As an investor, one of the most important decisions you can make is in regards to the wallet you choose to store your crypto assets. Not all wallets are created equally, and you should above all else, be sure that you’ve chosen a reputable one to store your assets. When choosing a wallet it should meet a few criteria before you decide to transfer any cryptocurrency there.
The one you choose will vary based on the asset that you are trying to purchase. In most cases, the official website is the best place to find out which wallets are legitimate, but sometimes community areas such as Reddit subs can also provide that information. However, you’ll also need to decide between a hot or a cold wallet.
A hot wallet refers to a storage medium that is always connected to the internet. While they are reasonably safe as long as you safeguard your information, there is always a chance that they can be compromised. It is not recommended to keep large amounts of money in a hot wallet due to this risk, as all computers inherently have some type of vulnerability that can be taken advantage of.
This is also true for web-based wallets which have the added misfortune of being vulnerable to not only attacks on their DNS, as MEW found out, but also to attacks via browser-based add-ons and scripts.
While a client or app is more convenient for sending or receiving money, it is often the least secure option of the two. Exchange wallets not only are hot, but you also do not own the private keys which presents additional problems should the company vanish. They provide you with no means to recover your funds, and they are a prime target for malicious attacks.
The hot wallet you use will vary based on the asset you have invested in, and in some cases, a client version may be the only option available to you. If this is the case, be sure to create multiple backups in safe places. In order to find a safe software-based option, go to the project’s official website. They will have available their own software packages or reputable partner options.
A cold wallet refers to funds that are kept on something that is not connected to the internet. These days, a hardware version is the most popular option, but if you don’t wish to spend any money on such a device you can still use the legacy version by creating a paper wallet. Paper versions were what people traditionally used to hold large amounts of coins.
Cold storage options are typically the safest bet if you have a large investment. Even if you’d prefer the convenience of a hot wallet, it still may be in your best interest to put the majority of your coins on a safer cold storage option for safe keeping. This solution comes with its own set of problems, but those can be easily remedied.
Cold storage utilizes methods which require a physical device or item to store your coins. This means that there is a chance that these items could either be lost, stolen or destroyed in many circumstances if you’re not careful.
Obviously, it’s not in your best interest to tote around a device, or a piece of paper with potentially thousands of dollars contained on it. If you have significant holdings it would be in your best interest to either invest in a fire safe or possibly a safety deposit box.
You should also be sure to create multiple backups of your funds. You could perhaps store a copy of the drive or the paper with the seed on it with a trusted friend or family member. Having multiple copies protects you in the event of a disaster.
When stored on paper there are a few other unfortunate problems. For starters, if anyone who knows what it is sees your seed or private key, they could easily take it for themselves. All the more reason you should keep it safely locked away somewhere from prying eyes.
You could however also create a problem yourself. The password strings are quite long, and if your handwriting is not the best it’s possible that you could have trouble recreating the password or private key should you need to. If you plan to use a handwritten copy, be sure to write neatly and always double check that the restoration seed or key works.
Best if you don’t want to use a hardware device which can fail, or you do not wish to spend money on purchasing one. Unfortunately, this is rather old tech, and many new coins and tokens may not have a way to create them. However, if your investment is in an older coin such as Bitcoin, Litecoin or Ethereum, they will definitely have this option available.
As an added bonus, should you want to give coins as a gift to someone, such as perhaps your children, this is an easy way to do so. You can print off a paper wallet, load it with funds, and then give it to them to store away somewhere safe for the future.
Keep in mind that these should be created offline so the information has no chance of being compromised, and when you actually do want to access the coins, sweeping the wallet can prove frustrating initially.
There are a few major hardware-based options which we’ll compare here. All of them are useful for their intended purposes, but they do have different features which you may like more or less. Some wallets will also be better depending on what you have invested in, as the coins and tokens that they can store greatly vary.
This is the most popular option, and as such, they offer storage for the most coins or tokens. If you need to store a lot of different tokens, then this is likely the way to go. While you can store ERC20 tokens, Ledger does not natively support them. In order to manage your ERC20 tokens, you would need to connect the Ledger to MEW, which is web-based.
This wallet offers an advantage over the Ledger in a couple of ways. First off, if you have many Ethereum tokens, they offer native support for them without the need to use MEW, which is web based and more easily compromised.
The Trezor also acts as a secure password manager for your online accounts! With one press of a button, it can secure your web wallets or exchange accounts as well which is a pretty nice feature.
KeepKey is a lesser known device than our other two entries, but they have some merits of their own you may be interested in. The most obvious being the way the device operates. The KeepKey team has worked to make their device very easy to use, even for payments.
Users can actually keep all of their cryptocurrency on the device, and if they make a purchase from a retailer such as Overstock who accepts Bitcoin, they can plug in their device, and the KeepKey will automatically populate the information for them, helping to easily complete the checkout.
The largest shortcoming of KeepKey is that they don’t offer storage for nearly as many types of assets as their competitors as of yet. Users will be confined to storing Bitcoin, Bitcoin Cash, Doge, Litecoin, Ethereum, and Dash.
They have however rolled out a Beta version of native ERC20 support, which is nice, and they integrate with Shapeshift. This option is best for non-tech savvy users who invest in large cap coins or ETH tokens mostly.
In conclusion, once your crypto assets have been purchased, you owe it to yourself to protect those assets. Please remember that there is no one who can retrieve your coins or tokens if they are stolen, or if your password is lost. You must take these steps yourself, and no matter what option you choose make sure that you put your seed or backup files in a safe place.