How to keep your crypto safe? What are hardware wallets and why should you consider getting one?
One of the biggest benefits of owning and holding cryptocurrencies is the decentralization and safety of your assets. Recently however there have been many cases of users losing their funds due to various online scams such as phishing websites or fake airdrops. It’s easy to think that this happens only to inexperienced and new investors but the methods scammers use are constantly evolving and becoming more sophisticated. Is it time you invest in a hardware wallet to keep your holdings safe?
The recent examples of investors having their $MOVE tokens stolen from their wallets raised concerns about the security of online wallets such as Metamask and Trustwallet. Investors spent a lot of time and effort researching and building their portfolio just to have it all taken away in an instant without even understanding how it happened.
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How to store your crypto?
There are two types of crypto wallets you can use for storing your assets: hot wallets and cold wallets. The main difference is that hot wallets connect to the internet, whereas cold wallets stay offline. This makes hot wallets more convenient to use, but not as secure. There’s far less risk of a cold wallet being hacked compared to a hot wallet.
Another difference is the price. Most hot wallets are free to use. Cold wallets typically cost anywhere from $50 to $150. Because of that, crypto investors often wonder at what point the security of a cold wallet makes it worth the price tag.
You could of course store your crypto on centralized exchanges such as Binance or Coinbase. This is a very popular option however in this case the exchange is in control of your assets and there is always the risk of an exchange being hacked as we recently witnessed with Bitmart. The exchange was hacked and nearly 200 million dollars were stolen, even further fueling the debate on where to store crypto assets securely. Another headache when dealing with centralized exchanges is the need for KYC as well as commonly occurring issues with withdrawing funds and limiting accounts.
Why is cold storage your best option?
Cold wallets are hands down the best option for anyone looking to seriously invest in crypto. The biggest benefit is that the Cryptocurrencies you own are never stored within the hardware wallet itself, they always live on the blockchain. The hardware wallet merely stores your private key. That private key opens the lock to your address on the blockchain where your assets actually live. Since the blockchain is everywhere, all you need is your hardware wallet to interact with your tokens.
Another security benefit is that your private keys stored on the hardware wallet are protected by a PIN and an optional passphrase. Should a thief take possession of your hardware wallet, it’s near impossible for them to extract your keys. The keys are never exposed to the internet so they can’t be stolen. That’s why it’s known as cold storage. If your hardware wallet is lost, the assets are backed up with a single seed phrase. A seed phrase, also known as a recovery phrase, is a list of words that re-generate your private key. You can use your seed phrase to move your keys to a different hardware wallet.
What to buy?
When you’ve decided to get a cold wallet, the next question is which cold wallet you should pick. There are quite a few options out there, but the two most popular brands are Ledger and Trezor. It’s worth noting that Ledger’s reputation took a hit after a data breach in July 2020. Its hardware wallets weren’t affected, and nobody lost any crypto. But over 250,000 customer records were leaked, and many of those customers have been targets of threats and phishing scams. Despite the breach, plenty of crypto enthusiasts still vouch for the quality of Ledger’s wallets. Both brands offer entry level devices for around $60 and will definitely make your crypto investing a lot less stressful and more secure.