The Best Places To Hold Your Cryptocurrency To Keep It Safe
Last updated on July 25th, 2023 at 07:38 pm
There is little doubt that besides choosing the best cryptocurrency to invest in, keeping your crypto assets safe is the most important thing you can do. When I first started my journey in crypto back in 2017, I did not take this important step, and failing to do so put my growing cryptocurrency portfolio at risk.
The best place to hold your cryptocurrency is in a hardware wallet. A hardware wallet provides maximum security and allows you to maintain custody of your private keys. Private keys are required to show ownership of a cryptocurrency and their possession is necessary to transact with cryptocurrency.
Properly securing your crypto ensures that you can keep your private keys safe from scammers, hackers and crypto thieves.
While using a hardware wallet is the best option for keeping your crypto safe, there is more to the puzzle. Following some basic security steps when using your hardware devices is also essential.
I will tell you what I learned from my mistakes. I will include hardware wallet options as well as some best practices to increase your security when using them.
Securing Your Crypto
There is no person in the cryptocurrency space that would ever say that seuring your crypto assets is unimportant.
Yet, most often, newbies to the space often treat security as an afterthought. I know I did!
Think about it, how often do we really think about security on a daily basis?
We bank online, sure we have a PIN or password (even though it may be the same password we use elsewhere online), but at the end of the day we expect that the bank is responsible for keeping our money safe.
Don’t misunderstand, I believe the bank definitely has a fiduciary responsibility to customers.
But don’t we as customers have any responsibility when dealing with our bank?
Of course we do… even though we don’t act like it.
With cryptocurrency, we, you and me, are responsible for keeping our assets, our wealth, safe.
There is no one to complain to if something goes wrong or gets lost… there is no insurance to protect our crypto assets…
In crypto, we are the bank.
We are the only ones responsible for all of the good choices and the bad.
This probably makes you wonder, is cryptocurrency really better than banks?
We think so, and we lay out exactly why here.
Should You Use A Cryptocurrency Wallet?
When someone is just beginning to invest into cryptocurrency, there is a predisposition to leaving your crypto on an exchange, basically treating a cryptocurrency exchange like a bank. This is a bad idea for a host of reasons.
Once you purchase cryptocurrency it is best to remove it from an exchange and store it in a cryptocurrency wallet. This gives you control over the private keys and protects them from being stolen.
However, the more important question is, what type of wallet should you use?
Frankly, that depends on what you are going to be doing with your crypto.
So for example, if you are going to be using your cryptocurrency for payments and the like, you want to use a wallet that gives you relatively easy access to conduct your transactions. Think of this like having cash in your pocket.
Alternatively, if you are going to be holding your cryptocurrency for a long time, you want a wallet that will provide maximum security and more difficult access. Think of this like having your money in a vault.
Most people in the crypto space use more than one wallet… and honestly, more than one type of wallet.
So, it’s a good idea to understand the different types of wallets and their uses. I break all of that down here.
But when it comes to the safest place to keep your cryptocurrency, a hardware wallet is the answer.
Importance of Private Keys
At its most basic, cryptocurrency is nothing more than a private cryptographic key.
This private key distinguishes what the cryptocurrency is (Bitcoin, Ethereum, etc) and thus its value. This value is based on the time you purchased the keys, the price you paid for them, and the current spot price for the asset.
SECURITY TIP: NEVER give anyone your Private Keys – with these keys, they can steal your cryptocurrency
To access your cryptocurrency wallet, your private key is used in concert with your public key.
Your public key is what allows you to receive cryptocurrency. Think of it like the address to your home.
This key can be given to anyone because it just allows them to send you crypto.
When these two keys are used together, your wallet is unlocked and you are able to complete transactions.
There is a phrase in this space that you should know and understand. It rings true no matter what cryptocurrency asset you own. That phrase,
“Not your keys, Not your coins”
– Andreas Antonopoulos
So, if you don’t have possession of these keys, you definitely don’t control the coins and technically, you no longer own them.
If I haven’t made it abundantly clear, you have to keep your private keys, your cryptocurrency, safe.
Need more information to help you better understand Private Keys?
Then this extensive article I’ve written on the topic is just what you need… check it out here.
