April 30, 2022
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TL;DR
Your crypto should be kept safe, in cold wallets if possible, no matter if you are buying, hodl’ing, investing, or both. In the vast majority cases, losing your tokens and coins is permanent and irreversible.
Use centralized exchanges that have KYC and AML compliance if you want to trade cryptocurrency. The best security is achieved through peer-to-peer trading or decentralized exchanges that have been audited.
You have many options for storing your crypto safely. It is possible to store your crypto on a regulated cryptocurrency exchange. This is a good option for traders and newcomers. You don’t have the keys to your wallet and therefore cannot accidentally misplace them in the hands of hackers.
You can keep your keys in a non-custodial wallet. However, it is more secure to have them in a safe place. Keep your private keys in a safe, offline location, such as a paper or cold wallet.
Audited DApps can be used to increase your security. You should also regularly verify which DApps have permissions to access your wallet. These permissions should be removed as soon as the DApp is finished.
Introduction
The idea of self-sovereignty is at the heart of cryptocurrency. It’s the notion that users can operate their own banks. You can make your funds more difficult to access than the best bank vaults if you secure them properly. You run the risk that someone could steal your digital wallet.
As you travel down the cryptocurrency rabbit hole, it is essential to learn how to properly secure your digital currency. Storage is not the only thing that matters. Many cryptocurrency holders now interact with DApps in DeFi, so it’s important to learn how to safely use your coins.
You wouldn’t let an untrustworthy company handle your money. The same goes for your coins. This is true for crypto exchanges that allow you to trade and purchase it. This guide will discuss the best ways to keep your crypto assets safe no matter where they may be.
Securely Purchasing Crypto
You can buy cryptocurrencies from many different places today. There are many places where you can buy cryptocurrencies. Each choice has its own advantages and disadvantages. Not all options offer the same level of security. Most users prefer to use reputable, central exchanges for the best combination of security and ease-of-use.
Secure Exchanges
Binance is an excellent example of a central exchange that offers high security. This includes increased regulation, Anti-Money Laundering measures (AML), Know Your Customer (KYC), and more. Although exchanges were not without problems in the early days, exchange operators and governments have made significant improvements.
You will need to transfer funds into the custodial wallet in order to use an exchange. Depending on your outlook, giving the exchange responsibility over your coins may provide security. You may feel more secure using an exchange wallet if you don’t know much about wallets or are unfamiliar with cryptocurrency. This will prevent you from losing your crypto or locking yourself out of the wallet.
Some people prefer to have direct control of their money. Perhaps you’ve heard the expression “not your keys not your coins” before. You can’t control your crypto if you don’t own it. For more information, you can visit our storage section.
There are some signs you should look out for if you have decided to use a peer-to–peer service or decentralized exchange. Check for an audit by a trusted source before you use a DEX. Later, we’ll get into audits. Binance also offers a DEX that leverages the company’s reputation and security.
Peer-to-peer services require KYC. It should offer an escrow option. Although it does not eliminate all risks, having funds held in escrow by a third party gives both buyers and sellers more protection against scams.
How to protect your account
To keep your account secure, sign up for the exchange or trading method you prefer. These are the same tips you’d use to protect your online bank account and other sensitive information. It is simple to prevent others from accessing your account or its funds.
Use a strong password that you change regularly. Your date of birth or other identifiable information should not be included in the password. It should be long and unique to the account.
Enabling Two-Factor Authentication (2FA). 2FA with your mobile device, authenticator application, or YubiKey is a secondary level of protection in the event that your password has been compromised. When logging in, you will need to use your password and the 2FA method simultaneously.
Be on the lookout for scams via email and social media. In order to steal your money, fraudsters often impersonate trusted people and exchanges. Unknown sources of software should be avoided as they could contain malware. In 7 Easy Steps, Secure Your Binance Bank Account guide.
How to Secure Your Crypto
After you have purchased or traded crypto, and your account is secured, the next priority should be to place it somewhere safe. A wallet is the only alternative to leaving your crypto on an exchange for later trading. Different wallets have different ownership rights and connections to the Internet. The level of security that you are comfortable with will determine which one you choose.
Avoid Common Crypto Scams
Unfortunately, scammers are attracted to cryptocurrencies. Scammers use cryptocurrencies to scam others. Once the funds have been stolen, there are usually no means of recovering them. Scammers exploit the anonymity of cryptocurrency and the fact that large sums of money are directly controlled by many users.
