Cryptocurrency

Safe And Secure Cryptocurrency Storage

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Welcome to this guide produced in partnership with Casa all about safe and secure cryptocurrency storage. You’ll come away with top insights on how to store your crypto and how to keep it secure.

But before you store your cryptocurrency, you’ve got to actually own it. So that’s where we’ll begin…

1. How to “own” your cryptocurrency

1:15 min read

Owning cryptocurrency is unlike other assets because it’s natively digital. And while traditional investments are usually kept in a bank or brokerage account, crypto investments are different: to store them, you need a “wallet”.

In owning cryptocurrency, you don’t own a digital coin, token, or asset; you actually own an address on the blockchain at which coins can be stored – and which has a pair of keys, public and private.

The public key is an incoming-only address that can be shared so others know where to send coins or tokens. Think of it as your email address, but anonymous, in the sense that giving an email address to someone doesn’t let them send emails from the account, only to it.

Think of the private key as the password to your email address. You need it to access your crypto – i.e. when sending cryptocurrency out of an address – in order to authenticate the transaction.

A cryptocurrency token, then, represents a balance on the blockchain, and what you really “own” is a private key that allows you to make transactions from a given address. In other words, cryptocurrencies are only really yours if you hold the private key that allows you to access them.

If your private key falls into the wrong hands, you’ve got a problem. And since cryptocurrencies are decentralized, there’s no third-party authority to resolve disputes or enforce ownership. That’s why safely storing your crypto and securing your private key is so important.

2. How to store your cryptocurrency

1:52 min read

The easiest and most straightforward way to store your cryptocurrency is to keep it on the cryptocurrency exchange you bought it through. However, it’s also the least secure way to store your crypto because you’re trusting someone else to custody it for you. If the exchange decides to shut down your account or gets hacked, there’s not much you can do to recover your funds. You don’t actually own the cryptocurrency you store on an exchange because you don’t hold the private keys to access it.

Digital wallets

Non-custodial digital wallets are one storage solution that gives you full ownership of your cryptocurrency by letting you hold onto those all-important private keys yourself, instead of relying on a third party to keep them safe. You can create one by downloading a desktop or mobile wallet app – and you’ll be able to store, send, and receive your cryptocurrency directly.

Advantages of digital wallets include enabling fast transactions, being easy to use on the go, and direct control of your private keys. Disadvantages include cybersecurity risks that accompany computers and smartphones, the loss of your crypto assets if your wallet device is lost, stolen, or damaged.

Hardware wallets

A hardware wallet goes some way to addressing those drawbacks and is widely considered the most secure method for storing your digital assets. It’ll keep your hardware keys under your control and, importantly, offline so it’s inaccessible to digital threats.

Hardware wallets work by generating a set of private keys, which you ought to keep safely offline. The wallet itself is secured by a PIN – and the device will erase after several failed access attempts, preventing physical theft. What’s more, hardware wallets let you physically sign off on transactions, ensuring a further layer of security on each action you make. It’s suitable for the long-term storage of large crypto balances.

There are some disadvantages of hardware wallets, though, and they include cost, with hardware wallets being the most expensive storage option, and complexity, with some wallets being difficult to set up and run, especially for beginners. They are also still a single point of failure. Hardware wallets are also less convenient than digital wallets, say, for day-to-day transactions.

3. How to secure your cryptocurrency

2:30 min read

No matter how and where you store your cryptocurrency, there’ll always be bad actors out there trying to get their hands on it at your expense. So it’s worth being aware of some of the most prevalent tactics.

Social engineering

Social engineering is when you’re tricked into exposing personal information that allows a hacker to steal your identity. This could be your email address, your phone number, or anything else that can be used to prove you’re you. A successful hacker can pretend to be you, reset your passwords, and log in to your accounts to steal your funds.

Phishing attacks

Hackers are also famed for their “phishing attacks”. That’s where they get you to enter your password or private key on a fake version of a real website. To avoid falling victim, never share your seed phrase with anyone online, always check URLs to make sure you’re on the correct site, and keep your software – especially anything crypto-related, like that of your hardware wallet – up to date.

Regardless of which method you use to store your crypto, there are several information security best practices you should follow:

  • Use two-factor authentication (2FA) on all accounts. Don’t rely solely on SMS verification – your phone number can be ported to another device.
  • Store sensitive information in a secure offline location, like a safety deposit box.
  • Use a password manager and different passwords for different sites, but don’t store your private keys on one.
  • Make sure your email accounts are secure – especially your linked “forgot-my-password” backup accounts.

Even if you follow all these rules and stay vigilant against phishing and social engineering, you’re always one step away from security failing you. See, most wallets are a single point of failure: they use a single private key – and if that’s lost or compromised, your cryptocurrency’s gone.

To offset that risk, you ideally want multi-modal security: if one point of security fails, the others keep your crypto secure. For example, a wallet that protects your cryptocurrency with multiple keys each stored on a separate device would offer extra protection. A lost key wouldn’t prohibit you from spending your funds but nor would it give access to any hacker who managed to get their hands on it since you’d need more than one key to access your wallet.

Casa offers cryptocurrency investors just that: its multi-modal security system offers 10x the security of a typical hardware wallet just for bitcoin. They also offer a white-glove service with a best-in-class Client Services team to help you navigate the complexities of your bitcoin security.

And there you have it! You now understand what owning cryptocurrency is really all about, how to store it safely, and most importantly, how to keep it secure. And for additional security that doesn’t have a single point of failure, Casa’s a great place to start so check them out.

 

This guide was produced in partnership with Casa.

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