The best way to do that is to use a hardware wallet.
What is a Hardware Wallet?
In the crypto space, when someone uses the term wallet, they are not referring to one specific type, this is an all encompassing term. A cryptocurrency wallet, varies in ease of use, how it’s accessed, and the level of security it provides.
The highest level of security for cryptocurrency is found in a hardware wallet.
A hardware wallet is an external device that uses encryption and security protocols to keep the cryptocurrency stored on them safe. A hardware wallet allows the user to store their private keys, which in turn permits them to interact with the blockchain of that asset to conduct transactions.
A hardware wallet is also sometimes referred to as cold storage or cold wallet.
The reason for this is because when you use a hardware wallet, your crypto assets are not easy to access. This is because this type of wallet is generally not connected to any type of internet device (except to access the wallet).
This means most of the time, a hardware wallet is air gapped and once you place the device in a secure location, such as a fire-proof safe, the only persons who have access are those that you have given it to.
A hardware wallet, just like every other wallet, only stores your private keys.
The difference between a hardware cold wallet and other wallets is that the wallet signs every transaction with the private key in an offline environment. Think of this like signing to withdraw your money from your bank.
Any transaction carried out online is transferred to the offline wallet and stored using devices like hard drives, USB and smartcards.
This means that the private key doesn’t come in contact with any online server during the process of signing the transaction. This prevents hackers from accessing the private key even if they come across the transaction.
You might be thinking, OK, if these hardware wallets are so great, why isn’t everyone using them?
A legitimate question… the drawbacks to all cold wallets are limited, but can be devastating if they happen and you are not prepared.
These include losing or damaging the device as well as it being a slower process to access your cryptocurrency because the device is not connected online.
When you weigh it all out, the pros for using a hardware wallet far outweigh the cons.
Advantages & Disadvantages of Hardware Wallets
| Hardware Wallet Advantages | Hardware Wallet Disadvantages |
|---|---|
| Most Secure Wallet Option | Not Ideal For Day-to-Day Transactions |
| Almost Impossible To Hack | Learning Curve For Beginners |
| Stores Crypto Offline (air gapped) | Device Can Get Lost or Damaged |
| Ideal For Long Term HODLing | |
| Wallet Restorable With Seed Phrase | |
| Can Stake Assets With Compatible Sites | |
| Some Wallets Have Bluetooth Connectivity |
This makes a hardware wallet the most secure option, especially for long term cryptocurrency holdings. These are the cryptocurrency investments you make and intend to hold for a long period of time to allow for price appreciation.
If you are new to cryptocurrency and are curious about how to create an initial crypto portfolio, I will tell you what I’ve done here.
Hardware Wallet Recommendations
Two of the best hardware wallets in the space are the Ledger or Trezor.
These cold storage wallets are USB style.
It works like a standard USB, but needs a computer and a chrome-based app to work offline.
These devices use a smartcard to protect and secure the private keys.
These links to both the Ledger and Trezor are my affiliate links.
So, I will make a small commission if you decide to purchase them.
If you decide to purchase them on your own, I understand.
SECURITY TIP: Be sure to make your purchase ONLY from the manufacturer of the hardware wallet. You don’t want to trust your cryptocurrency to any other seller.
Just be aware that it is NOT safe to purchase one of these devices anywhere except the manufacturer. A third party, such as Amazon for example, has any number of suppliers.
There have been instances where devices purchased from sources other than the manufacturer have led to the stored assets being stolen.
In these cases, the seller installed a virus on the device, giving themselves back-door access to any cryptocurrency on the wallet and then sold the device to an unsuspecting crypto investor.
Security When Using a Hardware Wallet
Once you’ve chosen which hardware wallet to use, you should take certain steps to ensure the safety of not only your cryptocurrency, but yourself.
While these risk mitigation strategies are not meant to be all encompassing, you can use them as a starting point. You should adapt and add to these approaches to fit you, your family and your needs.
Hardware Wallet Security
Keeping your wealth safe is important. It will ensure that any cryptocurrency you have remains in your control and ultimately can be passed down to future generations. These options will help you to do just that.
Back-up Your Wallet
When you first set up your hardware wallet, you will be provided with a set of 12 or 24 words that correspond only to your wallet.
