Before you invest in any cryptocurrency, there is one important thing that you should ponder on and decide beforehand—where to safe keep your cryptocurrency.
One of the challenges of owning Bitcoin is that it is digital. Although it is hard to crack secure networks, there is still that very slim chance where an experienced band of hackers can breach into the network. Highly unlikely, but still in the realm of possibility. This requires every Bitcoin owner to be critical in choosing a safe storage for their cryptocurrency investments.
In this article, we will tell you about the different types of cryptocurrency wallets you can own, as well as some tips on how to keep them secure.
Two Kinds of Cryptocurrency Wallets
A cryptocurrency wallet safeguards the digital currencies you own. It consists of two important things; a private key and a public address. A private key is your access to your cryptocurrency wallet, hence, you should not share this with just anyone. A public address is where you receive your funds, which is provided through text or a QR code by your wallet provider.
1. Hot Wallets
Hot wallets are online exchange platforms you can sign-up in. In this type of cryptocurrency wallet, the company provider manages the private keys on your behalf. Basically, users of hot wallets put their trust in the security practices of their hot wallet provider.
2. Cold Wallets
On the other hand, cold wallets do not use the Internet when viewing or transacting cryptocurrency. Cold wallets have two sub-types which are:
a. Software Wallets - wallets which can be installed on your computer or on your mobile phone, and;
b. Hardware Wallets - dedicated devices which are purposely built to secure cryptocurrency.
Cold wallets are good for those who want to safe-keep their cryptocurrency right on their hands. Especially for hardware wallets, there are buttons right on the device which users are required to press to confirm or cancel transactions. Also, the private keys of hardware wallets are never revealed even to the user, which doubles up its security.
The downside to cold wallets are most do not have back-ups in case of loss, and it could cost a lot more than a hot wallet.
Tips to Keeping Your Cryptocurrency Safe
Tip # 1: Use hot wallets that are from known and reputable companies
There have been instances where supposed hot wallet providers turned out to be a scam. So before you sign-up and invest your money on a hot wallet provider, do your research first and read reviews about your top choices. If you see red flags or seemingly fake reviews, it’s best to skip it and find another provider.
Tip # 2: When accessing your hot wallets, use a trusted, secure network
It becomes easier for hackers to breach into your operating system when you connect to public servers. Make sure you are connected to the Internet through a privately secured network—one that you trust and always use. This could save you the trouble of a possible security breach.
Tip # 3: Place your hardware wallet in a safe
Especially if your hardware wallet contains a lot of money, best to treat it as such! Don’t rely on your will to keep your hardware wallet safe, as well as your memory with regards to safe-keeping. Even if most hardware just looks like a regular USB, it’s better to be sure that all your hard-earned investment is safe locked in a box than in your office drawer.
Tip # 4: Do not share your private key to just anyone
Whether you have a hot or cold wallet to store your cryptocurrency, never share your private key in public. You never know who’s listening. Be wary of posting account details of your digital investments online as there are lurkers on the Internet that are just waiting for the ping to their next target. It is always best to share your private keys to one of your most trusted family member or friend so they can also access your digital investment in case something unfortunate happens to you.
In conclusion, there are advantages and disadvantages to each type of wallet. There are things to consider when choosing storage for your cryptocurrency. For instance, how much crypto are you willing to invest in? A small investment is safe with a hot wallet, whereas a huge amount of funds are better stored in a hardware wallet. You see, it’s not just the trading that you should strategize when investing in cryptocurrency, but its storage as well.
Templar Fund, a privately-managed cryptocurrency hedge fund, provides a highly secure and fully-automated trading desk that is operated by experienced trade and finance experts. Templar Fund is a publicly transparent company that doesn’t have a minimum amount of investment, enabling anyone in any income bracket to make passive income and eventually acquire wealth.