Tuesday, October 20, 2020
Ledger Nano X - The secure hardware wallet
Home DeFi Basics Why & How to Store Cryptocurrency Securely

Why & How to Store Cryptocurrency Securely

  Cryptocurrency is meant to give investors peace of mind, knowing that they own their coins to spend, save or utilize as they wish. New holders in the space can jump right in, without knowing the dramatic history or the true risks to ‘being your own bank’.

There have been a few major hacks in the cryptosphere over the years, a few notable ones, shown on the Infographic below.

The biggest mistake many new and seasoned investors alike make, is storing your cryptocurrency on an exchange. As the saying goes, “not your keys, not your crypto”.

Infophraphic Crypto History

There have been major improvements to the security of exchanges, such as 2FA (two factor authenticator), SMS verification, email verification and different passwords / pins for multiple sections of certain sections for an exchange (i.e. Main deposit/withdrawal account and trading account).

The issue with these is that although it makes it much harder for malicious parties to gain access to a user’s account when trying to compromise their account, it luls a user into a false sense of security; one may forget that if the exchange themselves has an internal issue, whether it be from a bad actor working from the inside, a malicious strategy set up from the exchange founders themselves, or even just a security hole in the system which could allow for a hacker to exploit and drain funds, these end-user measures will be useless as a defence.

The second mistake that many investors make is withdrawing their funds onto an online wallet, whether it be from the app store / play store, or onto their desktop wallet. Although the cryptocurrency private keys belong to the user so they are in full control of it, this strategy of storing cryptocurrency could actually be worse than storing them on an exchange, due to the fact that there is no second layer of security involved so if the device is compromised, there would be no way of stopping the hacker from taking the funds.

The safest way to store cryptocurrency

In our opinion, the safest way to store cryptocurrency is via a hardware wallet. These little devices are easy to use and allow for you to store your private keys offline. If your computer is compromised, they can not access your cryptocurrency because you need to verify transactions and any interactions on the wallet by clicking buttons on the actual hardware wallet. There is always a screen that shows the full transaction address on the hardware wallet for when you need to send a transaction.

Always buy a hardware wallet from the official site. I.e. Ledger.com. If you buy it off a 3rd party website, there is a chance it can be tampered with.

When setting up your hardware wallet, make sure that it does not come with an existing seed phrase written on the papers. Everything should be blank and you will need to write down a 24 word key yourself. Never store these online, make sure you use your best handwriting and write out a couple of them. Store them in safe places that nobody else will ever be able to access.

The good thing about the hardware wallet is that if you ever break it or if it gets corrupted for any reason, you can restore your cryptocurrency by inputting the 24 word key into a new device.

Out of the hardware wallets available, my favourite is the Ledger Nano X. Here is the best guide I found for setting up a Ledger Nano X below. If you want to buy one with my official referral link, it would be much appreciated and will be the same price. If you want to buy the Ledger Nano X without my referral link, then you can buy it from here.

Setting up a Ledger Nano X Video Tutorial

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