Store Crypto

Storing your cryptocurrency securely is a critical aspect of managing your digital assets. With various storage options (so-called wallets) available, it's important to understand the differences and choose the one that best suits your needs. Wallets manage your private and public keys, and they generate new addresses from the public key. They offer a convenient way to send and receive crypto through an interface. The most important element is the private key, which allows you to "unlock" your funds. Without it, you lose access to your funds.

Cold and Hot Wallets

• Cold Wallets: Offline wallets used for secure long-term storage. Hardware and Paper Wallets belong to Cold Wallet category.
• Hot Wallets: Online wallets used for convenient access and frequent transactions. Examples include desktop, mobile, and web wallets.

Hardware Wallets

• Physical devices that store your crypto securely offline. To send or receive crypto you have to connect the hardware wallet to your PC and the corresponding App.
• Popular Options are Trezor and Ledger.

💡 Tip:
Buy hardware wallets directly from the manufacturer to avoid tampering risks. Avoid buying from unreliable vendors.

Paper Wallets

• A physical printout of your private and public keys.
• For long-term storage and secure from online threats but must be kept safe from physical damage or loss.
• This type is not recommended. Not convenient to setup. It starts with creating the keys. You need a secure environment which means downloading the software to generate the keys. You don't want to be connected to the internet. Don't print out the keys in a public space. Make sure the printer is not caching any information about the print job. Over time, ink can fade or the paper can be damaged.

Custodial vs. Non-Custodial

• Custodial Wallets: Wallets where a third party (like an exchange) holds your private keys. Easier to use but less control over your assets.
• Non-Custodial Wallets: Wallets where you control your private keys, offering greater security and autonomy. You are responsible. If you lose your key / recovery phrase, you are out of luck.

⚠️ Warning
Always remember: Not your keys, not your crypto. When third parties have the keys, you are not in control of your funds. Things with exchanges can go south pretty quickly. It's not the first time people are suddenly not able to withdraw funds. See FTX halts withdrawals.

Recovery Phrase

You might ask what happens when my hardware wallet or my computer with a desktop wallet on it, gets damaged? Are my funds lost forever?
When you set up a new wallet it generates recovery phrase, which is a series of random words. It can be used to restore your wallet on a new computer. To answer the question, no your funds are not lost if you have your recovery phrase.

• Best Practices: Keep your recovery phrase secure and never share them. Writing them down and store them in a safe place. If you have a safe put them in there.
• Have your recovery phrases and private keys at multiple locations. Rent a safe-deposit box with 24/7 access and put them there as well.

Choosing the Right Wallet

There is no perfect choice. You want convenience, you pay with lack of security. You want security, you pay with inconvenience. You probably end up using all of them except Paper Wallets which are not recommended.

• Hardware Wallets: Get two of them and split up your funds. Two wallets also give you flexibility in case you need to move funds and have to create a new wallet / recovery phrase. Happened to me once. My recovery phrase was not secure anymore, so I moved the funds to another device and setup up a new wallet with a new recovery phrase.
• You will use centralized exchanges and therefore will use custodial wallets. Don't leave huge amounts of your crypto on an exchange. Move it to your own wallets as soon as possible.
• Desktop / Mobile / Web Wallets: If you have coins that are not supported by your hardware wallet you might have to use one of these. Some services/companies might work with specific wallets only.