How to store your cryptos.

Gepubliceerd op 14 juni 2022 om 11:04

Here follows a short oversight on how to secure your crypto.

One of the topics covered in my bitcoin course is the optimal storage of your crypto. Most people store their purchased crypto on an exchange such as Bitvavo, Kraken or Binance. There is nothing wrong with that, but you don't own your crypto. The exchange manages your cryptos and you are completely dependent on this third party. For example, if the exchange is temporarily unavailable or if it decides that you cannot withdraw anything temporarily, you will no longer be able to access your cryptos.


If you like to take full ownership of your cryptos, it is a good idea to take a look at the different types of crypto wallets. Wallets create a 'personal account number' for you on which you can receive cryptos and they create a key that you need to authorize payments from your crypto account number. (it is called a private key) This private key is of the utmost importance and you should keep it as safe as possible, because the owner of this key has full access to your wallet.


Cold wallets or hardware wallets are the safest way to store and manage your cryptos. These wallets are small USB sticks that store your private key completely offline. Therefore, it is impossible for a hacker to access your wallet. The key is always offline on the USB stick and there is no way to access it digitally. You always need the hardware wallet to confirm a payment from your crypto account. So without this device nothing can be withdrawn from your crypto account. An example of such a wallet is the Ledger Nano. This wallet is a standard for the personal management of your crypto portfolio and is used by many crypto investors, including myself.


A less secure way to store your crypto is a hot wallets or software wallets. These are apps that you can install on your mobile phone and your private key is hidden in this app. Examples are Trust Wallet or Blue Wallet. You can use these apps to manage your coins on your mobile phone, but I do not recommend using these wallets for managing your entire crypto investment. The problem with these wallets is that you depend on the app developer for the security of your key. If the developer does not secure the app well enough, it is possible for hackers to steal your crypto assets. Hence the name 'hot wallet'. A cold wallet, where the key is always kept offline, does not have this risk. You can use these apps for small amounts and the blue wallet is especially nice because it allows you to make payments over the Bitcoin lightning network. Furthermore, hot wallets can be fun to find out how bitcoin transactions work and what you have to do for that.

You can best compare the hot wallet with a current account. The cold wallet is my savings account and gives me the safest feeling. I myself have the Ledger Nano S and this is an ideal device for novice crypto investors.


And I want to end with this: feel for yourself up to what amount you want to leave your crypto on an exchange or hot wallet and when you prefer to switch to a cold wallet. It is difficult to put a fixed amount on that because it is different for everyone.

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