Maybe you are like me & want to go through great lengths to ensure that your crypto is safe & not prone to being stolen, lost, etc. I'm going to share the best practices that I've found for maximum security. As cryptocurrency becomes more valuable in the future & more people find out about it, you'll want to sleep sound at night knowing that your crypto is in your hands, no one else's.
So you've bought your first fraction of a Bitcoin on coinbase, now what? Should you just leave it there like a bank account essentially. NO. There's a saying around here- not your keys, not your crypto. This simply means that if you don't ACTUALLY control the private keys to your cryptocurrency, you technically don't own it. Coinbase, Binance, or whatever exchange you have it stored on, owns it because they control the private keys. What is a private key? "A private key is a secret, alphanumeric password/number used to spend/send your bitcoins to another Bitcoin address. It is a 256-bit long number which is picked randomly as soon as you make a wallet. The degree of randomness and uniqueness is well defined by cryptographic functions for security purposes." You don't really need to know that, more important in my opinion, is your seed phrase. I've been into cryptocurrency for years & have never needed to know my private keys or use them for any reason. So what is a seed phrase?
Think of your seed phrase like a recovery key of sorts. It's your password to unlock your wallet even if you lost it, or lost access to it, whether you've chosen to use a hardware wallet or software wallet. Seed phrases are used for practically everything in crypto. It's a random set of words that to someone, would mean absolutely nothing, but to you means being able to recover your wallet from anywhere in the world. Football, target, yard, desk, finger, something like that might be your seed phrase. When setting up a wallet, hardware or software, you'll at some point be asked to write these words down. Don't do this on your computer, if you are storing a larger amount of crypto or money on it. If you are storing $5 or just want to try out a new wallet, then I see nothing wrong with simply screenshotting your seed phrase, and putting it in a random hidden folder on your computer. Otherwise make sure you write these words down manually somewhere. Maybe store them in an old video game you don't play anymore or put them locked away in your household safe. Either way keep these words close to your heart & always have access to them.
So you've gotten this far but you need help choosing a wallet. Hardware or software? Very easy difference. A software wallet is simply software on a computer. Metamask is a good example, for Ethereum & all types of tokens built on its network like Erc20, Erc721, etc. Also Trust Wallet is a great wallet which you can store crypto on your phone. A hardware wallet is a standalone device, which you plug in using a USB, to your computer to access your crypto. Which one should you choose?
The answer is simple. Choose are hardware wallet please, especially for larger amounts of crypto. If you store crypto on a software wallet on your phone, it CAN be hacked with a process called "SIM Swapping." I don't feel like getting into that but google it if you are worried about it. Simply put don't store crypto for long periods of time on your cell phone. My advice? Get a hardware wallet. Something like a Ledger, Trezor, or many others, are the best option. Your crypto is safely stored offline, can only be accessed by you, and yet you can still trade with it using decentralized exchanges. Remember if you store your crypto on an exchange, you don't actually own it. If the exchange got hacked, your funds could be gone forever. (Google Mt. Gox hack if you'd like to learn more). So go out & get a hardware wallet today & sleep sound knowing that you own your crypto. Make sure you write down your seed phrase in case you need to recover your coins. Let's say you lost your hardware wallet for some reason. This isn't actually a big deal at all if you have your seed phrase written down. You'd simply have to purchase another hardware wallet of the same kind & recover your crypto via inputting your seed phrase! (I highly recommend buying 2 of the same hardware wallets for this reason- you lost one, you use the other to recover with your seed phrase. You lost your seed phrase? No biggie, set up the second hardware wallet, write that seed phrase down, and send all the crypto you stored on the 1st one, to the 2nd one.)
I know this all sounds pretty complicated but it's really not. Don't store your crypto on exchanges for long periods of time. In fact I'd never store much on any exchange other than maybe Coinbase or Binance or your favorite leverage trading website. Mostly every cryptocurrency is either supported by a hardware wallet or has a standalone desktop wallet which you can download. And if you are OCD like I am, it feels nice knowing all of your crypto is in one place, easy for you to access, but impossible for anyone else to access. Take the plunge, get a hardware wallet ASAP, & store all your crypto on there. Don't store it on your phone to be SIM swapped, & don't leave it on some random small exchange to possibly be hacked someday.
If you follow all these tips, you are well on your way to becoming a crypto security expert!!
Until next time, Owen checking out. Peace.