Cryptocurrency is once again, on the rise. At the end of July 2020 the most popular cryptocurrency, Bitcoin, broke $10,000 USD for the first time in almost a year. As digital assets continue to grow and gain popularity, it’s important for newcomers to understand how cryptocurrency works, and how to safely store their digital assets.
Understanding crypto wallets is a key part of becoming a crypto investor, trader, and user. Most cryptocurrency wallets function in a similar way and are similar to online banking apps. All crypto and bitcoin wallets come with a public and private address. Simply put, this public address is used by people trying to send bitcoin to your wallet. Your private key can be thought of as a password that you use to interface with (access and transfer) your bitcoin. Here are 5 ways to safely store your cryptocurrency.
One of the most popular crypto wallets is mobile wallets. These wallets are typically apps which users download. These apps create a unique public and private keys, or addresses, for each user. Many also offer the ability to create a QR code that resembles the public address, making it easy to send bitcoin too.
The security of mobile wallets can vary, so it’s important to do your research and understand how your chosen wallet works. Popular mobile wallet features include 2-factor authentication, noncustodial wallets, which means you are the true owner of your keys, and industry-grade security.
Hardware wallets are another popular choice for the safe storage of cryptocurrencies. Like all cryptocurrency wallets. Hardware wallets have their own set of keys, however, they have a huge difference. Hardware wallets are similar to USB’s in that you plug them into your computer, load your assets onto the device, and can then remove it from your computer, taking your digital assets offline. As they are offline, but still stored on the blockchain, hardware wallets protect your assets from cyber attacks, explains Zipmex.
Another popular wallet choice is a desktop wallet. They work very much the same as mobile wallets. They are programs that you download onto your computer to use to interface with the blockchain. The best desktop wallets come with strong security features and easy to use functions. One issue, however, is that because desktop wallets are connected to your computer and often the internet, they can be at risk of security attacks. On the other hand, desktop wallets are great choices for those who are frequently sending and receiving on a computer.
Paper wallets are one of the more interesting ways of storing cryptocurrency and are often viewed as one of the most secure if done correctly. Originally, until about 2016, most people creating paper wallets did so by printing out a QR code of their wallet onto paper and then storing this piece of paper in a secure and safe place. Now, most people write down their 12-word seed phrase, which is a mnemonic version of their private address.
Writing down the seed phrase with one’s own handwriting removes the security flaws of printing out a QR code. This way of accessing your digital assets allows you to create a new public address for each transaction, something the QR code method does not. The most important thing to think about with paper wallets is how you store your piece of paper. Those most serious about their security laminate their paper and store it in a fire and waterproof safe. The result is quite a secure form of storage.
These 4 ways of storing your cryptocurrency each have their own benefits and downsides. The choice is up to you and how you plan on using cryptocurrency. Digital wallets are great for those who want something that’s easy to use and will be making a lot of transactions. Hardware wallets are great for those storing large amounts of crypto, and paper wallets are great for those who want to securely store their assets offline.