These words are called your seed phrase or back-up phrase.
You should not share this phrase with anyone, or store them on a computer or other device which can be hacked.
If you want to share this phrase with someone for safe keeping, then be sure whomever you share it with is trustworthy. Because with this phrase, they can access your wallet and take your crypto.
Make sure you back-up your wallet. Do this by copying these words of your seed phrase, in the proper order, and secure them in a safe place.
If something should happen to your hardware device, such as it gets lost, stolen or damaged, you can use this phrase to reset your wallet on another device and access your crypto.
Keep Your Wallet Software Updated
New security vulnerabilities are found all the time. This is not true just in cryptocurrency, but in devices we use everyday, like your cell phone.
The best way to keep these devices secure and operating properly is to be using the latest version of the operating system. Manufacturers issue software updates regularly, be sure that you update your hardware wallet as needed.
Create Strong & Unique Passwords
Having multiple passwords can be a pain. Afterall, we need them for everything these days.
Unfortunately, this leads most people to compensate for this by using the same password for multiple logins.
THIS IS THE KISS OF DEATH IN CRYPTO!
If your password gets out there due to a hack of a cryptocurrency exchange, let’s say, and you’ve used the same password on all the exchanges that you use, and maybe even all of your crypto wallets… now you’re in serious trouble.
When you set a password and PIN on your hardware wallet, make sure it is a strong password as well as a unique one.
I have put together a great resource concerning strong passwords, you should read about that here.
In the meantime, you may want to explore using a password manager to help you. We use and recommend NordPass.
Use Secure Internet Connections
There are many opportunities for a hacker to get you information, such as public or unsecured wifi connections.
You should eliminate this possibility whenever you can by using a secure internet connection and avoiding public wifi.
While internet providers will tell you that your home or office wifi is secure, it makes sense to add an additional layer of security to make sure that your device is protected, even inside of their secure network.
You should use a VPN, Virtual Private Network. Think of a VPN like a private tunnel that only you can drive through.
I use and recommend Torguard VPN. There is a Torguard VPN on every device that my family and I use.
I’ve negotiated a discount with Torguard for friends of CryptoCoinMindSet:
Use code CCM and get your VPN with Torguard at 50% off for as long as you have that subscription
One final note about using a VPN. You can find some free options for VPNs, I caution against using these.
The ones that I’ve tried are not completely secure and they have slowed my internet connections considerably.
Like most things in life, you get what you pay for!
Use Multiple Hardware Wallets
You’ve probably heard the phrase, don’t put all your eggs in one basket…
Well that rings true here in crypto. If you have a considerable amount of cryptocurrency, it’s a good idea to have it stored on more than one wallet. It’s an even better idea to have each of those wallets in a separate, secure location.
This simple act provides you with an extra layer of security.
Consider that you may not be able to reach one of your hardware wallets for any number of reasons.
In the meantime, you have another wallet where you can access your crypto assets if you need them.
The bottom line is, the more cryptocurrency you own, the more you want it on more than one device.
Ledger makes having multiple hardware devices easy with their Ledger Family Pack.
Personal Security
While this is not meant to be an in-depth personal security review, you can practice some simple steps to further help protect yourself and your cryptocurrency.
Don’t Publicize Your Crypto Holdings
Once you begin making money in the cryptocurrency and increasing your investments it can be exciting. When this happens, most of us want to share our success.
Avoid doing this!
When you tell people how much cryptocurrency you own, you paint a target on your back. It is easy for criminals to search social media and track you down. This puts you and your family unnecessarily at risk from a physical attack.
Also, if you share your crypto holdings with your family and friends, be sure to tell them not to tell anyone else about this information either. Frankly, it will put them at risk as well.
I’m not saying not to tell people about cryptocurrency, I’m saying just be smart about what you tell them.
Don’t tell people how much you own or where it is stored.
Questions Related To Hardware Wallets
Why is security important in cryptocurrency?
Having good security practices when you invest in cryptocurrency is paramount. Read More About Why Security is Important Here.
Can someone steal my cryptocurrency if they have my wallet address?
Depending on which wallet address they have, it may be possible. Figure Out If Your Cryptocurrency Is At Risk Here.
Disclaimer
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