Safe storage of cryptocurrencies - How to choose the best crypto wallet?

07/27/2021, 10:41 AM

Safe storage of cryptocurrencies - How to choose the best crypto wallet?

Bitcoin and other cryptocurrencies can be stored in different ways. In this article, we will describe various types of wallets and explain how to use cryptocurrencies safely.

Bitcoin and other cryptocurrencies provide great advantages and powers. They allow everyone to be a personal bank and be a unique owner of your money. However, with great powers comes great responsibility.

When you forget or lose PIN from your bank card, you can contact your bank, and get a new one. This is only possible because the banks are the owners of your money that you have entrusted them with safekeeping and management.

Given the decentralised nature of cryptocurrencies, there is no centralised place or institution to turn to in case you lose data. You are on your own.

Even the Bitcoin Store cannot help you if you save cryptocurrencies on your own wallets. Therefore, it is necessary to keep access data in an adequate manner to prevent the loss or theft of cryptocurrencies you own.

Introduction

Remember, most cryptocurrencies work on the principle of a pair of public and private keys.

Public key is like your IBAN, while private key is more like your PIN. Most advanced digital wallets allow you control with multiple different keys. The access to these wallets is unlocked by a set of random words (seed) generated when you generate your wallet.

These words are the most important access information that you need to store safely. The person who has access to security words owns cryptocurrencies that are unlocked by them.

You remain the owner of the cryptocurrencies if only you have the access to security words i.e. private keys. If others control them, cryptocurrencies are not really yours.

When storing cryptocurrencies, you need to think about possible unexpected situations:

Physical attacks:

  • Flooding
  • Fires
  • Pets

Online attacks:

  • Hackers
  • Data loss
  • Device failures

It's almost impossible to predict these type of situations, but you can do something about your cryptocurrency safety. You should choose a storage that suits your budget and provides great safety features.

Crypto wallet types

There are a number of different types of wallets. We sorted the following types from safest to least safe option:

  • Hardware wallets
  • Paper wallets
  • Desktop wallets
  • Mobile wallets
  • Online wallets

We will go through each of these types of wallets below.

Hardware wallets

A hand pointer choosing between Ledger and Trezor wallet.

Hardware wallets currently represent the very top of crypto security. There is no safer way to keep cryptocurrencies other than maybe paper wallets created in perfect conditions.

Hardware wallets are ideal if you are looking for a high level of security and ease of use. Hardware wallets are specialized devices that often resemble USB sticks. They allow you to use a number of different cryptocurrencies (not limited to Bitcoin) and your private keys never leave the security of the device itself, i.e. they are never online.

This is why they are safe to use even on compromised i.e. infected computers. Most hardware wallets require a computer that plays the role of an intermediary, but now there are already Bluetooth-enabled models that are easy to use also over your phone.

How to use hardware wallet?

During the initialization of the device, it is important to write down the backup words ( and make multiple copies) and save them to a secure location. There are about 24 backup words, and as the word says, they are backup option in case you lose the device or the device breaks down.

Be sure to store the words well because the owner of the words is also the owner of all cryptocurrencies. We do not recommend keeping words in any digital form, even in "password manager". Do not take pictures of your security words and save them in that practical but extremely unsafe way.

You can buy the most popular hardware wallets in Bitcoin Store exchange offices. We currently offer Trezor ONE and Ledger Nano S.

Trezor is recommended for users interested in Bitcoin and a few of the most popular cryptocurrencies, while Ledger is more suitable for users who use a wide range of different cryptocurrencies. In terms of safety, both devices are at a high level.

Paper wallets

Paper wallets are type of wallets that have pair of a public and private key printed on a piece of paper. They often have QR codes, which makes them even easier to use.

Paper wallets are very safe as a cryptocurrency storage, however it is not easy to create them for most users. Ideally, paper wallets should be generated in the following environment:

  • Offline computer
  • Installation media created in a secure environment
  • Newly installed operating system
  • Using an offline wallet generator
  • Printing (offline) or manually writing the private keys
  • Two or more physical copies of keys stored in different locations beyond the reach of unauthorized person

Paper wallets created in some of the ways mentioned above provide great security. However, keep in kind that the moment you use a private key for sending crypto in an online environment, the level of security will get lower. Reusing the same paper wallet is not recommended.

Desktop wallets

Desktop wallets are basically applications on a computer. Their security depends on the state of the computer on which they run and the wallet application itself. The computer needs to regularly maintained, updates and security patches need to be installed on a regular basis, quality security solutions need to be used.

It is necessary to pay attention to the wallet sources - the internet is flooded with various fake wallets that try to steal a user's cryptocurrencies in different ways. Always download applications from official websites and avoid suspicious pages.

Scammers are becoming more skilled every day so being careful is a must. The good thing is that most scams are obvious and are easy to get around. The most common loss of cryptocurrencies occurs when users download and use a malicious wallet specifically designed to steal your cryptocurrencies.

As with other types of wallets, it is necessary to save the security words in a safe and recommended place - offline location. The use of unique, powerful passwords is also implied. The password generator is your best friend. We do not recommend storing significant amounts of cryptocurrencies this way due to the relatively high risk of theft.

Mobile wallets

Mobile wallets are an ideal choice for the daily use of cryptocurrencies.

Mobile wallet security depends on multiple factors. It is important to use verified applications from official app stores.

Avoid downloading apps from unverified sources. Furthermore, the environment in which they are used is important. The smartphone should be clean without viruses and unsuspecting advertisements.

Always use your mobile data connection – avoid using public WiFi networks. More advanced users can elevate security to an additional level by using VPN services about which we will not write in this article because they go beyond the needs of most users. Using an old cell phone as a dedicated solution for crypto wallets is an interesting and fairly safe solution.

Online wallets

They can be accessed directly from the browser. Online wallets are not connected to a specific computer or operating system. They provide a high level of ease of use at the expense of safety depending on how you use it.

Probably the most famous example of an online wallet is MyEtherWallet (MeW), which can be used in a number of different ways. If used through manual typing of private keys or security words, it is a high-risk solution. The outcome would be different if MeW is paired with a hardware wallet.

Then it becomes the ultimate combination for managing the Ethereum network. Bookmark official online wallet page that you use and always access it via that link because fake copies of popular online wallets are common.

Conclusion

With this, we conclude this article on crypto security. The ultimate wallet choice depends on the user's preferences and capabilities. We recommend using hardware and mobile wallets depending on the situation and the amount of cryptocurrencies. An alternative combination is to use desktop + mobile wallets for users who don't want to buy additional devices. This combination is less safe, but with compliance with safety recommendations, it can be satisfactory. Bitcoin Store offers a cryptocurrency storage option that is the simplest option for beginners.

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