How to Keep Your Cryptocurrencies Safe and Steps to Follow

By Kiara Sofia Smith
Published on: August 5, 2021

The security risks of cryptocurrency self-storage are becoming more significant than ever as the cryptocurrency market is in the middle of a massive bull run, with Bitcoin (BTC) approaching all-time highs.

What is a crypto wallet?

A cryptocurrency wallet is a piece of software that stores your public and private keys, allows you to transfer and receive digital currencies, keep track of your balance, and connect with different blockchains. To handle and secure your cryptocurrency holdings, you’ll need a cryptocurrency wallet.

There are many different types of crypto wallets, but the most important distinction is whether they are hot or cold.

A hot wallet is an online wallet where you have an access at any time.
A cold wallet is an offline wallet that is not connected to the internet. You can continue to receive payments at any moment, but no one can transfer them out.

Different types of crypto wallets

There are basically four different types of crypto wallets- paper, hardware, cloud and online. Let’s take a look at each of them individually.

Paper Wallets

Cold storage is the standard classification for paper wallets. A tangible copy or paper print of your public and private keys is referred to as a “paper wallet.” It can also refer to software that generates a pair of keys as well as a digital file for printing. In any event, paper wallets can provide you with a great level of security. To move your funds, you can either import your paper wallet into a software client or just scan its QR code.

If your preferred cryptocurrency has a paper wallet, you’ll most likely find instructions on how to create one on the project’s website or community page. For example, to create a paper wallet for Bitcoin, use the Bitcoin Paper Wallet Generator.

Paper wallets are cold, but they come with their own set of concerns. Paper wallets, for example, are readily damaged, burned, copied, and photographed, and require mutual confidence if you aren’t producing one yourself. People laminate paper wallets, print many copies and keep them in separate locations, engrave them on metal or other sturdy materials, and so on to make them less fragile.

Keep in mind that keeping electronic copies of your paper wallet on your computer is a poor idea. The paper wallet’s private key should always be stored offline. Keeping your paper wallet files online is just as safe as using a hot wallet.

Cloud Wallets

By definition, online wallets are hot. Your funds can be accessible via a cloud wallet from any computer, device, or location. They are extremely convenient, but they keep your private keys online and are therefore vulnerable to third-party control. As a result, they are by design more prone to attacks and theft. Among the most popular cloud wallets are:

Binance
Coinbase
Gemini
Huobi

Non-custodial online wallets are a safer variant of cloud wallets. They’re accessible through the web and apps, but the service provider doesn’t have access to your personal information. In most cases, exchange platforms have non-custodial wallets, which allow you to trade your currencies in a safe and secure manner. Cloud wallets from the following companies are examples of non-custodial cloud wallets:

Bitcoin.com Wallet
Crypto.com DeFi Wallet
Metamask

Software Wallets

On a personal computer or smartphone, software wallets are downloaded and installed. They’ve got a lot of cash in their wallets. Both desktop and mobile wallets provide a high level of protection; nonetheless, they cannot protect you against hacks and viruses, therefore you should attempt to keep malware-free as much as possible. Mobile wallets are typically smaller and simpler than desktop wallets, however both can be used to manage your assets. Furthermore, some software wallets allow you to access your funds from many devices at the same time, such as cellphones, laptops, and even hardware wallets.

Jaxx
Freewallet
Exodus

Hardware Wallets

Hardware wallets, unlike software wallets, keep your private keys on an external device such as a USB drive. They are completely chilly and safe. They’re also capable of making online payments. Some hardware wallets accept different currencies and are compatible with web interfaces. They’re made to make transactions simple and straightforward, so all you have to do is plug it into any online device, unlock your wallet, send money, and confirm the transaction. Hardware wallets are said to be the safest way to store cryptocurrency. The only disadvantage is that they are not available for free.

Popular hardware wallets:

Ledger
Trezor
KeepKey

Typically, the wallet you choose is determined by your investment portfolio. Every significant project should have its own native wallet, which should be available on its website, however a multicurrency wallet may be more convenient in some cases. It’s important to note that not all multi-currency wallets support all coins. Even hardware wallets can only support a certain number of coins. Popular cryptocurrencies like Bitcoin and Ethereum, on the other hand, have no shortage of wallets.

Here you can find simple steps to ensure that your crypto like Bitcoin, Ethereum are safe in this bull market and in the future:

Keep cryptocurrency in exchange for no longer than is absolutely necessary.
Enable the two-factor authentication (2FA) option at all times.
Choose a pin code that is difficult to guess if you use a hardware wallet, and never post your 24-word recovery sheet online.
Don’t brag about your crypto holdings in public using your real name or an address that can be traced back to you. Even if you put your crypto money in cold (offline) storage, some thieves are able to take them.
Only trust what you see on your hardware wallet screen, and double-check everything else on the device.
Always consider that your gadgets could be hacked at any time, therefore use caution when using your computer or smartphone screen.

In addition, follow these guidelines to reduce the risk of losing your cryptocurrency.

IP addresses and withdrawal addresses should be whitelisted. If you have a static IP address, make use of it. Ensure that only you have access to your money and accounts.
Authentication with two factors. Always use two-factor authentication to protect your accounts. Instead of SMS, use software or hardware 2FA equipment whenever possible.
Make a distinction between your assets and your liabilities. Do not keep all of your crypto assets in a single location. Using one or more cold storages for long-term holdings and at least one hot wallet for trading and transactions is the best method to deal with it.
Make sure you’re connected to a secure Wi-Fi network. Never use public WiFi to access your online wallet, exchange account, or any other sensitive information. Make sure your WiFi access point employs strong encryption, such as the WPA-2 protocol, even if you’re in a supposedly safe location.
Crypto Addresses should be double-checked. When you send a transaction, some malicious apps can alter and paste an incorrect transaction address. The new address is usually associated with an attacker. It’s preferable to be safe rather than sorry.
Use Security Measures You’re Comfortable With. Some people never feel safe, therefore they go to great efforts to keep their cryptocurrency safe. They forget, however, that their security tools might potentially lose crypto. Hackers aren’t the only ones that lose access to their accounts, assets, or wallets. If you’re not into security in the first place, don’t overcomplicate it. Strive for a good combination of complexity and security.

Kiara Sofia Smith

My current focus is blockchain technology and cryptocurrency. One could even call me a blockchain “enthusiast.” I have worked for almost a decade on several financial projects related to the stock market news, fundamental research and technical analysis for several blogs.