Crypto Cold Storage in a Hardware Wallet. Crypto wallets on exchanges. Crypto Hot storage Software Wallets. What does all of this mean for your crypto? AND-is cold storage in a hardware wallet or hot storage in a software wallet best for you…or are you comfortable just storing your crypto on an exchange?
Cold Storage (Hardware Wallets)
If you are new to the world of bitcoin and cryptocurrency, you may never have heard the saying “not your keys, not your coins,” so this might not mean much to you when you hear this statement. But…for those who care about the security of their crypto assets, the phrase “Not your keys, not your coins,” holds great meaning.
If you read recent news, you’ll know that the major crypto exchange coinbase recently had many members stating they were hacked with Sim Swap Hacks via phone carriers and entire accounts have been locked out by the masses and massive amount of cryptocurrency holdings have been stolen from tons of users. So, chances are decent that you may be more concerned with storage of your crypto than ever before and now may be the perfect time for you to look at a cold storage hardware wallet for your bitcoin and crypto.
So, what does it mean when someone is talking about owning bitcoin and other crypto assets and they Refer to a hardware wallet/cold storage? And-when people talk about bitcoin and crypto- what does it mean when they say “Not your keys, Not your coins?”
The term “not your keys, not your coins” means you get to be the only person on earth who has access to your cryptocurrency Wallet’s “seed phrase” or “Recovery Phrase or KEY.”
When you have a cold storage hardware wallet like a trezor or ledger or another cold storage wallet, you receive a small piece of hardware that looks similar to a flash drive-and usually connects to your usb-which can be used as a means of accessing and transferring your crypto assets. All crypto is technically held on the blockchain but cold storage in a hardware wallet is a secure way of storing and accessing your crypto assets which prevents others from obtaining the ability to transfer assets out of your account without a key/seed phrase.
You must be very careful when you go to set your hardware wallet up for the very time because this will be your only chance to write down/memorize/store your wallet’s “Key/seed/recovery phrase” and you must do so with precision to avoid having any sort of issues. Once your “key/seed phrase” has been generated once, it is only accessible by the owner of the wallet and the owner alone. in other words-never share your “seed/key” with anyone and also try to follow other commonly mentioned best practices and security tips like making multiple copies of your seed phrase on different pieces of paper, store safely in different locations perhaps, confirm multiple times that you have correctly copied your seed phrase/key to somewhere before proceeding, and do your best to never lose your keys because nobody will be able to help you recover your crypto assets if you lose or forget your key/seed/recovery phrase. even the manufacturers of the cold storage hardware wallets are not able to help you-so tread carefully. and again, just remember to never share your most important information-your seed phrase/keys/recovery phrase-with anyone.
Essentially, the term “Not your keys, not your coins,” refers to the importance of securely storing bitcoin and other crypto assets in a way which gives you-and only you-the access (i.e. keys or seed phrases/passwords/pin numbers, etc.) to your bitcoin/crypto holdings. Of course, we’re referring to using a cold storage hardware wallet in this instance because cold storage of your crypto in a hardware wallet is truly the only method by which you can store your bitcoin and other assets which will truly secure your bitcoin offline and completely unavailable to everyone except you. One amazing thing about cold storage is that you can lose access to the physical hardware wallet itself, but you can still access your funds when you get a new hardware wallet as long as you retain your seed phrases/keys. AND-if you have 2 factor authentication set up for your crypto hardware wallet, which companies like trezor and others offer, then it’s not possible for anyone to send funds out of your wallet without you verifying it on the device.
Now, for some people, honestly they don’t love the whole idea of bitcoin giving you the ability to “be your own bank,” and that’s totally fine.
While everyone can choose to store their crypto in whatever way they see fit-cold storage in a hardware wallet is not as difficult to manage or setup as it may seem like it could be-because even a newbie who isn’t that comfortable with crypto or tech could probably set up a cold storage hardware wallet if needed- and, cold storage is highly recommended by most serious bitcoiners and crypto advocates because cold storage is really the most secure method in existence today that allows individuals to securely hold your crypto assets in a way which ensures you, and you alone, retain ownership and access to your funds.
With cold storage, the absolute most important thing is to never share your seed phrases with anyone and to keep that information as secure as humanly possible because it is the literal “KEY” to your crypto fortunes.
But…even cold storage hardware wallets are not without some drawbacks for certain users, as not every currency can be stored in cold storage due to a lack of compatibility for some assets.
Until something more secure comes along, the “most secure” method known right now for storing your bitcoin and cryptocurrency assets is to hold your assets in cold storage with a hardware wallet.
So, what amount of bitcoin and other crypto should you own before you consider buying a hardware wallet for crypto cold storage?
Cold storage in a hardware wallet is something that any person who owns crypto should consider if you have any desire whatsoever to keep your crypto assets away from the prying eyes of hackers and other bad actors who may choose to steal unsecured bitcoin funds. Some people may advise you that cold storage is not needed until/unless you have “significant” amounts of cryptocurrency, but nobody wants any amount of crypto to be stolen be hackers, right? This is one reason why it’s preferred by many to not even take the chance and most crypto holders who value their security and privacy will typically recommend you take advantage of cold storage in a hardware wallet because it truly is the safest way to store your bitcoin and crypto as of 2021.