Always be careful and don’t send money to anyone you don’t know. It is important to verify the identity of any person you send money too. These are the top scams you should be aware of:
1. Phishing – An email may be sent from an exchange asking for personal information or log in. This could be a scammer trying to steal your personal information.
2. Fake exchanges These websites and mobile apps often imitate an exchange’s look. After you have entered your information, scammers will use it to gain access to your real account.
3. Blackmail Scammers may try to send malware that locks your files and demands ransom. You will likely need to send Bitcoin or other currency to pay. The files may not be returned to you after payment.
4. Ponzi and pyramid schemes – A new project may offer you the chance to purchase its coins, or to enter a special deal that requires you to pay crypto. Sometimes, it’s possible to get a deal too good to be true. Make sure you do your research and make sure that the investment is safe.
5. Impersonation You may be posed as a trusted person, official, friend, or other type of representative. You may be asked for crypto or other information you wouldn’t normally give out. They will then ask you for crypto or other information that you would not normally give out.
What is a Private Key?
Like a real key to unlock your cryptocurrency, a private key allows you to spend it. Your overall security is best if you keep your private key safe and have easy access to it. The key is a long number, so it’s impossible to guess. You will get a private key if you flip a coin 256x and write “1” for heads and “0” for the tails. Here’s the one we just created. This encodes the information in hexadecimal (using characters a-f and numbers 0-9).
You can search that number on Google to see that it is the only one appearing (unless it has been copied elsewhere). This should give an idea of the randomness of the number – it is extremely unlikely that anyone has ever seen it before.
This example doesn’t even do it justice. The number of private keys that can be used is almost equal to the number of known atoms. This is the fundamental security principle of cryptocurrencies such as Bitcoin and Ethereum. You can rest assured that your coins are safe as they are hidden in a large, brain-meltingly large number. These are obtained by performing cryptographic magic with your private key to obtain a public key. This key is hashed in order to get the public address.
This article will not go into detail about how it is done. It’s possible to create a public address using the private key. However, it is difficult to do the reverse. You can list your public address online, via blogs and social media. Without the private key, no one can spend the money sent to it.
You lose access to your funds if you lose your private keys. You can only spend the funds if someone else has your private key. It is therefore important to keep your private keys safe from prying eyes.
Seed phrases
It is important to note that today’s wallets rarely only have one private key. They are hierarchical deterministic wallets (HD), which can hold billions of keys. You only need to know a seed phrase. This is a list of human-readable words that can be used for generating keys. This may look something like the following:
Strike sadness, boss daring voice connect holiday Vintage Quantum Pony Stable genuine
If you don’t choose to use one private key, then you will likely be asked to backup a seed phrase whenever you create a new wallet. Key storage will be discussed later. The term keys will be used interchangeably for both private keys as well as seeds when we talk about keys storage.
How to secure your seed phrase
It is very important to protect your 12, 18, and 24-word seed phrase. Anyone with access to this phrase can steal your money and import your keys into their wallet. A JSON file, or private keys that are the exact same as a seed phrase, may be available. Follow our tips to be very careful about managing your keys.
1. It is not recommended to save your seed phrase on a device that has internet access. Your phrase could be compromised if you download a virus, or your computer is remotely hacked. 2. Securer storage online is better The phrase can be stored either physically or offline. You should backup your key, even if it’s stored on a cold storage device (which we’ll talk about later), in case your device fails. 3. Consider the materials you will use and where it will be stored if you are going to keep your phrase physical. It is not a good idea to write the words on paper that can easily be lost or destroyed. It might be a good idea to keep the phrase in a safe place or deposit it with your bank. As the phrase can’t easily be destroyed, some people will engrave it onto metal. Others may use metal letters on a board.
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Hot Wallets vs Cold Wallets
To distinguish cryptocurrency wallets, the terms “hot wallet” and “cold wallet” are used. It’s not the temperature these terms distinguish, however.
Hot wallets are digital crypto wallets . Cold wallets are physical devices which store cryptos within them. Although there are many types of wallets available, the most popular are the hot and cold.
The most popular wallet is the hot one. We’ll discuss a number of reasons why this is so. I will also try to show that cold wallets are better than hot ones.
