Cryptocurrencies have taken the world by storm in recent years. The phenomenon had an inauspicious start back in 2009 when a shadowy character going by the name Satoshi Nakamoto announced the birth of his blockchain baby Bitcoin. Slowly, inexorably interest built until in early 2017 speculators moved in and pushed the value of a single Bitcoin from about $1,000 in January to nearly $18,000 by December. A recent correction has the currency sitting at around $11,000 today, but that is still an astonishing figure. With values going through the roof and potentially millions of dollars and your entire financial future at stake, it has never been more important to find a secure place to store your virtual currency. Below we'll look at some of the best ways to do that.
Unlike fiat currencies like the dollar, coins exist only as an entry on a digital ledger in cyberspace. You can't see them or touch them, and you can't take them out of the bank and stash them in your mattress for safekeeping. In fact, you can't even take the code that they're made of and stash that somewhere private.
What you need to do is find a secure place to store the public and private keys that denote you as the owner of said cryptocurrency. Because if someone somehow gets ahold of your keys, you can kiss your bit-fortune goodbye. It's like stealing an ATM card and pin number, only potentially much bigger.
So how do you protect something you can't see or touch from someone you can't see who's trying to wrestle it from you, probably without your knowledge? The answer in most cases is the wallet. The wallet is a secure software program in which you store the keys which provide you access to that part of the blockchain that verifies your ownership of whichever virtual currency you happen to own. Only you have access to this information unless someone steals the key from you. Then they have access and you are up the creek since the blockchain doesn't check IDs. So just what are these wallets we've been talking about and is there more than one kind?
There are five different types of wallets where you can store the keys that unlock your wealth. They are:
As you may have deduced from what we said above, we believe the hardware wallet (Ye Olde Cold Storage) is the best way to go if you?re serious about securing your public and private keys from loss or theft. The hardware wallet looks just like your other USB drives and easily connects (and disconnects) from your computer.
There's a PIN for access as well as a secondary password (the "seed") just in case you have a brain cramp and forget your PIN. You'll want to keep both passwords written down somewhere and maybe stored in a safe deposit box or something because if you don't and you forget both passwords, you'll be up the proverbial creek without a paddle.
Also, keep in mind that if someone steals your hardware wallet during a home invasion, you'll lose everything. So it's always a good idea to have somewhere safe where you stash your cold storage unit when you're not using it. Some advise creating a backup. But the more copies of your keys out there, the greater the chance that one of them will find their way into the wrong hands.
Securing your public and private cryptocurrency keys is serious business. Even though exchanges vow that they are secure, never take it for granted that actually are and proceed accordingly.