Storage solutions for your cryptocurrency investment involve considering several options that guarantee varying levels of safety and convenience. With the ever-growing value and appeal of crypto assets to hackers, the right solution for storing your cryptocurrency becomes crucial. Below are the key options available, ranging from most accessible to most secure.
1. Cryptocurrency exchanges: Conveniently vulnerable
While the most accessible method of handling your digital assets is through cryptocurrency exchanges like Binance and Coinbase, they pose the greatest security risk. These platforms serve as custodial services, controlling your private keys and, thus, your funds.
Risk became apparent in 2019 when hackers breached Binance and stole 7,000 Bitcoin worth $40 million.
Binance could cover these losses, but that might not be true for most small exchanges. In 2019, hackers stole $283 million in crypto alone from the exchanges.
Exchange storage best practices:
- Keep only such amounts as are needed for active trading
- Select reliable exchanges with robust security features
- Turn on as many security features as are available, including two-factor authentication
- Use decentralized exchanges, like KyberSwap, to ensure you hold your private keys
2. Software wallets: A comfortable middle ground
Software wallets find the comfort zone between security and accessibility. They are desktop and mobile applications giving access directly to your private keys but usually remaining relatively easy to access.
Some of the most well-known software wallets are:
1. Exodus: Has built-in exchange functionality
2. Jaxx Liberty: Supports multiple currencies
3. Guarda: Web-based access
4. Atomic Wallet: User-friendly interface
Software wallets are only as secure as your device. They are safer than exchanges but still susceptible to malware, viruses, and other cyber attacks. They are best used for managing smaller amounts of cryptocurrency that you may need to access frequently.
3. Hardware wallets: Maximum security for serious investors
Hardware wallets represent the gold standard in cryptocurrency security. They hold your private keys offline and are less likely to fall victim to an online attack. Leaders in this market include:
1. Trezor One and Model T
2. Ledger Nano S and Nano X
3. KeepKey
The primary benefit of hardware wallets is in their design: private keys never leave the device, and all transactions require physical confirmation. This two-layer security system makes them suitable for storing significant amounts of cryptocurrency.
Despite superior security, hardware wallets have several drawbacks:
- Initial cost: it starts from around $55 for basic models
- Not so convenient for frequent trading
- Require careful backup of recovery phrases
- Require physical storage in a secure location
4. Advanced option: Multisignature wallets
Multisignature (multisig) wallets are also available for users who need the best institutional-grade security. These wallets require multiple signatures to verify transactions. They would be suitable in cases like business partnerships, corporate treasury management, and shared fund administration.
Popular solutions for multisig wallets are Electrum and Armory, which may be extended by integrating hardware wallets to secure your coins completely. Additionally, Hex Trust provides an institutional-grade custody solution, offering regulated and highly secure multisig wallet services. By combining robust security measures with compliance and operational efficiency, Hex Trust is an excellent choice for institutions looking to safeguard digital assets while maintaining flexibility.
However, this increased security comes at the cost of convenience, making multisig wallets less practical for frequent transactions.
Best practices for storing cryptocurrency
Regardless of the chosen method of storage, here are some essential security practices:
- Do not share your private keys or recovery phrases.
- In more than one safe place, store a backup of information.
- Use different, strong passwords for all your accounts.
- Wherever possible, use two-factor authentication.
- From time to time, update the wallet software.
- Keep large holdings on separate storage systems.
Conclusion
The best solution depends on a specific need or an investor's trading style and ability to take the risk.
Remember that cryptocurrency transactions are irreversible, and there is no central authority to resolve disputes. Properly securing your digital assets is not only recommended but essential for protecting your investment.
By following these guidelines and choosing the right storage solutions, you can greatly reduce the chances of losing your cryptocurrency while keeping it easily accessible when needed.