Cryptocurrencies are stored in “wallets”. However, these wallets don’t look like the kind you might use to store your paper dollar bills…
Since cryptocurrencies are digital, these are special wallets designed to hold digital coins. And there are different types.
Some exchanges (like Coinbas and Bittrex, for example) provide you with a free wallet when you set-up an account. Wallets provided by the exchanges are convenient and easy to use. They are sometimes called “hot wallets” because you need an internet connection to access them.
However, the safest way to store your coins is offline in a “hardware” wallet.
These devices often look like thumb drives or key chains. They plug into the USB drive of your computer.
When you move your coins onto a hardware device, you gain the advantage of not having to rely on an exchange to protect your assets for you.
Instead, your hardware wallet can be disconnected from the internet, making it virtually impossible for hackers to steal your coins.
Recommended Hardware Wallets
Adam personally uses the Trezor hardware wallet. It has an excellent reputation for security, and can be purchased for around $85 on Amazon (buy directly from the manufacturer, or a reputable 3rd party only).
If you buy a Trezor, setting it up is fairly simple. The company who makes it has an excellent offers excellent help and support through their website, to make things easy.
Keep in mind, the one thing that throws people off at first is the “PIN” unlocking system. During the setup process, you will create a pin number.
When you enter this number to unlock the device, the numbers will be in a different position every time. This is a security measure, but it does seem a little strange the first few times around.
The second most popular hardware wallet is the Ledger. It can also be found on Amazon, or purchased directly from the manufacturer if you want to be 100% sure it’s not tampered with.
All major hardware wallets have a paper backup feature. You can write down a “seed passphrase”, which consists of 20+ words. It acts like a backup to your coins.
This way, even if you lose the wallet, you could buy another one and “restore” the coins with your seed phrase.
Be aware that your seed phrase is sensitive. If someone else finds it, and knows what it is, they could take your coins.
Whatever hardware wallet you choose, be sure to seep it somewhere extremely safe, and make multiple backups of everything.
Tips for Keeping Your Coins Safe
Security is of utmost importance when it comes to crypto. Unfortunately, there are malicious actors out there who try to steal bitcoin.
Here are some tips for keeping your coins safe.
- Use long, random passwords, and keep paper backups of each of them in a safe place
- Use a separate (new) email account for your accounts on cryptocurrency exchanges
- If you store on an exchange, use two-factor authentication (Google Authenticator is the most widely used method. It’s an app that runs on your phone and provides a code used to login to your account.)
- Do not use a computer that you suspect has viruses or an infection