We all understand how secure is a blockchain network but still, every technology has some loopholes and hackers are always ready to exploit the opportunity. Whether you are a Hodler or a short-term investor, it is always advised to never disclose your passwords and other sensitive information to anyone. As the technology is growing, hackers are also upgrading their skills to exploit the loopholes and that’s why many exchanges and as well as new projects become victims, investors and traders lose their hard earn money, you can take the recent example of crypto com hack where hacker stole assets worth $30 million dollars. 

In crypto, there is a very famous quote that one must remember and it is, “ Not your keys, not your crypto “. Now the question may arise, if exchanges are not the safest place to store your bitcoins or other cryptos then what place, here in this blog I will tell you about the best practices that one must follow to keep their crypto assets safe.

To understand the concept, first, we must learn about some basic terminologies such as Public key, Private key & Seed phrase.

What is the Public & Private key?

Public refers to the wallet address where your cryptos are stored while private key refers to the password to access the funds on the blockchain. Let’s try to understand this with an easy example, We all have email accounts be if of your own website or google mail or yahoo mail, the email address is publicly available to everyone and everybody can send an email to that address but the password of the email is the key to access the data inside the inbox.

So, the Public key is equivalent to an email address while the private key is equivalent to a password. The private key is used to access the funds on blockchain and is used to transfer assets from one wallet address to other. Private keys are unique for every wallet address i.e. no two wallet addresses can have the same private key.

A private key is a 256-bit number that is random and unique for all wallet addresses, but remembering a number can be a tough task that’s why seed phrases were created.

Seed phrases are groups of letters generally ranging from 12 to 24 letters, that are unique for every wallet address and you should keep your seed phrase safe as it is the only way to access your funds back, in case any damage happened to your device. Seed phrase is used to recover your wallet from anywhere i.e. if somebody knows your seed phrase they have access to your funds and they can do anything with that.

Example of a seed phrase: dove lumber board young robust kit invite plastic quote regular skull history

Types of wallets to securely store your bitcoins

There are mainly five types of wallets that one can use to securely store their bitcoins, the types are universal i.e. every crypto has these types of wallets but the wallets that I will be discussing today will be mostly bitcoin specific.

General installation guide 

1. Download the wallet from the internet by typing its name, if it is a software wallet or a mobile wallet.
2. If it is an extension wallet aka web wallets, then install them from the chrome web extension store or extension store of whatever browser you are using.
3. After installing the wallets, click on create a new wallet.
4. You will see a seed phrase, write it somewhere safe and click next or okay.
5. Your wallet is ready.

• Software Wallets

Software wallets refer to decentralized computer applications that you can run on your PC and you will be able to store your bitcoins and other cryptos safely in your pc or laptop. There are two kinds of wallets in every segment, they are single-chain wallets & multi-chain wallets i.e. some wallets only support cryptos of a single blockchain while some offer multiple blockchain support. The best software wallets to store your bitcoins are: 

1. Armory
2. Bitcoin Core
3. MultiBit HD

• Hardware Wallets

Hardware wallets refer to devices that store your private key securely offline in a USB device. Hardware wallets are the safest way to store your funds and are often considered cold storage, as they isolate your private keys from the Internet, mitigating the risks of your assets being compromised in an online attack. The best hardware wallets to store your bitcoins are:

1. Ledger
2. Trezor
3. Opendime

• Web Wallets

Web wallets are convenient wallets but are less secured than software & hardware wallets. Web wallets are convenient as you can access your funds from anywhere and from any device. The best web wallets to store your bitcoins are:

1. Coinbase
2. Blockchain
3. Circle

• Brain Wallets

Brain wallets refer to the basic concept of memorizing the seed phrase that will be used to access your funds on the blockchain. You remember the seed phrase and hence it is not available anywhere else and this way you store your crypto in your brain.

How & where bitcoins are stored?

Let’s start with an example, Person A wants to buy a piece of land from Person B, Person A purchased the land from Person B, and the ownership of the land is now transferred to Person A. 

In this example Land didn’t move from its place, only the ownership gets transferred, now just replace Land with Bitcoin i.e. Bitcoins are not stored in your wallet or anywhere, they remain on the blockchain when you buy or sell bitcoin, only the owner of the bitcoin get transferred from one person to another [ from one wallet address to other wallet address ] and the private key is used to access them.

Closing thoughts

We are still in the developing phase and a lot of people are taking advantage of this and scamming people. We must enhance our knowledge and understanding of crypto & blockchain so that we don’t get scammed. Never share your private key with anyone keep it as safe as you keep your bank login information.