Digital money is hard to earn and easy to lose.
Let's see where it is best to keep your coins, so as not to lose them by mistake or due to intruders
In the crypto industry, the "hodl" strategy is common: investors buy coins for the long term and do not sell, regardless of market fluctuations. But digital money is easy to lose, even if you do not make risky transactions. One of the main questions for everyone who is just beginning their acquaintance with the sphere of cryptocurrencies is how to store them. There are several ways, and each of them has its own pros and cons.
Stock market
The easiest and easiest way to store cryptocurrency is to keep it on the exchange. When creating an account (we told you about registration on the exchange in detail earlier), each user gets their own wallet. It supports all coins that are traded on the platform, and they are always available for quick access. You can sell or buy more. One of the advantages of this option is that you can easily restore access to your account.
In contrast, there is the main disadvantage — the problems of exchanges with security. From this point of view, cryptocurrencies remain in the era of the Wild West, because no major trading platform has been left without the attention of hackers. Even the heads of major exchanges urge not to hold funds on them.
"Please do not store more cryptocurrency on exchanges than you need to trade. Use Ledger and Trezor (hardware wallets), DEX (decentralized exchanges) — not a panacea, look at the DAO. The open source code only means that exploits will be discovered earlier (probably by the bad guys), " wrote Kraken CEO Jesse Powell on Twitter.
In 2018, ICORating found that most exchanges (54%) have various security issues. The situation has improved over the past two years. Now it is difficult to imagine a platform that does not offer to install two-factor authentication. But hackers also improve their skills. Therefore, the exchange should only store the amount that is not afraid to lose.
The exchange can go offline at any time. For example, on March 13, when the price of bitcoin fell to a local low of $3800, the BitMEX trading platform was unavailable for trading. The user may lose access to their funds at the most inopportune moment.
An illustrative case occurred with clients of the canadian exchange Einstein. Last fall, it owed clients more than $12 million, while it had "solid assets" of only $45,000. One trader stated that the amount owed by the company to him is $535,000, according to another lender-several million dollars.
You need to be very careful when choosing an exchange, because there is always a risk of getting caught by scammers. Earlier, we wrote about which trading platforms should be avoided.
Hardware wallet
The most secure way to store cryptocurrency is considered hardware wallets (devices that often look like a flash drive). But even here everything is not so clear and you need to be extremely careful. For example, in December last year, experts from the Kraken exchange found out that the KeepKey wallet can be hacked in 15 minutes, and the attack will cost hackers $75.
However, this method is still more reliable, since criminals need to get physical access to the wallet to break in. If it is stored in a safe place, the risk can be minimized.
Last year, the hacking of the largest Binance exchange by trading volumes doubled the sales of Ledger wallets. But they often find vulnerabilities or errors in their work.
When choosing a hardware wallet as an option for storing your funds, you need to remember that the loss of the pin code will lead to the loss of cryptocurrency. Also, the disadvantage of hardware wallets is the possibility to lose or damage them physically. For example, it can be broken at home by children or a dog.
Online wallets
This method has similarities to the storage option on the exchange. Cryptocurrency does not belong to you, and its fate depends entirely on the service on which it lies. Extremely convenient and unsafe method. Hackers have a lot of options for how to steal funds. For example, hacking a user's account, the service itself, or creating a phishing page. You need to be extremely careful and not keep a large amount of funds in your online wallet.
Depending on the method of storing private keys, online wallets are divided into hybrid and traditional ones. The first type of wallet uses separate key storage using multi-signature. the second type uses private keys located on the service, and only a backup copy is available to the user.
The main advantage of hybrid wallets is that developers do not have full access to the user's coins. Payments from such a service cannot be made without the joint participation of the client and the company. This increases the level of protection. On the other hand, the loss of the secret phrase will be fatal, in this case, you can forget about the cryptocurrency.
One of the most famous online wallets — Blockchain.com. In may, the company announced the addition of support for cryptocurrency interest-only accounts. They can be used to store bitcoin, with an annual yield of 4.5%.
Another popular wallet, and BitGo. It is considered secure, since each transaction requires two signatures. The platform does not have full access to the user's coins. You can also work with it only after enabling two-factor authentication.
Local wallet
A universal way to store funds is a local wallet. These are applications for PC or mobile devices, extensions for browsers. It is easy to find such a wallet: just go to the official website of the project and download the appropriate version. But this method also has its own difficulties.
The mobile version is suitable for those who need constant access to their coins to conduct transactions. But the cryptocurrency will not be stored on your smartphone, so you can only access it if you have the Internet. Even if the device is lost, digital money can be returned.
A local wallet on a PC makes sense only for coins that use Proof of Stake in their algorithm. Because to store cryptocurrency in this way, you need to fully download the blockchain of the selected asset. And it can weigh tens or hundreds of GB. In the case of PoS, as long as the wallet has some amount in cryptocurrency, and the computer is turned on, the user is credited to the balance of a certain amount in digital money. This is the function that should appear in Ethereum 2.0. you can Become a network validator by storing at least 32 ETH in your wallet.
