Your investment means nothing if it gets stolen!
Investors in the cryptocurrency market subject themselves to large amounts of risk by choosing this asset class. Deliberate trade management allows the trader to pick and choose their financial risk, but there are 'other sharks in the water'. Hackers have had a massive impact on the history of cryptocurrency. Mt Gox, Cryptopia, Quadriga Cx.. These used to be reputable names and even the world leader Binance has been hacked for millions.
If you leave your coins on an exchange, you are putting yourself at risk. This is true for traders, investors, and HODLers alike. If the exchange gets hacked and becomes insolvent or will not reimburse you - the funds are gone. Unless you're actively managing a portion of your total investment, the rest should be safely stored.
Not your keys? Not your crypto
The best defense is a good offence.
First lets explain the different "levels" of security that you can have when evaluating possible wallets. We're going to focus on the types of wallets which exist, and then dive into the different products available to the market, and which we choose to use.
Hot Wallet - this niche of wallets are ones which are connected to the internet. An internet connection allows access from anywhere, at anytime, and by anyone. Although credentials and authentication will be required as appropriate, there is always a risk of fraud/theft/etc. This would include applications, web wallets, and some desktop depending on their individual connectivity settings.
- Cold Wallet - the discerning feature of these wallets is that they are not connected to the internet. This lack of connectivity means that you must have access to the private keys themselves to access them. The private key behind a wallet is the digital signature allowing transactions to occur. Some examples that come to mind are the Ledger Suite of hardware wallets, paper wallets, and Trezors.
- Ledger Nano: This is the creme of the crop when it comes to hardware device storage. Easy to configure, utilize, and create peace of mind knowing it is safe. I personally have a Ledger Nano X, and love the iPhone app that allows you to monitor the funds remotely, with no risk of access. Above is an affiliate link because we've teamed up with Ledger to provide cheaper prices for you all. Check it out!
- Desktop Wallets: Almost every project has their own wallet. Since the programming back end can vary and have such stark differences to one another, many wallets cannot hold the same coins. Although not as much as a problem now, once upon a time you'd need to install different wallet apps to securely store your coins. Luckily things have progressed since then.
- Exodus: This is not something we have used ourselves, but this brand has made quite the name of themselves recently. Their Desktop interface is very clean, and it supports a diverse breadth of projects within the cryptocurrency space. This one falls somewhere inbetween Desktop wallets and online wallets in terms of safety and security.
- Online Wallets: Not ideal for long term use, but they work when other options are unavailable or unfavorable. There are a very diverse group of online wallets available. Generally you want to stick with popular ones, or even better - developed by the team behind the coin. Ones which I have used are MyEtherWallet and Horizen Web Wallet. If you need help ensuring that you're choosing a good option, send a message in our community Discord server!
- Exchanges: the least secure option possible. If your login credentials get stolen, the funds are gone. If the exchange gets hacked, the funds are gone. If the exchange exit scams, the funds are gone. If you lose your password/email, the funds are gone. Lots of things could go wrong, so why risk leaving your investment vulnerable to theft?
Need help selecting a Bitcoin wallet?
Here is a fun little quiz you can do to find a solution that works for your needs!
Wallets are only 1/2 the battle!
The other component of safe storage is proper precautionary behavior! The ways that people can try to hack you are literally endless. Orderly online conduct ensures you aren't open to specific vulnerabilities. This is a lengthy topic, and will be a talking point in a future blog post.
Hope you enjoyed this one, share it with a friend! We're forever thankful for the community we do have, and are looking forward to what the future brings. Spread the word and tell a friend because Performante is taking over!