Choosing a Crypto Wallet to Securely Store Your Digital Assets

You might have heard about a San Francisco man who was locked out of almost 300 million dollars worth of Bitcoin after forgetting his password.

01:13 24 August 2023

You might have heard about a San Francisco man who was locked out of almost 300 million dollars worth of Bitcoin after forgetting his password. If you want to avoid this kind of nightmare, here’s some advice on how to store your cryptocurrency safely and wisely. 

When you buy a cryptocurrency like Bitcoin, it gets stored in what’s called a crypto wallet and has a private key associated with it. This private key serves as a password, which is made up of a long string of numbers and letters assigned specifically to your wallet. And if you want your coins to stay safe and intact, you need to safeguard your private key. 

Check out the major types of crypto wallets that can help you store your digital money. 

Custodial Wallets

The easiest way to stash crypto is to keep it on the exchange where you bought it. Exchanges like Coinbase or Binance enable you to purchase, trade, and manage your assets right on the platforms. These services store your private keys on their third-party servers, and holders aren’t granted access to their passwords. They take custody not only of your keys but also keep tabs on all financial operations you perform, encrypt your transactions, and ensure your assets are safe from any unauthorized use. Hence, the name - custodial wallets. 

Though custodial wallets can be a convenient and fast way to store and manage your crypto funds, you can never take control of your tokens or do anything to enhance their safety. If you entrust your money to a new, unreliable company, you may end up losing your tokens, which is the last thing you want. So, make sure to do thorough research and choose your exchange wisely before carrying out any financial operations on your preferred platform. 

Even if you start cooperating with a reputable crypto exchange, it would be a wise decision not to store large amounts of crypto on it. 

Crypto Wallet Apps

There’s also an option of going with financial applications that does more than just store crypto. Companies like PayPal or Robinhood have added some features that enable you to purchase and sell cryptocurrency on the go. You can also do your own research to find other great apps that allow you to send cryptocurrency from your own personal wallet to other users and make a whole bunch of other transactions on your mobile device.

The major downside to this method, however, is that some apps can leave you stuck executing transactions in their environment. For example, PayPal allows cashing out only with PayPal, meaning you cannot transfer your crypto to any third-party account. What’s more, as is the case with custodial wallets, you don’t have access to your private keys. So, your sensitive information is hosted online and thus remains vulnerable to phishing and hacker attacks. 

Still, if you want to trade your crypto on the go and don’t plan to store hefty amounts in your accounts, a crypto wallet app can be a handy short-term solution. Just download only highly-rated apps, which have established their reputation as reliable crypto exchanges. 

Hardware Wallets 

For more control, you can store your coins on your own computer in a digital wallet. There’s dedicated software that can help you manage your crypto fast and easily. That said, there’s some risk of being hacked if your computer is connected to the Internet. So, if you own a considerable sum of coins you want to stash for a long period of time, you can’t go wrong with a cold wallet. In this case, your private keys will be stored on a single physical device that looks like a thumb drive. 

Companies like Ledger and Trezor make drives, especially for cryptocurrency wallets. These devices boast extra protection against online threats and hacker attacks, meaning your sensitive information isn’t exposed even when your wallet is plugged into your computer. 

Some hardware wallets give you a random combination of words known as a recovery seed, which is essential for recovering your coin if your wallet is stolen or damaged. 

There are also highly encrypted hard drives known as IronKey. If you opt for such a solution, bear in mind that it only allows ten password guesses before it locks up for good. And this is exactly what happened to that unfortunate guy mentioned at the beginning of the article. 

Crypto can be complicated and confusing. So, if you’re new to it, ease yourself into it. Do some research and then pick the method that seems the most convenient to you. A well-informed decision can save you a lot of headaches and financial damage.