Post Menu and Details.
- How to safely store cryptocurrencies online
- Advantages of hot wallets:
- Keep cryptocurrencies safe
- How to safely store cryptocurrencies offline
- Benefits of cold wallets:
- Disadvantages of cold wallets:
Reading time: ~4 minutes
Many investors hold their cryptocurrencies on online exchanges. But hacker attacks show that storing coins safely outside of exchanges can pay off. The possibilities at a glance.
Cryptocurrencies such as Bitcoin, Ethereum, Solana, or Cardano are becoming increasingly popular with investors. In addition to shares, different cyber currencies are often added to the depots. Anyone who buys Bitcoin and Co. on one of the numerous crypto platforms does not own the coins. They remain with the respective stock exchange but are held and managed there for the customer. Similar to how other valuables things are kept in a vault, Users can physically secure cryptocurrencies. It is a great way to keep your cryptocurrencies safe.
The best way to protect yourself is to avoid becoming a target is to tell as few people as possible that you own bitcoin.
Also, never please tell us how much bitcoin you have. And if you keep thousands of euros in an old sock at home, you don’t tell everyone that either. Perhaps your possessions are not worth that much now, and you, therefore, do not consider the risk to be that great but consider whether that is also the case when the price may be much higher in a few years. Once you’ve told us how much you have, you can’t undo it in the future.
Preferably do not tell when you bought it, because then people will also know approximately what price you paid. After all, with a little bit of prior knowledge about you and an indication of your purchase price, an estimate can be made about how much you may have. Unfortunately, those estimates are often too high; Bitcoiners are often thought to be rich.
Keep Bitcoin, Ethereum, and Co. safe online and publicly – this is how it works.
How to safely store cryptocurrencies online
Depots at crypto exchanges such as Kraken are so-called hot wallets. A hot wallet is continuously connected to the Internet. Therefore, it does not inherently provide the highest possible security. The provider could become the victim of a hacker attack, and third parties could access the customer’s coins. The providers are aware of this danger and try to protect their hot wallets against such hacker attacks as best as possible. However, a particular risk always remains.
Advantages of hot wallets:
Hot wallets offer their users a high level of convenience. Because the wallet is continuously connected to the Internet, customers can trade their coins quickly and easily using various devices. Especially those who want to trade regularly can react so quickly to current price developments – however, users should take the trading fees incurred by the crypto platforms into account here. The security standard for hot wallets from crypto providers is already very high. A primary risk always remains with this variant.
Disadvantages of hot wallets: Hot wallets are naturally not the safest form of storing Bitcoin and Co., as they are constantly connected to the Internet. Because of this constant internet connection, hot wallets are popular and primary targets for hackers.
Many crypto exchanges offer their customers additional security options to choose from to secure the coins. The crypto platform Coinbase, for example, offers so-called “vaults” for individual cryptocurrencies. These safes add another level of protection for users. To set up such a safe, users need a second email address – for example, a family member – to legitimize and carry out transactions with the coins held.
Keep cryptocurrencies safe
If users have created such a safe and deposited the respective cryptocurrency, users must first withdraw these coins for transactions from the safe before users can trade them. Crypto exchange will only release the payout of the coins from the vault if the owners of both registered email addresses agree to the transaction within 48 hours. The Crypto platform will notify you of this by email. If a third party has access to these coins, the registered email address will be informed about a requested debit. You can now cancel this requested charge within 48 hours. In addition to the crypto platform, hackers would also have to hack both registered email addresses to get to the coins in the vault.
On the one hand, this limits the options for action since customers can no longer react to short-term price developments, but the security of the coins held is increased.
Investors should note that a safe is only possible with a constant internet connection and is not free of dangers. At the same time, the exchanges themselves already offer a very high-security standard. For example, the Coinbase website uses AES-256 encryption, an exceptionally high encryption standard, to protect users’ banking information. In addition, Coinbase backs up 98 percent of all digital assets to offline storage.
In addition to Coinbase, other providers also offer similar security tools. Also, in addition to general encryption, the Kraken crypto platform also offers additional options for users. For example, most digital assets at Kraken are stored on a cold wallet which means that the coins are also stored offline. In addition, users can set up an additional security option with a so-called master key: Investors must enter this master key – in addition to their login – on the platform to gain access to their coins.
How to safely store cryptocurrencies offline
Firstly, storing coins offline on so-called hardware wallets is the safest way to store your cryptocurrencies. Furthermore, crypto values are safe on these hardware wallets or cold wallets since they are not connected to the Internet or only for a short time. Therefore, users can store cryptocurrencies such as Bitcoin, Ethereum, or Cardano offline in the long term. Furthermore, these hardware wallets are comparable in appearance to external hard drives or USB sticks.
The cold wallets have no connection to the Internet, except when users connect them for the transfer.
Benefits of cold wallets:
Putting away cryptocurrencies offline offers additional security than a hot wallet as they offer a nominal attack surface for hackers. A user is the one who owns the key only. Crypto exchange doesn’t play intermediate here.
Disadvantages of cold wallets:
Users of cold wallets have to accept some compromises and a high level of security. After coins are transferred, only a user is subject to its accountability.
There are different providers of cold wallets that look like either external hard drives or USB sticks. The coins held online can be transferred from the crypto exchanges to these backup media.
Thank you for reading!