Cryptocurrencies are gaining in popularity and is leading everyone to ask the same question: How can I keep my cryptocurrency safe? Taylor goes into the steps you take to make sure your crypto is safe and secure, all while maintaining control over your own wallet and funds.
The prices of tokens has soared lately, and I want to add some extra security. What are my options?
It’s great that you’re thinking about the future and how you can protect your cryptocurrency. The first thing to know is that there are varying levels of security with tradeoffs in terms of convenience. Many people use a hosted service, such as Coinbase, however these are custodial services where you don’t actually control the coins. If your account is shutdown for any reason, you have no actionable recourse outside the court system. That’s why blockchain enthusiasts prefer to control their own coins.
Okay, I think I’m ready to control my own cryptocurrency. How do I get started?
The easiest way is to simply hold them in a wallet you control on your computer or smartphone. For smaller amounts, a “hot wallet” can be useful—like keeping some cash in your pocket. It’s great for convenience, but computers can be easily infected and phones can be lost, damaged, or stolen. For this reason, it’s recommended to store larger amounts in a separate, more secure wallet—similar to how people use savings accounts at a bank.
What do I need for the cryptocurrency “savings account”?
These sort of separate wallets are often referred to as “cold storage”. They can be as simple as a piece of paper or as complex as a specialized hardware device. Some even come in the form of stamped metal that will survive fire & water damage!
That sounds… complicated. Got anything easy?
Actually, hardware wallets can be incredibly easy to use and are very secure. Devices the the Ledger Nano S are inexpensive and support multiple tokens. They often have companion software on a desktop/laptop that you use to communicate with them, but their main goal is to protect your private key—the most sensitive aspect of blockchains & cryptography.
I can’t afford that… and I’m not sure I trust some extra hardware to work forever. What’s wrong with writing down my private key?
There’s nothing inherently wrong with writing down your private key, except that someone else can see it, or it could degrade over time. For that reason, you want it to be very difficult to access and do so only in emergencies. This is actually the recovery method for hardware device should you ever need to manually recover them. As part of the setup process, you will need to write down your “seed phrase”, which is where your private keys come from.
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