Your secure way out in Cryptocurrency & secure storage for your Coins
Crypto Market is a roller-coaster ride for Indians which plays with around 10 million Crypto investors with a market cap of a whopping 1 billion INR
Well, most of us out there would be very eager on which cryptocurrency to invest in. After the recent tag #buythedip trending all over the Social media. So what is actually happening? Let me get things easy for you.
First of all you’re not alone in this journey. Secondly, there is a fear on implementing Bans and Regulations on crypto-investors considering its popularity.
But still you can get to the safer side. There are many methods to store your Crypto assets safely with a Private Key to yourself. Its amazing right, to hear this but there is a question roaming in the air which is “Why can’t I store my Crypto assets in the exchange wallet itself?”. That’s where you need to understand the difference between your own Private Key Wallet and exchange buyer wallets (Wazirx, CoinBase, Binance, CoinDCX or in some cases called as Portfolio).
Exchange Wallets — Behind the Scenes
These exchange wallets allocate you a Portfolio or a Wallet linked with your account, where you can buy, sell, trade and even stake coins. But that doesn’t mean that you have your Private Key. The security warning is simple, anyone who has your Phone and Password can easily get access to your assets. One Notable such incident is 2020 February — Altsbit Hack which lead to the loss of a large amount of Crypto assets but it doesn’t mean that Coin has been hacked. Yes, those Crypto assets are being stolen and not hacked. So on any event a Hacker can bypass the security of the Wallet exchange platforms, steal and exchange your assets, but can’t hack your Coins.
Protect your Crypto assets
In order to protect your Crypto assets from these theft and to have a perfect exit strategy for securing the assets is having your own Wallets (both Software and Hardware)
Software Wallets
Software Wallets are called “Hot Wallets”.
“Hot Wallets are wallets that run on internet-connected devices like Computers, Phones or tablets.”
These wallets are based on computer software and are available in 3 formats as Desktop, Mobile and Online Wallets.
Desktop Wallets: with these wallets, your currency is stored on a PC or a Laptop. Many traders prefer this type of wallets as it offers optimum control without third-party interface. With that being said, Security can be an issue as its totally up to you to protect your Coins.
Mobile Wallets: These wallets are accessible through an app on your mobile device and can be used anywhere. While one type of app (Exchange Wallet Apps) stores your coins on your phone, the other gives you access to online storage servers. It is advisable to store a limited amount of digital currency on such wallets.
Online Wallets: Web-based wallets can be accessed from any device and any location. While this option is very convenient, the major drawback is that these wallets is that it stores the private keys online and are controlled by a third party concerns, making them more vulnerable to fraud and hacking.
These wallets are meant to be used for small amount of cryptocurrency. You could liken a hot wallet to a Checking Account. Conventional financial wisdom would say to hold on spending money in the checking account while the bulk of your money is in Savings accounts. Same goes with Hot Wallets.
Holding Cryptos the Real Way
It is important to note that holding Cryptos in an exchange wallet is not the same as holding it in your personal wallets. Exchange wallets are custodial accounts provided by the exchange. The user of this wallet is not the holder of the Private Key to the assets held in that wallet.
If an event were to occur where the exchange is hacked or the account gets compromised, your funds would be lost. These Crypto exchange do not provide SIPC or FDIC insurances, which makes safe crypto storage. This makes sense and proves the fact, it is not wise to keep large amount of cryptocurrency in any hot wallets, especially an exchange account. Instead, it is suggested that you withdraw the majority of funds to your own personal Cold Wallets (calm down we’ll see about Cold Wallets).
Hardware Wallets (Cold Wallets)
On other hand, Hardware wallets are designed to make your Crypto life much easier, providing more secure options
“These wallets are not connected to the internet and has lesser risk of being compromised.”
These wallets store User’s address and Private Key on something that is not connected to the internet and typically comes with a software that works in parallel so that the user can view their portfolio without putting their Private Key at risk.
Paper Wallets
A Paper Wallet is a Cold wallet that you can generate off of certain websites. It produces a Public and a Private Key that you can print out on a piece of paper. The ability to access cryptocurrency in these addresses is only possible if you have that piece of paper. Many people laminate these paper wallets and store them in safety deposit boxes at their bank or even in a safe in their home. Paper wallets have no corresponding user interface other than a piece of paper and the blockchain itself.
USB Wallets
These are USB drive device hardware wallets that store a user’s private keys securely. This has serious advantages over hot wallets as it is unaffected by viruses that could be on one’s computer because private keys never come in contact with your network-connected computer or potentially vulnerable software.
These devices are also typically open-source, allowing the community to determine its safety rather than a company declaring that it is safe to use.
Summary
Cold wallets are the most secure way to store your Bitcoin or other cryptocurrencies. For the most part, however, they require a bit more knowledge to set up. It’s essential for anyone interested in owning cryptocurrency to learn about safe storage and the concepts of both hot and cold wallets.
