratives or spearheading PR campaigns, Savannah’s creativity and determination leave an indelible mark on every project she undertakes.