Ways to store Cryptocurrencies
It is very important to store your cryptocurrencies right. The most important thing you need to know is, that wallets have a private key, which is a unique passwort that grants you access to your cryptocurrencies. Your cryptocurrencies aren't really stored on a PC, App or exchange, rather they are stored on the blockchain. With your private key you can access them. The safer this key is, the safer your cryptocurrencies are.
In the following there are several different ways to store your cryptocurrencies.
Every exchange platform on which you purchase or trade cryptocurrencies creates a wallet for every different cryptocurrencies. These wallets don't give you a private key, you can access your various cryptocurrencies by simply logging into your platform account. However, there are several problems:
- The exchange platforms (especially when centralized) can shut down or be hacked. In this case your cryptocurrencies can easily be lost
- Hackers can hack your account by getting access to your e-mail account, your phone, or with the password of your account
- Only the exchange platform knows the private key of your wallets. Therefore, it has access to all cryptocurrencies stored on this platform. This makes your wallet vulnerable for hacking attackts
To store your cryptocurrencies on an online account isn't very safe. Never store all your funds on an account!
Most cryptocurrencies have a software wallet that can be stored on your computer. They are more safe than online platform wallets. However, they do have some disadvantages too:
- Desktop wallets require space on your PC or Mac and it takes time to synchronize with the specific blockchain
- Nearly every cryptocurrency has its own wallet - this can lead to having a lot of wallets on your PC or Mac
- They can get hacked in case a hacker can access your PC through a keylog attack or by taking screen shots of your private key
- The software itself can have bugs and thus can't be totally secure. However, most wallets have undergone hacking tests
Remember, the most important thing you need to do is to store your private key safely. Most wallets have the possibility to create a back up file (.dat) which contains your private key information. This file gives you access to your wallets (from any computer). If there is no file, there is a pass phrase or seed. Make sure to never store this passphrase on a computer or mobile phone.
This option is the safest one. A hardware wallet is a wallet that is offline (never connects to the internet). This means, that the private key has never been on a device with a screen that has been online. Thus, it is impossible to get hacked. Again, never store the passphrase on any device connected to the internet.
You can store your private key and wallet on a paper sheet. In this case, your private key is on that piece of paper. To be safe, print it out with a computer that has never been online. If you do so, no one can possibly have a screen shot of your private key.