How To Store Cryptocurrency Safely in 2020

Getting cryptocurrency is one thing while storing it safely requires entirely different skills and knowledge.

This guide teaches you how to protect your funds, choose the right wallet, and avoid the most common hazards of crypto security.

What Is A Crypto Wallet
A cryptocurrency wallet is a software program designed to store your public and private keys, send and receive digital currencies, monitor their balance, and interact with various blockchains. You need to have a cryptocurrency wallet to manage your crypto assets and keep them secure.

There are many cryptocurrency wallets out there, but the essential distinction between them is whether they are hot or cold.

• A hot wallet is connected to the internet and can be accessed at any time.

• A cold wallet is not connected to the internet and allows to store your funds offline. You can still receive funds at any time, but no-one can transfer them out.

Hot wallets include all online cloud wallets, most mobile, and software wallets, and exchanges.

Cold wallets are hardware wallets, offline kept paper wallets, USB and offline similar data storage devices, and even physical bearer items such as physical Bitcoins.

Most cryptocurrency holders use both cold and hot wallets. Hot wallets are handy for frequent trading, while cold wallets are better for long-term holding of crypto assets.

But before we explore different wallets, here is a brief reminder of why keeping your digital assets in exchanges is generally not a good idea.

Types Of Cryptocurrency Wallets
There are four distinct categories of cryptocurrency wallets: paper, hardware, cloud, and online. Let’s have a look at each of them.

Paper Wallets

Paper wallets are generally classified as cold storage. The term “paper wallet” generally refers to a physical copy or paper print of your public and private keys. Other times it means software used to generate a pair of keys along with digital file for printing. Whichever the case, paper wallets can grant you a relatively high level of security. You can import your paper wallet into a software client or simply scan its QR code to move your funds.

If a paper wallet is available for cryptocurrency of your choice, you’re likely to find a guide on how to make one on the project’s website or community page. MyEtherWallet is a universal way to make a paper wallet for Ethereum and all ERC-20 tokens. Use Bitcoin Paper Wallet Generator to generate a paper wallet for Bitcoin.

Although paper wallets are cold, they come with their share of risks, too. For instance, paper wallets can be easily damaged, burned, easy to copy and take pictures, and require mutual trust if you're not making one yourself. To make paper wallets less fragile, sometimes people laminate them, create multiple copies and store them in different locations, engrave them on pieces of metal or other sturdy materials, etc.

Note, that it is a bad idea to keep electronic copies of your paper wallet on your PC. The private key of paper wallet should always be kept offline. Keeping your paper wallet files online makes it as secure as a hot wallet.

Cloud Wallets

Online wallets, by definition, are hot. Using a cloud wallet, your funds can be accessed from any computer, device, or location. They are super convenient, but they store your private keys online and can be controlled by third-parties. Therefore, they are more vulnerable to attacks and theft by design. Popular cloud wallets include:

Guarda
Coinbase
Metamask
Blockchain.info
A safer version of cloud wallets is non-custodial online wallets. They are accessible via web and apps but the service provider does not have access to your private keys. In most cases, not custodial wallets are a part of exchange platform, meaning that they let you trade your coins in a safe and secure manner. Examples of non-custodial cloud wallets include wallets by:

Crypto.com DeFi wallet
LocalCryptos
Bitwala