here are the best way to store your internet money

5 Ways To Store Your Cryptocurrency
What's The Best One Though?

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.

Keep Something That Doesn't Exist Safe from Threats You Can't See

a couple of altcoins on a laptop

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?

The 5 Different Types of Crypto Wallets

cryptocurrencies storing on a system

There are five different types of wallets where you can store the keys that unlock your wealth. They are:

  • ​The mobile wallet - A mobile wallet is an app that you download to your smartphone or tablet. Theyre relatively easy to use and always right there at your fingertips. The danger of course with mobile apps is that if you lose your phone or it's stolen you could wind up losing your digital shirt. There are several mobile wallets out there today so do your research to find the one that's best for your particular situation.
  • ​The desktop wallet - A desktop wallet, as you may have surmised, is a program you download and install on your PC or Mac. There's little chance that someone using your desktop computer could break into your desktop wallet. However, you are still susceptible to hacks from more sophisticated criminals whose favorite tools these days are malware programs that surreptitiously install on your computer and wait until you open the wallet to pounce.
  • ​The online wallet - There's no doubt that online wallets are convenient. However, there's also no doubt that they're the riskiest type of wallet in which to store your keys. Cryptocurrency exchanges have wallets built in, but if you've been keeping up with current events, you know that exchanges are prime targets for hackers and that millions have been lost because those built in wallets have been hacked and the keys stolen.
  • ​The hardware wallet - At the opposite end of the security spectrum from online wallets are hardware wallets. Hardware wallets are separate pieces of hardware that can be disconnected from your computer at any time, rendering them invulnerable to hacks or malware. This type of wallet is called cold storage as opposed to online wallets that are referred to as hot storage." If you're serious about your security, you can't do any better than a hardware wallet.
  • ​The paper wallet - The ultimate low tech solution to the high tech problem of security the paper wallet is nothing more than a paper printout of your public and private keys and typically contains a QR (Quick Response) code as well. While there's nothing to be hacked and that's great there's always the chance you'll simply misplace the paper, put it through the washing machine or that you'll accidentally throw it out or leave it where someone could pick it up.
paper QR walltet
What are Centralized Exchanges?Cryptocurrencies have sent shock waves through the old economy not seen since the invention of the personal computer. Every day brings tales of fortunes made and lost, more businesses adapting to the virtual currency model and more stories about pending regulation and contradictory stories about a rosy, regulation free future. It's tough to know what to believe, but one thing is certain: at the moment crypto is the hottest commodity on earth. And in spite of some rough patches, it doesn't seem like it's going to cool down anytime soon. As such one of the most common questions swirling around the cryptocurrency revolution is this: How do I get some?Obtaining Bitcoin and Other CryptocurrenciesThere are two ways you can acquire Bitcoin or any of the nearly 1,400 copycat cryptocurrencies in circulation today. You can either ?mine? them, or you can acquire them through an exchange. Mining is an incredibly involved process that requires you to:Purchase one of the latest ?mining rigs? (computer hardware built especially for the job).Obtain a ?wallet? where you?ll be able to store the public and private keys that both protect your coins and enable their use.Find a ?mining pool? to join so you can combine your processing power with others to harvest more Bitcoins (you could go it alone but believe us you don?t want to).Pick up the latest mining software and install it on your computer.Hook the rig up to your computer and get to work.The thing about mining is that it devours electricity like anteaters devour ants. You may even find that you?re spending so much on electricity that it?s impossible for you to mine enough Bitcoin or other cryptocurrency to make your efforts profitable. On the plus side, you get to keep what you mine without having to pay any fees or join any exchanges.Exchanges, on the other hand, are like a warm summer breeze compared to mining. Just set up a wallet, open an account and start buying and trading. The advantage of the exchange is its simplicity. The disadvantage is that you'll be charged fees and exchanges are vulnerable to hacks, which could wind up cleaning you out.The Decentralized ExchangeA decentralized exchange is the more complex to interact with but also more secure. With this type of exchange, the private and public keys never leave your computer until the transaction commences. There's no reason to have a third party act as an intermediary holding your crypto: all transactions are person to person. As such it's much less likely you'll lose money to a hack although transactions, as we said, tend to be more complex and take longer to process.ProsLess prone to hacks these days than centralized exchanges.The user maintains direct control over their crypto funds.A fairly high degree of anonymity (though this may be changing).No trading fees so more in keeping with the crypto guiding principles.Typically no personal identification needed.ConsA pretty steep learning curve for the uninitiated.A small number of features.Not able to accommodate fiat currencies.Your personal computer is more vulnerable to being hacked.The Centralized ExchangeAt the other end of the spectrum are centralized exchanges. Centralized exchanges are popular for a very simple reason: they?re easy to use and incorporate traditional fiat currencies into the equation. You can exchange your dollars or euro directly for Bitcoins or Litecoins or whatever and vice versa; you can exchange your Bitcoins for dollars or whatever currency you prefer. The problem most cryptocurrency users have with centralized exchanges are that they tend to be contrary to the anything goes, no fee principles behind the birth of cryptocurrencies.Centralized exchanges are openly for-profit enterprises that charge transaction fees for among other things, providing access to the blockchain. Still, if people didn't appreciate how convenient they made transactions, they'd fold up pretty quick. But they don't because less orthodox crypto fans don't really give a tinker's cuss about egalitarianism. They want to turn a profit. And centralized exchanges provide them with more ways to do that than decentralized exchanges, which only allow crypto to crypto transactions. So until something better comes along the centralized exchange is likely to slog on, absorbing criticism while they count their money.ProsPlenty of ways to trade including the use of fiat currencies.Relatively easy to use for the average tech-savvy person.Lots of advanced tools.Plenty of liquidity.Most will assume at least some liability for hacked funds.ConsThe exchange exerts control over your funds.You?ll probably have to produce identification to join.Fees, fees, feesA low level of anonymity.More prone to hacking these days than decentralized exchanges.Possibility of downtime because of the centralized structure.Did we mention fees?The Security IssueThere?s one significant downside to centralized exchanges that calls out for more elaboration it is their troublesome habit of being hacked and losing everyone's money. For instance, in January 2018 a centralized exchange in Japan called ?Coincheck? acknowledged it had been hacked and that approximately $500 million worth of a cryptocurrency called NEM was stolen from customers. The company has said it is investigating and has suspended some services on the site.In fairness though, it?s not just centralized exchanges that have been hacked. For instance, a Bitcoin exchange called Mt. Gox was hacked in 2014 with the cyberthieves making off with $450 million worth of the cryptocurrency ($7 billion using today?s valuations). The Mt. Gox hack was a wakeup call for many decentralized exchanges and since then security has been significantly tightened with most hackers now going after centralized exchanges, personal wallets and even mining hardware via malicious downloads.ConclusionThe centralized exchange will likely linger as a fixture of the crypto universe for some time, especially if they can get their security act together. By providing the ability to exchange crypto for fiat they provide a means of acquiring cryptocurrency decentralized exchanges simply can't. Not yet anyway.

​The Case for the Hardware Wallet

cryptocurrencies sitting on a dollar with a graphics card

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.

About the Author Aaron Grubbs

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