Storing Your Crypto In Your Exchange Account
The least secure method of storing your cryptocurrency would be to just leave it in your exchange account because with this method you do not own the “keys” for your crypto.
Since a third-party, i.e. the exchange in this instance, controls your crypto’s keys/seed phrases it means that your crypto is susceptible to disappearing rather easily. Yes, most exchanges work very hard to protect user security…but it’s us users that make it harder, and also the third-party companies like phone carriers can get hacked and expose data as well. In addition to the recent Coinbase attacks and thefts we reports earlier in this article, Not that it is super likely for many of the more reputable players out there to do this, but there are exchanges in the past that have completely dissolved/collapsed virtually overnight and sadly some of these bad operators have also had the nerve to Run off with customer’s funds along with them.
Another drawback of storing your crypto in your exchange account is that- if a hacker or bad actor obtains access to your exchange account somehow- they can (and usually will) steal your funds. Your password and 2-factor authentication unfortunately are not enough to really keep your crypto 100% secure.
Due to the nature of crypto-oftentimes it’s difficult or nearly impossible to ever recover your funds whatsoever if they are stolen by hackers or stolen by the place you are using to store your assets.
Of course, many crypto investors do start out just storing their crypto on an exchange for various reasons-and, honestly, many people don’t get provided fair information that really helps them understand how truly insecure your assets are when on an exchange. but still, in all fairness, it still is probably more secure than having a bank account and-while we do not have the statistic available-the instances of theft and fraud with crypto do pale in comparison the the frequency of bank accounts being hacked/funds stolen/identities stolen also. But alas, it also is undeniable that there are a fraction of crypto users as compared to fiat currency bank account users obviously. Nevertheless-despite the efforts of exchanges to keep assets safe, with methods like sim swaps and hacks of your phone carriers on top of your exchange account-funds are proven to still be susceptible to loss when on an exchange and thus this method of crypto storage really should not be used by anyone who is truly serious about the security of their assets…or at least that’s what most crypto experts would tell you.
Hot Storage Software Wallets For Storing Your Crypto
A “hot Wallet,” meaning a hot storage software wallet, is a software program you access via your desktop/laptop/mobile device and it is a method of crypto storage which many new crypto owners turn to when they want a step up from storage on an exchange account but when they are not quite ready to invest in a cold storage hardware wallet for ultimate security.
Hot storage software wallets- even if they are provided by exchanges- are still more secure than simply storing your crypto in your exchange account. There are also other hot storage software wallets out there, like electrum which is well-regarded among bitcoin owners out there and also meta mask. with the explosion of the ethereum blockchain, smart contracts, nfts, and all other erc-20 crypto tokens and more that are being built on ethereum, it is undeniable that meta mask has started becoming one of the most popular hot wallet options among fans of ethereum and NFTs…and there are lots of other products out there also. Of course, somewhat like cold storage hardware wallets, there are limitations to many hot storage software wallets in the sense that you cannot always store all of your assets in one place. For example, you cannot store bitcoin with metamask and that alone is something that causes many users to either not use metamask or- for those who are forced to do so or choose to due to a desire for exposure to more assets, etc.-to sometimes seek multiple different solutions when it comes to hot storage.
Why is a hot storage software wallet a more secure option for crypto storage than storing your crypto on an exchange account itself, but still generally considered less secure than cold storage in a hardware wallet?
Generally, most crypto experts consider hot storage in a software wallet to still be more secure than storing your crypto in an exchange because- in the case of a hot storage software wallet you do still get to control the keys/seed phrases/recovery phrases whereas you don’t receive this protection simply storing your assets on an exchange.
However, hot storage in a software wallet is still considered somewhat less secure than cold storage in a hardware wallet because software hot storage wallet users sometimes leave traces of their seed phrases/keys on their personal devices which can make those wallets somewhat easy to compromise. nonetheless-with a hot storage software wallet you do still get to control your personal keys and that does get some people a sense of comfort. But-overall-most crypto owners would say you probably do not want to store large amounts of cryptocurrency in hot storage because of security concerns.
After reading this article, we hope you feel a little more comfortable with the world of cryptocurrency and hope you understand a bit more about how you can best store your cryptocurrency assets like bitcoin, ethereum, dogecoin, litecoin, NFTs and so much more. No matter what method of storage you choose to use, it’s important to understand what you are doing and this will help you make more informed decisions.
Most importantly-and no matter what-never share your keys/seed phrases or passwords with anyone regardless of how you store your crypto because that’s one of the best ways the average person can ensure protection of their cryptocurrency assets. For all you crypto enthusiasts and HODLERS out there- and for everyone who is new to crypto alike- minedPool Technologies is your source for all things bitcoin mining and crypto mining. Thanks for reading and remember-store your cryptocurrency securely to protect your investments as much as possible…or at least that’s what most experts would advise you. Happy Hodling!