Cryptocurrency has hit the mainstream in recent years, with numerous people investing in it. It seems like a great deal on paper with no middleman to take a cut, no need for banks or credit cards, only you and your coin.
The reality is much more complex. The wild volatility of crypto’s value makes it a risky investment. There are countless horror stories of those who have lost thousands or even millions on bad investments.
The answer is good backups. The best way to protect your money is to keep it stored somewhere else other than where you are spending it at any given time. Plenty of options are available for storage after you purchase cryptocurrency. However, they all boil down to two big categories: hot wallets and cold storage.
It is hard to ignore the buzz surrounding blockchain technology and cryptocurrency. Media outlets are covering stories about Bitcoin and other cryptocurrencies since its rise in popularity in 2017.
But how do you store your digital currency?
This article highlights three types of cryptocurrency storage methods: software, paper, and hardware wallets. We will go over the advantages and disadvantages of each method and which situations they are best suited for.
Before you plan to buy cryptocurrency, be sure you do your research first! It is worth mentioning that there are numerous ways to fund your purchase. You can buy crypto with a credit card or convert cryptocurrency (fiat) into US dollars and transfer it back.
The blockchain is a revolutionary concept gaining momentum over the last few years. It is essentially a public ledger of the history of all cryptocurrency transactions, where every transaction gets recorded and verified by the network. It is like an internet-based spreadsheet but with added security measures to ensure that no one tries to edit or delete any information.
Blockchain technology can get used in lots of different ways:
Now that you have picked up and read this article, the first thing you will want to do is to set up your wallet. A hardware wallet is just like any other software wallet at its core. You will need an internet connection, a device with a screen (such as a phone or computer), and some bitcoins to store.
There are many places on the web where you can purchase bitcoin, but most require that you give them your money before they send you any. It used to work well in the early days when bitcoin was cheaper and smaller in value than today.
Hot and cold wallets are commonly used in cryptocurrencies but may not be as familiar to the general public. They are both essential if you hoard crypto, so let us learn what they are and why you might want one.
Cryptocurrencies can get stored in a hot wallet, meaning that it stays connected to the internet (usually via a smartphone, computer, or digital wallet). If a hacker breaks into your home or business, he can simply steal everything on your hot wallet first. All they would require is finding it, and with the increasing popularity of cryptocurrency and hackers seeking out ways to steal from it.
Hot wallets are also susceptible to hacks due to their ability to easily download any information (such as passwords) should someone find them online.
You store cryptocurrencies on a cold wallet when you want to keep them safe from hacking attempts and theft. A cold wallet gets completely disconnected from the internet and gets usually connected through encryption.
Cold wallets are more secure than hot wallets because they are much harder for an attacker to find. They have to analyze every single piece of information in their way until they stumble across yours. It makes theft much less likely since there’s no easy way to gather this information by using malicious code or stealing web traffic with spyware.
Although cryptocurrency started on the internet, it’s since moved into real life. You can now use cryptocurrency to pay for things you buy in stores and online with a credit card or debit card.
One of the main ways people use cryptocurrency is with what is known as a software wallet. A software wallet is an app on your PC or mobile device that lets you send and receive coins (or sometimes tokens). Most software wallets let you control them using private keys that you have access to only.
Software wallets are handy tools for spending crypto—but they’re also highly insecure! One of the biggest risks with cryptocurrencies is how easily they can lose through software wallets. Because software wallets are vulnerable to attacks, many experts recommend staying away from them altogether. It is advisable to practice safe computer hygiene instead when storing digital currencies.
Paper wallets are a form of offline cryptocurrency storage. They’re often preferred because they’re cheap to make and don’t rely on software or hardware. However, they can also be harder to use and carry more risk than other options. Paper wallets are an excellent option if you want to store your crypto for the long term but still move it around occasionally.
Cryptocurrency has been steadily growing in popularity since its inception in 2009. Since then, it’s emerged from the underground and is a viable means of making purchases. However, with this newfound viability comes several risks, security breaches, server downtime, etc. It makes storing your cryptocurrency safe at a high premium.
A cryptocurrency wallet is a software application or digital currency address that stores your cryptocurrency. You can think of it as a bank account but for digital currencies. A wallet stores your private keys, the unique combinations needed to access your funds.
To know what private keys to use to access those funds, you need a backup phrase, a secret phrase that serves as the password of your crypto wallet. There are multiple types of wallets, and you should choose the type that best suits your needs and expected level of security. Also, there are multiple storage solutions within each wallet type based on how secure you want to keep your funds.