SECURE CRYPTO STORAGE ESSENTIALS
- Securely storing cryptocurrency means protecting your private keys.
- Two ways of storing cryptocurrency: on an exchange or in a wallet you control.
- There are 5 main types of cryptocurrency wallets: online, desktop, mobile, paper and hardware.
- Hold the majority of cryptocurrency in cold storage for security and store the minimum amount online for convenient everyday use.
- A securely-stored backup is essential.
The basics of secure crypto storage
Storing crypto relies on a set of two cryptographic keys – a public key, which acts as the door to your crypto safety deposit box, and a private key, which is the combination used to unlock it. Public keys are visible to everyone, while private keys should only be known to you.
When we talk about the secure storage of cryptocurrency, we are actually talking about the secure storage of private keys.
If you keep your funds at an exchange, like Bitstamp, the exchange takes full responsibility for safeguarding the private keys and takes special precautions to ensure that your assets are safe. If you decide to store the coins yourself, it is up to you to select a secure cryptocurrency wallet.
Visit our markets page to buy cryptocurrencies at the Bitstamp Exchange.
There are a number of different cryptocurrency wallet types available – from online software or hardware solutions to traditional analog pen and paper. It is important to understand the advantages and disadvantages of each type, so you can keep your coins and tokens safe.
Types of crypto wallets
An online crypto wallet can be accessed via any web browser. Most are free to use and support multiple cryptocurrencies. With your private keys instantly accessible online, they are suitable for users looking for a fast way to perform transactions.
While convenient, online storage of private keys opens up options for exploitation. The vulnerability lies in the transaction data having to be transmitted from the server of your wallet provider to your device and vice versa. A responsible wallet provider will try to make sure these transmissions are secure, but you can never be too sure.
A desktop wallet is a software program that stores your private keys on your personal computer’s hard drive. Most desktop wallets can be downloaded for free and are user-friendly.
If you keep your computer offline, a desktop wallet is a secure way of storing cryptocurrencies. But since most computers are used to access the internet, desktop wallets are vulnerable to hacks or malware.
A mobile wallet is a mobile app that enables access to private keys on the move. These apps often include practical features, such as QR code scanning, contactless payment options and face-to-face trading, making them a convenient choice for those who use cryptocurrencies in everyday life.
Practicality, however, should not outweigh security. You should always make sure to select a safe and reliable mobile wallet that is built robustly and supports essential security features, such as two-factor authentication. Bitstamp provides a mobile wallet with all the functionalities of the exchange built to rigorous standards of security. Find out more about our Bitstamp mobile wallet.
The least technologically-sophisticated way of storing crypto is to print the private and public keys on paper. This method provides a high level of security, as your assets are stored completely offline. Keep in mind, however, that paper wallets are as secure as the place you store them.
The disadvantage of using a paper wallet is that you have to transfer your keys to a software wallet before any crypto transactions can be made by typing them in manually each time you want to use cryptocurrency. If you’re an every-day user, the difficulty of this process can outweigh the security benefits of paper wallets.
Storing cryptocurrency offline is commonly referred to as “cold storage” and is considered the safest storage option, since it is immune to hacks. A hardware wallet combines the advantages of both software and paper wallets, providing convenience as well as security. Private keys are stored offline on specially-built hardware devices.
Consumer-grade hardware wallets sometimes look similar to flash drives. To perform crypto transactions, the device is simply connected to a computer (or, in some cases, even a smartphone) that is connected to the internet. The keys are stored on a protected part of the microcontroller, which secures them while the wallet is connected to another device.
Such hardware wallets usually come with “seed words,” which enable the recovery of private keys in case the device breaks down or gets lost. When choosing your device, it is best to opt for one that features a display – transaction information displayed on a hardware wallet is more trustworthy than the data displayed online.
Keep your crypto wallet safe
Owning crypto comes with full responsibility for the safety of your private keys. The best course of action is to store the majority of coins in cold storage and keep only the minimum amount in software wallets, to cater to your everyday needs.
Protect your wallet with a unique password of at least 12 random upper- and lowercase letters, numbers and symbols. If using a software wallet that supports two-factor authentication, keep it on at all times.
Your wallet is only as secure as the device it is hosted on, so protect your electronic devices from hacks and viruses and keep up with your wallet provider's security updates.
Back up your crypto wallet regularly to maintain control of your private keys. If your wallet is compromised or breaks down, your cryptocurrencies can be lost forever. It is best to store backups on various secure mediums (like paper wallets), and always encrypt backups stored online.
It is also wise to make sure that your loved ones will be able to access your funds, should anything happen to you. If you own significant amounts of cryptocurrency, it is prudent to include information about your wallets in your will.
If you do not want to deal with all these issues, an alternative is to keep your coins at a reputable exchange, like Bitstamp.
Storing crypto at an exchange
When making fiat-to-crypto transactions (and vice versa) on an exchange, it is important to choose a safe and reliable platform. Reputable exchanges take great precautions to ensure the safety of their users' funds. Bitstamp keeps approximately 95% of all crypto assets in cold storage and uses a MultiSig online wallet for the remaining 2%.
Bitstamp has been around since 2011 and has established itself as a safe and reliable venue for over four million customers worldwide. You can register your free account and get access to the world’s biggest cryptocurrencies by market cap. Then carefully decide how you’re going to store your digital assets.
This webpage has been approved as a financial promotion by Bitstamp UK Limited which is registered with the UK’s Financial Conduct Authority. Please read the Risk Warning Statement before investing. Cryptoassets and cryptoasset services are not regulated by the Financial Conduct Authority. You are unlikely to be protected if something goes wrong. Your investment may go down as well as up. You may be liable to pay Capital Gains Tax on any profits you earn.