When you buy your first crypto, you naturally have a question: how and where to store it? For the safe management and storage of digital assets, the market offers a large number of tools — crypto wallets with different functions and security depth. Which one to choose? It all depends on your goals and needs. In this article, we review several safe ways to store crypto.
Bitcoin storage
Keeping crypto is a matter of your funds' safety. Bitcoins are stored digitally and are at digital risk.
The main threats to Bitcoins include:
- theft of private keys by hackers (for example, from an exchange or online wallet);
- loss or theft of media on which private keys are stored;
- fraud (fishing);
- user errors (loss of passwords, etc.).
Therefore, choosing a reliable way to store cryptocurrency is an important step after buying it. The safety of your funds depends on this.
Cryptocurrencies are not physically stored anywhere. They exist as entries in the distributed ledger. This blockchain is stored on many computers around the world.
"My coins", to which users commonly refer, are a set of cryptographic keys that give access to records on the blockchain. These keys are of two types:
- A public key is the address of the crypto wallet in the form of a combination of letters and numbers. Using it, you can determine the current balance of the wallet and send transactions to it;
- A private key is a unique combination of characters representing the digital signature of the coins’ owner. You can use it to make a transaction or check your current balance.
Owning a private key gives full control over Bitcoins tied to the corresponding public key. Possessing only a public key allows you to send Bitcoins to this address. Therefore, by storing Bitcoins, we mean reliable storage of private keys.
Let's consider the main ways to store crypto and evaluate them from the point of view of security and convenience.
Types of storage
A cryptocurrency wallet is specially designed for storing assets. If you choose this tool correctly, your digital assets will be insecure.
Types of wallets:
- custodial, which is provided and controlled by a third party (custodian), which is also a guarantor — as a rule, it is an exchange;
- non-custodial, fully owned by the holder — you have access to the secret key and are solely responsible for the Bitcoin security.
Noncustodial wallets also come in two forms:
- hot (software), usually as a browser add or as a specific application;
- cold (hardware), similar to a USB flash drive.
Each coin owner can choose the safest way to store Bitcoins based on how often they use their accounts, send and receive payments, and the amount of digital funds they want to keep.
Web wallets
One of the easiest ways to keep cryptocurrency is to store it in an online wallet. This option, however, is not the safest, because the user trusts his funds to a third-party service, but this disadvantage is partially offset by simplicity and convenience.
Online wallets can be hybrid and traditional. The first method involves separate storage of keys using multi-signature, the second — private keys are stored on the service, and you have only a backup copy.
The main advantage of hybrid wallets is that developers do not have full access to the funds. Transaction from such storages will be processed with the client's and the company's involvement. This is safer, but if you lose the secret seed phrase, you will never get access to your funds.
Traditional online wallets are easier to use but are a target for scammers, who can steal funds by hacking into an account or creating a phishing page.
You need to be cautious and avoid storing a large amount of crypto in an online wallet. One of the most popular services is Blockchain.com. Another well-known wallet is BitGo, which is considered to be safer. Each transaction in this wallet requires two signatures, and the company does not have full access to customers' coins.
Exchange wallets
An even easier way to store Bitcoins is on the exchange. When registering at the site, each user automatically receives a wallet. It supports all coins presented on the exchange, there is always instant access to them.
Among the advantages of this option is the ability to easily return access to your account and your cryptocurrency. However, exchanges have serious security issues. None of the largest marketplaces is completely protected from hacking, and all of them at least once lost customer funds due to hacker attacks.
Also, the platform may unexpectedly go offline because of technical problems. At this point, customers lose access to their cryptocurrency while working. In addition, the choice of the exchange should always be approached extremely carefully, as you can get on fraudsters.
Crypto exchanges are not suitable for storing large amounts of cryptocurrency. It is better to deposit the exact number of digital assets needed for trading. After that, it is safer to transfer the surplus to third-party wallets, mainly on hardware.
Hardware wallets
A cold storage wallet is the best way to store crypto assets. This is a small device that looks like a USB flash drive and helps you to store Bitcoin offline. It can also be susceptible to scamming, but hackers need to gain physical access to the storage. If you keep it in a safe place, the risk will be minimized. However, hardware devices can be simply lost or broken.
In 2019, the hacking of Binance, the largest trading exchange, doubled sales of Ledger devices. However, holes or errors in their work are also found.
Desktop wallets
A more complex, but universal way of storing funds is a local wallet. It is a PC (personal computer) app or browser extension. A storage of this type can be downloaded from the project’s official website. Keys are generated and stored locally on the user's PC.
However, such wallets are vulnerable to anyone who gains access directly to the device and the browser it operates on. We don’t recommend installing a desktop wallet if you share a PC with someone else. Browser wallets are usually used when you need to transfer money from one cold wallet to another, or when you need a small amount to make transactions with a quick confirmation of the transfer of funds.
SA desktop wallet is arguably the best solution for PoS (Proof of Stake) assets storing because as long as there is some amount in the wallet, and the PC is turned on, the user is credited with a certain amount of digital money on the balance. It will be necessary to fully download the blockchain of the selected asset (with a big weight).
Mobile wallets
These are cryptocurrency applications for iOS and Android smartphones. Keys are generated on the mobile device when the application is installed. The main advantages of such wallets are user-friendly interface and mobility. However, this option has its drawbacks: a reduced level of security compared to the desktop solutions and dependence on the integrity of the mobile OS.
The mobile option is suitable for those who need constant access to their funds to conduct transactions. Cryptocurrency will not be stored on a smartphone, access to it can be obtained only with the Internet. Even if the device is lost, your Bitcoins can be returned.
The safest Bitcoin storage
To sum up, the best Bitcoin wallet for your coins is non-custodial. This type of wallet is divided into hot (software) and cold (hardware). The hardware wallet is considered the best choice. However, you should remember to keep a secret seed phrase in your wallet securely.
The most insecure way to store your cryptocurrency assets is an exchange wallet. Keeping Bitcoins on the exchange is justified when making transactions, buying coins, and speculative trading. And we highly recommend withdrawing funds from the exchange into non-custodial wallets.
Security precautions
It is important for the digital funds' owner not only to use reliable crypto wallets but also to follow other recommendations:
- record and store codes and passwords for two-factor identification;
- use unique passwords that are complex in composition and are not used on other sites;
- access to the Internet only through secure networks;
- store the seed phrase in physical form, such as on a piece of paper or in discrete fragments, to make it as difficult as possible to access;
- load applications only from confirmed resources.
How to choose the best way to store Bitcoin? The smartest solution would be “not to hold your eggs in the same baskets." This golden rule works not only in the classical financial system but also in cryptocurrency. After all, if you store all your Bitcoins in one place, you will lose everything at once! And even Ledger will not save you if attackers gain access to your seed phrase. Many experienced market players distribute their assets in several wallets: part of the funds are stored in hardware wallets, some on the exchange, and some in hot wallets, and it is desirable to have a separate wallet for each blockchain.
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