How to properly store your crypto is something many people overlook when they first start out buying it. At the beginning, the amounts may seem small and insignificant so its easy to forget about this but it’s important to think about this sooner rather than later as it could be a costly mistake. Let’s take a look at some of the ways people choose to store their crypto coins and tokens.
Leaving crypto on a crypto exchange (such as Coinbase or Binance)
Pros:
- Quick and easy to set up.
- No cost.
- Useful for traders to do frequent transactions with ease.
Cons:
- You don’t own the private keys, meaning the Exchange is in full control of the crypto, not you.
- If something happens to the exchange, you could lose your crypto.
- If you enter a dispute with the exchange for any reason, your crypto assets could be frozen.
- Not all crypto tokens are listed on centralized exchanges.
- Presales and early entry into many tokens is not possible on centralized exchanges.
Storing them in a hot / software wallet (such as Metamask or Trust Wallet)
Pros:
- Quick and easy to set up
- No cost
- Access to decentralized exchanges
- Easy for transactions on the go
Cons:
- Unlike a cold / hardware wallet – this is susceptible to hacks if you connect the wallet to a suspicious website.
- When setting up, the seed phrase is displayed on screen which adds the risk of it being compromised.
Storing them on a cold storage / hardware wallet (for example Ledger Nano or Trezor)
Pros:
- You are in full control of the private keys.
- Private key is never exposed to the internet and is secured on a small physical device.
- You need to plug in the device and enter a PIN if you wish to send out from your wallet.
- Useful for long term holders to store any not think about it.
- Access to decentralized exchanges.
- Seed phrase is generated and displayed on the physical device, not on your computer.
Cons:
- Cost involved with purchasing a hardware wallet.
- Slower to use for frequent transactions.
Our recommendations
Hardware Wallet
The reason for this is that it prevents the possibility of a malicious transaction as the physical device needs to be present and unlocked for a transaction to take place. Even after that, you need to approve each transaction from the device.
Important points to know about a hardware wallet:
- Only purchase directly from the manufacturer and NOT online stores such as Amazon or eBay. The reason for this is because the may have already been activated or tampered with and there is no guarantee they are safe to use.
- You will be prompted to write down your seed phrase when activating the device. NEVER store this digitally (on a computer or by taking a photo etc). This should stay in a physical, non-digital form.
- Once you have written down your seed phrase, you will never need this for any transaction. It is solely for you to recreate another hardware wallet with your crypto on, should yours become lost or damaged. Remember that the crypto is not actually stored on the device but the private key (in other words, your seed phrase) which gives access to the crypto (which is stored on the blockchain) is.
- If the device is delivered and appears to have been tampered with or damaged – do not use it, send it back immediately and request a replacement.
- DO NOT GIVE YOUR SEED PHRASE TO ANYONE – NO MATTER WHAT THEY TELL YOU. You will probably find many scammers operating in crypto social media. They will pretend to be some kind of helpdesk support and will probably try to get you to give up your seed phrase. As soon as you give up your seed phrase, scammers will empty your account in seconds.
Which hardware wallet should I choose?
There are a few different providers of hardware wallets but the two which are the most well-known are Ledger and Trezor. We decided to purchase a Ledger Nano X and have been very happy with it so far. Here is a short video from the team at Ledger:
The Ledger currently comes in two different models, the S and the X. We felt that the X was the better choice as it allowed for a greater number of different types of crypto assets to be stored on it (100 on the X compared with just 3 on the S). It does however come with a higher price tag. You can see the comparisons between the two models on their website here.
Have a question about storing your crypto that we haven’t covered here? Please contact us.
