The rapid growth of crypto has attracted both legitimate investors and cybercriminals seeking to exploit vulnerabilities in crypto and NFT storage. To ensure the safety of your cryptocurrency holdings, it's crucial to avoid common crypto storage mistakes and adopt best practices. This comprehensive guide will help you navigate crypto storage, providing clear, concise explanations and actionable insights to protect your investments.
Understanding Wallet Types and Their Importance
Storing your cryptocurrency in the right wallet is paramount. There are two main types of wallets: non-custodial wallets (often referred to as "cold wallets") and custodial wallets. Understanding the differences between these wallets and their associated risks is vital to securing your crypto.
- Non-custodial Wallets: The Cold Wallet
Non-custodial, or self-custody, wallets allow you to control your private keys and own your cryptocurrency holdings. When using a non-custodial wallet service, you're fully responsible for remembering your private keys and maintaining security measures to protect your funds. If you forget your private keys, which is common, you will be unable to access your cryptocurrency.
Hardware wallets, often resembling USB sticks, are a popular form of non-custodial wallets. They store your private keys offline, providing a secure and reliable storage solution.
- Custodial Wallets: The Hot Wallet
Custodial wallet services, such as exchanges like Coinbase or Binance, control your private keys and hold your cryptocurrency in their wallets. When you buy cryptocurrency through an exchange, you receive an IOU for the cryptocurrency, while the exchange owns the private keys and holds the cryptocurrency in their wallet.
Although custodial wallets offer the convenience of not worrying about storing or forgetting your private keys, they also come with risks. A hacker doesn't need your private keys to move funds from your account, as the exchange owns the keys, not you. This eliminates one wall of protection for your funds.
Avoiding Crypto Storage Mistakes: Best Practices for Wallet Security
Now that you understand the importance of choosing the right wallet, it's essential to follow best practices for cold wallet security. By avoiding common crypto storage mistakes, you can ensure the safety of your coins.
- Never Share Your Seed
Your crypto hardware wallet's seed, a 24-word recovery phrase, provides ultimate access to all your funds. Treat it as valuable as your entire crypto portfolio and protect it accordingly. Under no circumstances should you share your seed with anyone. Remember the mantra: never share your seed.
- Store Your Seed Securely
Avoid storing your seed online or on a piece of paper. Instead, opt for an offline storage solution such as a stainless steel plate or a two-step stainless steel system like any of our seed phrase storage products, where each element is useless on its own but reveals your seed only when combined.
- Use Your Hardware Wallet with Caution
Avoid using your hardware wallet in public or connecting to public Wi-Fi networks, as this exposes your device to security risks. Instead, use your wallet in a secure environment and always double-check transaction information on your wallet's screen to rule out potential threats.
- Trust Your Device as the Source of Truth
When sending or receiving transactions using your hardware wallet, treat the information displayed on the wallet's screen as the ultimate source of truth. Visually double-check it against the original address details to ensure no alterations have occurred.
- Perform Regular Device Check-ins
Schedule regular check-ins with your hardware wallet to ensure it's functioning properly and to recharge its battery. Update your wallet's firmware during these check-ins to improve its functionality and security, choosing a wallet with the highest possible Evaluation Assurance Level (EAL) for optimal protection.
Additional Tips for Crypto Storage Safety
In addition to the best practices outlined above, consider the following tips to further enhance your cryptocurrency storage security:
- Use multiple hardware wallets for different purposes to minimise risk.
- Enable two-factor authentication (2FA) for added security.
- Keep your device's firmware up-to-date.
- Protect your device with biometric access, such as a fingerprint scanner.
- Use a Virtual Private Network (VPN) to add an extra layer of encryption to your internet connection.
Conclusion
By understanding the differences between wallet types and following best practices for wallet security, you can protect your crypto from potential threats. Stay vigilant, educate yourself on the latest risks, and take proactive measures to secure your crypto holdings. With the right precautions in place, you can enjoy all the benefits of cryptocurrencies without worrying about the safety of your investments.
