STORING AND SECURING YOUR CRYPTOCURRENCY

In order to store your cryptocurrencies you have to buy them first.

You could do it in several ways like a peer-to-peer transfer ( P2P, from someone else through a transaction using just the blockchain network), using an exchange like Binance, Kucoin, Coinbase, Crypto.com or others using bank transfers or credit cards (the most popular and simple way) or with fiat currencies (a complicated way to do it).

After you have your (crypto) coins you need to store them, so you need a wallet.

TYPES OF WALLETS

There are 2 major types of wallets: CUSTODIAL and NONCUSTODIAL.

With custodial wallets someone else is in control of your wallet, the respective entity (the exchange usually)  stores and secures your coins, it could sell your founds in an unpredictable and critical event or, in case of a hack of the entity’s database/network/app, you could lose a part of your money (or even all of it). This happen when you buy through exchanges. These wallets are HOT wallets (your coins are stored online).

On the other side, there are noncustodial wallets, that means you are the only one responsible for the usage of your coins, you store and secure them using SOFTWER/HOT wallets or HARDWARE/COLD wallets.

A HOT WALLET has a connection to the internet and it includes applications in order to be used. You could also may need an extension added to your network that store your money. Basically, instead of having a physical wallet, you have one on the internet. The hot wallet is believed to be secure, because it has a good level of security. When you create this wallet you have to set up a password or a pin and after that you will get 12 random words that are your ‘recovery key’. You are the only one who control the wallet with that words. In case you lose it, you will never be able to access your wallet again. Your money will be forever lost. If anyone has access to this key, she/he could stole your coins. This adds security to the custodian’s wallet and also make the custodian more responsible. Some examples of HOT wallets are Metamask, Trust Wallet, Binance Wallet.

A COLD WALLET has no connection to the internet. It is a physically device that helps you store your coins. Being something that do not have only an online connection, it is consider to be more secure. The process is simple in theory: you buy the coins and send them to an address (for example, using an exchange) that correspond with the hardware wallet address through an app. In practice it is a little more complicated, but Ledger Wallet make it simple. 

Ledger Wallet set-up:

__You buy your Ledger device first.

__You will get an USB cable and a device (that is really small and have only 2 buttons, you press both of them to confirm an operation and one of them to navigate) that can be connected to your computer using the USB.

__You will install Ledger Live app and open it. After connecting the device to the computer, you will have some instructions to follow, that will be shown to you on the Ledger device screen, follow them carefully.

__You will have to set up a pin code and then you will receive 24 random words that are your recovery key. Write them down (you could use the paper that ledger device acquisition provides to you, or something else) and never share them, they are your recovery key.

__You will have to check if you save the words right through the app: after you receive them, the next step is to verify if you can put them in the correct order, using the device.

Other cold wallet is Trezor Wallet.

COLD WALLETS are so important because they can not be hacked and give you the control of your coins, making them to be store in a secure manner.

For example, an exchange like Coinbase officially admitted that if the company were to file for bankruptcy, the court might treat customer assets, that the exchange is custodian for, as Coinbase’s assets. And they’d be at the back of the line for repayment, forcing normal people, unaccustomed to the ins and outs of federal bankruptcy court, to claw back their money along with everybody else owed money by the exchange.. An exchange could also impose new rules that could affect you negatively, it has the power to list and delist coins anytime. Recently, the Coinbase exchange announced that the ‘Coinbase pro’ version will cease to exist. The exchange said that ‘Coinbase Pro’ will start sunsetting Coinbase Pro to migrate all advanced trading services into one unified Coinbase account. That was an unpredictable news and the users just have to do as the exchange said.

So take your coins off exchanges!