What Are The Safest Ways To Store Cryptocurrencies?
Cryptocurrencies are extremely volatile which makes them a risky investment option. Digital assets are still not regulated completely and the news of scams, frauds, and hacks is also increasing. Investors who know how to store their crypto assets safely get an advantage. No method of crypto storage is foolproof. However, if you understand more about it, you can keep your digital assets more safely.
What Is The Need For Crypto Storage?
Digital tokens are used for encrypted transactions using decentralized computer networks, which are called blockchains. Crypto tokens will stay on the blockchain while crypto wallets make crypto assets accessible and allow you to send and receive cryptocurrencies between two accounts. There will be a unique account number for every cryptocurrency you have, which is known as a wallet address or public key. Every account will have a private key also. One of the most important factors of crypto storage is to protect this information through a wallet.
What Are The Common Crypto Storage Types?
The common crypto storage types used to safely store crypto assets are
- Crypto Exchanges
Crypto exchanges are digital marketplaces that allow you to buy cryptocurrencies using real money. You can also exchange cryptocurrencies or sell them for fiat currencies. eToro, Coinbase, Binance, etc are the popular crypto exchanges. Decentralized crypto exchanges are also available, but they are more complex to use. Your crypto exchange account can be considered a wallet. But when you store your digital assets in these exchanges, they will be controlling your assets and the users will not be given access to their private keys. So they are known as hosted wallets or custodial wallets. Therefore, if you choose an unreliable wallet, it can cause you huge losses.
- Hot Crypto Wallet
Hot crypto wallets are software-based online crypto wallets. The account you have on a crypto exchange is also a hot crypto wallet as it is connected to the internet. Self-custody or non-custodial hot wallets will be connected to the internet and give you complete control over your private keys. They will be stored in the software or app itself. It is convenient to access a self-custody hot wallet using an app or web browser. But they are extremely prone to fraud, cyber attacks, hacks, threats, and scams.
- Cold Storage
Cold wallets are offline wallets. It is mostly a physical device that can be specially designed hardware or a USB drive with accessibility and custom security features. It may also have paper documentation. However, the fragility of paper makes it an unfavorable approach.
Which Is The Safest Option To Store Cryptocurrencies?
The best idea is to store your digital assets in multiple storage options. Thus, you can avoid the chances of losing everything if any of your storage media is compromised. A hardware wallet is the safest way to store your crypto assets. As they operate offline, they are safe from hacking attempts. Avoid sharing your private keys with others and do not store them on a computer or online.