Hot Wallets
Since the birth of Bitcoin, digital cryptocurrency wallets have existed. There are two types: online or desktop wallets. Although mobile wallets can be considered digital, due to their mobility, they could also be classified as hybrid wallets.
Two of the greatest perks digital wallets offer are their ability to hold any cryptocurrency and that they are free.
Let’s start with the all cryptocurrency holding part. This point is frequently brought up by digital wallet supporters in the “cold wallets” debate.
Once a cryptocurrency has been created, the ICO process is underway, it isn’t functional until it is stored somewhere. Usually, the creators of crypto are also the ones who develop and create wallets for it.
There are many more well-known and mainstream cryptocurrencies, such as Bitcoin, Ethereum, and XRP, that have a variety of digital wallets. Each one offers unique features and customizable customizations. Newer, less well-known cryptos typically have one designated wallet that allows for basic trading and buying functions.
This is an important point in the ” Hot wallets vs Cold wallets” debate. Many people have or want different less popular crypto coins. However, they can’t do this while having, for instance, a warm wallet.
Another important factor is the fact that hot wallets generally come free. It’s easy to find the one that best suits your needs and register it. These devices are not free for cold wallet enthusiasts to enjoy. They cost money which reduces their popularity and decreases their use. Although it is difficult to predict what statistics would exist if cold and hot wallets were both free, that’s impossible.
Cold Wallets
As I mentioned, cold wallets are specially designed devices that have been designated physical currency storage. Just like the hot wallets, cold storage wallets have their cons and pros, so let’s look at them.
The greatest benefit of cold wallets is the ability to always have your cryptos with you . Wherever you go. These wallets can be carried around in your pocket and are small or compact. This allows you to have both comfort as well as privacy while transferring funds.
However, cold wallets have few drawbacks compared to hot counterparts.
First, cryptocurrency cold storage is often very expensive. The average price for a cold wallet is around $100. Depending on how many crypto coins you have, this could either be extremely expensive or very cheap .
Another problem is the limited number of cryptocurrencies that cold wallets can store. Most cold storage wallets can only store the major crypto coins on the market such as Bitcoin, Ethereum and Dash.
These items are also quite costly, which tends to reduce cold wallet usage.
Why cold wallets are better than hot ones
You’re probably wondering if cold wallets are better than hot ones after you’ve read this tutorial. They’re worse than hot ones! There is a simple reason why cryptocurrency cold storage is the best option:
Security.
When it comes to cryptocurrency storage, cold wallets are the standard in security.
This section has been kept out of the hot/cold wallet overviews. This is because I believe it is so vital that it merits a separate section.
The most vulnerable wallets worldwide are hot wallets. The digital wallet stores your security keys in their online servers . These servers are very vulnerable to hacker attacks, fraud attempts and other malicious intent-driven actions. Although most high-profile hot wallet companies and sites have extensive security measures in place, it doesn’t mean that your savings will disappear forever.
There is one solution when it comes to digital cryptocurrency storage. It is insurance. Sites such as cryptobase.com will automatically provide you 100% coverage if they trust you with your cryptocurrencies. This is an rare but reassuring option.
Cold storage wallets have a reputation of being inaccessible. It is a great feeling to know that your codes are safe and secure in this tiny device. These devices are so focused on security that even if your computer was infected with a virus, keylogger, or leacher, your device would still be safe and secure.
Security should always be the top priority when choosing the right crypto storage wallets. It doesn’t matter if you get the best wallet, but security should be your number one priority. Cold storage wallets that are the most secure are the most.
Which is the best storage solution?
There is no single answer to this question. This article would be much shorter if it were. It all depends on how you use cryptocurrency and your risk profile.
An active swing trader, for example, will have different requirements than a long-term hoDLer. If you manage large sums of money, you might want to use multi-signature systems. This means that multiple users must agree before funds can transfer. The easiest option is a hardware wallet. However, you should test them first with small amounts of money to make sure they work. In case your device fails or is lost, you’ll want to have backups of your keys elsewhere.
Online wallets can be used to store small amounts of money that you want to use for goods or services. Your mobile wallet acts as a cold storage account. It is similar to a physical wallet. It should not be a large amount that could cause serious financial problems if it were to disappear.
Custodial solutions will work best for trading, lending, staking and lending. You should have a plan in place for how much money you are allocating, such as a position sizing strategy. You should not invest more than what you can afford to lose in digital currency.
