Whether you invest in Bitcoin, Ethereum, or any other type of cryptocurrency, learning how to store your crypto is essential. This is especially important to investors entering the market because crypto currencies don’t have the same protections as a traditional bank or investment account.
When you buy crypto, you receive a public and private key. These are codes that allow you to access the place where your coins are stored. In other words, crypto owners don’t store their coins in their own computers or a personal hard drive. This is why having safe storage for your crypto is the first step to protecting your digital assets.
Depending on the use that you give your crypto, there are several ways to store it. Continue reading to learn about the available storage methods for your cryptocurrency and find the one that’s most convenient for your needs.
Leave Your Crypto Coins in an Exchange
Before you can buy cryptocurrency in an exchange, you need to first create an account. For this reason, many investors choose to just store their coins in the same account where they bought them.
Currently, some of the most well-known exchanges include:
What are the advantages and disadvantages?
Convenience is the biggest advantage of keeping your crypto coins in an exchange. By leaving them in the same place where you bought them, you save time and avoid transfer fees. In addition, it’s also easier to trade them for other coins. If you plan on actively buying and selling your crypto, leaving them in the exchange makes these transactions more straightforward.
Although cryptocurrencies are decentralized assets, it’s important to point out that exchanges are centralized institutions. This means that exchanges are run in the same way as traditional companies. They have executives who control the decision-making process and also have databases that store all of the account owners’ information.
It’s important to note that by storing your crypto in an exchange, there is a risk that the institution could be hacked and your keys could be compromised. There’s also the risk that the exchange could close unexpectedly and you could potentially lose your coins.
Before choosing a cryptocurrency exchange, the news platform Cryptonews recommends reviewing the following items:
- Access: Certain national or local regulations could block access to some exchanges.
- Security: The safest exchanges start with HTTPS, provide double authentication, and perform audits that constantly monitor activity.
- Transparency: Look for an exchange that shares its owners’ information, their institution’s physical address, and who the other members of the team are.
- Volume: The exchanges with the largest transaction volume have greater liquidity and a better reputation.
- Fees and commissions: Research the fees that each exchange charges for buying and selling on their platform. An average cost is 1% per transaction, though some exchanges also charge fees for withdrawals and deposits.
- Payment methods: Some exchanges accept credit or debit card payments, such as your PODERcard. Others also accept PayPal or bank transfers. Some only accept deposits of other cryptocurrencies.
Moving Your Crypto Coins to a Wallet
Due to the inherent risks of leaving your crypto in an exchange, many owners prefer to keep a small number of their coins in an exchange and transfer the rest to a wallet. By leaving your coins in an exchange, you can trade them for others and continue investing. In your wallet, you can store the coins that you wish to use for other types of transactions or that you want to save in a more secure manner.
What Is a Wallet and How Does It Work?
Crypto wallets are digital accounts for storing, sending, and receiving cryptocurrency keys. They work as a personal accounting book that keeps records of crypto transactions.
Some wallets can only send and receive a specific type of cryptocurrency. Others work with many types of coins.
Your public key is the address where you can receive funds directly into your wallet. With your private key, you can access the coins that you own in the blockchain. From this wallet, you can also send funds to other people. You only need your beneficiary’s address or public key to send a crypto transfer.
What Types of Wallets Are There?
There are two types of wallets: hot wallets and cold wallets. Hot wallets are connected directly to the Internet. Cold wallets are portable devices that store all of your digital assets’ information.
Hot wallets come in the form of mobile apps or software that you install onto your computer. However, hot wallets don’t actually store your coins. Crypto wallets store the keys that allow you to access your digital assets. Because these wallets function through an Internet connection, there is always the possibility that your information could get stolen.
There are three types of hot wallets:
1. Desktop wallets
Desktop wallets are apps that are installed directly on your desktop or laptop computer. When you use this type of storage system, you must also consider your computer’s security measures. It’s also recommended to implement computer backups.
Some of the most popular desktop wallets include:
2. Mobile wallets
If you prefer to operate from your phone, mobile wallets offer a more convenient way to access your crypto on the go. These wallets allow you to send and receive payments using iOS and Android operating systems. Unfortunately, there is always the risk of being hacked as mobile wallets are connected to the Internet.
The most popular mobile wallets include:
3. Web wallets
Some exchanges, like Coinbase, and agents, such as Robinhood, offer their own crypto wallets. These are known as web wallets. For greater convenience, they are also accessible through mobile or desktop platforms. However, these wallets limit the type of transactions you can make. Usually, they don’t allow for payments between individuals.
Cold wallets offer the greatest level of security to store your crypto currency keys. Since they are not connected to the Internet, these portable external devices prevent access from non-authorized individuals. But with cold wallets, there is always the risk of losing the device itself. In addition, if another person gets a hold of your cold wallet, they can access your crypto and become the owner of your coins.
Some cold wallet providers include:
What is the best option to store your crypto coins?
For many investors, the best option is to store their crypto coins across different platforms (some in their exchange account, some in their hot wallet, and another portion in their cold wallet). Diversification across the different storage methods allows investors to lower their risk of hacking or theft.
The amount of coins you store in each of these options depends on how you plan to use your crypto. If you buy and sell coins as an investment tool, it’s a good idea to keep a larger percentage in a trustworthy exchange. If you prefer to use crypto as a currency, a hot wallet could be your best option. If you only want to buy and hold your cryptocurrency in a safe spot, consider a cold wallet.
Regardless of your preferred storage method, it’s important to remember that digital assets like Bitcoin and other cryptocurrencies are highly volatile. Just like with traditional investments, remember to diversify your assets and limit your risk.
Frequently Asked Questions
Where to store my crypto?
You can store your digital assets in an exchange or in a crypto wallet. Your best method depends on how you plan to use your crypto assets and the security level that you’re looking for.
How to cold store crypto coins
Cold storage options are considered the safest way to store your crypto since they have no Internet connection. However, these devices can also get lost or stolen. If someone else finds the cold wallet, this person can access your keys and become the owner of your crypto.
How do you store Bitcoin?
There are three methods to store Bitcoin and other cryptocurrencies:
- In your exchange account
- In a hot wallet
- In a cold wallet
How do I protect my crypto coins?
To store your crypto coins at the highest protection level, experts recommend:
- Using a two-step authentication method
- Choosing a cold wallet without Internet connection
- Limiting your entries to only one device
- Storing your cold wallet in a safe location
To stay up to date with the most recent crypto information, visit our page frequently and remember that Knowledge is Power (SABEResPODER)!