How to store cryptocurrencies
Whether you invest in Bitcoin, Ethereum, or any other cryptocurrency, learning how to store your crypto is essential for investors looking to enter this market. Especially since cryptocurrencies do not have the same protections as a traditional bank account or an investment account.
When you buy cryptocurrencies, you receive a public key and a private key. These keys give you access to the place in the network where these coins are located. In other words, crypto owners cannot store their coins on their own computer or personal hard drive. This is why storing your cryptocurrencies safely is the first step in protecting your digital assets.
Depending on what you want to use your crypto for , there are several ways to store it. In this article, we present the available storage methods for you to discover which one is best for you.
Leave your cryptocurrencies in an exchange
When you buy cryptocurrencies on an exchange , you need to create an account. This is why many investors decide to only store their coins in the same account where they were purchased.
Today, the most recognized exchanges are:
What advantages and disadvantages does it have?
The biggest advantage of holding your cryptocurrencies on an exchange is the convenience. By leaving them in the same place where you bought them, you save time and transfer costs.
Another advantage of keeping your coins on the exchange is the ease of exchanging them for other currencies. If you plan to actively buy and sell your cryptocurrencies, leaving them on the exchange makes these transactions easier for you.
But even though cryptocurrencies themselves are decentralized assets, it is important to note that exchanges are centralized institutions. This means that the exchanges work like traditional companies, with executives who control the decisions and databases that store all the information of the account holders.
By holding your cryptocurrencies on an exchange , there is a risk that the exchange will be hacked and your private keys will be compromised. There is also a risk that the exchange will close unexpectedly and along with its demise you may lose your coins.
To choose a cryptocurrency exchange, the Cryptonews news platform recommends taking into account the following:
- Access: Certain national or local regulations may block access to some exchanges.
- Security: The most secure exchanges start with HTTPS, have double authentication, and have auditing programs that constantly monitor activity.
- Transparency: Look for an exchange that discloses information about its owners, physical address, and team members.
- Volume: Exchanges with higher transaction volume have more liquidity and a better reputation.
- Fees and commissions: Research what are the fees that each exchange charges for each purchase or sale. An average cost is 1% per transaction, although there are also some exchanges that charge for withdrawals and deposits.
Move your cryptocurrencies to a wallet (cryptocurrency wallet)
Due to the inherent risks of leaving their crypto on an exchange, many crypto owners prefer to keep a small amount on the exchange and transfer the rest to a wallet . By leaving coins on the exchange, you can exchange them for others and continue investing. In a wallet, you can store coins that you want to use for other types of transactions or to store more securely.
What is a wallet and how does it work?
Cryptocurrency wallets or purses are digital accounts used to store, send and receive cryptocurrency keys. They work like a personal ledger that keeps track of your crypto transactions .
Some wallets can only send and receive one type of cryptocurrency. Others work with many types of currencies.
Your public key is the address where you can receive funds directly to your wallet. With your private key, you can access the cryptocurrencies you own on the blockchain . From this wallet, you can also send funds to other people. You only need the beneficiary’s address or public key to make a shipment.
What kind of wallets are there?
There are two types of wallets : some are directly connected to the Internet and are known as hot wallets , others are portable devices that contain all the information of your digital assets and are known as cold wallets .
hot wallets
By having an Internet connection, hot wallets work like telephone applications or programs that are installed on your computer. It is important to remember that hot wallets do not store your coins. Cryptocurrency wallets store the keys with which you can access your assets. And being connected to the Internet, these wallets carry a degree of risk as they are susceptible to theft of your information.
There are three types of hot wallets :
1. Desktop wallets
They are applications that run and store their keys on your own computer. When using this type of storage system, you must take care of the security of your computer. It is also recommended that you implement a backup system for your information.
Some of the most popular desktop wallets include:
2. Mobile wallets
If you prefer to trade from your phone, mobile wallets offer the ability to access your crypto conveniently. These wallets allow you to make payments and receive shipments with the iOS and Android operating systems. But, being connected to the Internet, they also run certain risks.
The most popular mobile wallets include:
- Mycelium (information only available in English)
- ZenGo (information only available in English)
- Blockstream Green
3. Web wallets
Some exchanges like Coinbase and brokers like Robinhood offer their own cryptocurrency wallets. These are known as web wallets and can be used in their mobile version or downloaded to your computer. However, these wallets have limited use and generally cannot be used to issue payments between individuals.
cold wallets
Cold wallets offer maximum security when storing your cryptocurrency keys. By not being connected to the Internet, these external portable devices prevent access by unauthorized persons. However, they carry the risk of being lost, and once these wallets reach the hands of other people, they can access their cryptocurrencies and become owners of them.
Some cold wallet providers include:
- Ledger (information only available in English)
- Trezor (information only available in English)
- CoolWallet (information only available in English)
What is the best option to store your cryptocurrencies?
For many investors, the best option for holding cryptocurrencies is to keep some of their digital assets on exchanges, some in their hot wallets , and some in cold wallets . In this way, they manage to diversify their storage methods and reduce their risk.
How much to store in each of these options depends on what you use your crypto for . If you buy and sell cryptocurrencies as an investment tool, it’s a good idea to hold a larger percentage on a reputable exchange . If you prefer to use it as currency, a hot wallet may be your best option. But if you just want to buy and hold your crypto on a secure site, consider a cold wallet .
Either way, it is important to remember that digital assets like Bitcoin and other cryptocurrencies have a high degree of fluctuation. As with traditional investments, remember to diversify your assets and not take too much risk.
Frequent questions
Where to store my cryptocurrencies?
Digital assets can be held on an exchange or in a cryptocurrency wallet. The best method for you depends on what you intend to use your crypto for and the degree of security you seek.
How to keep cryptocurrencies cold?
With no Internet connection, cryptocurrency cold storage is considered the safest option. However, these devices can be lost. If someone else finds them, these people can access your keys and become the owners of your cryptocurrencies.
How are Bitcoins stored?
There are three methods to store Bitcoins and other cryptocurrencies:
- in your exchange account ,
- in a hot wallet ,
- in a cold wallet .
How to protect my cryptocurrencies?
If you want to store your cryptocurrencies with the highest level of protection, experts recommend the following:
- use a two-step authentication system,
- choose a cold wallet without internet connection,
- limit your income to a single device,
- keep your cold wallet in a safe place.
