Cryptocurrencies are increasing in popularity around the world. However, unlike fiat currency that owners can store in banks, cryptocurrencies require alternative forms of storage. Below are six ways that you can store cryptocurrencies.
Considered to be the riskiest way to store cryptocurrencies, online wallets allow users constant and easy access to their cryptocurrencies. Vendors advertiser that such wallets are to be impossible to hack. However, online wallets guarantee users no line of protection if there is a security breach. Most avid users of cryptocurrencies suggest using cold storage methods in place of the online wallet.
Storing value in cryptocurrencies offline or in “cold storage” normally begins with removable drives. Anything, in which your data can be stored such as USB’s or CD-ROMs, is safer than the online alternative. Users must save a copy of their currency file on the device and then remove it from their computer. External offline wallets are available that use an external device that can be connected to a user’s computer via a USB that stores private keys in an encrypted format.
An intermediary that stores cryptocurrencies on a user’s behalf and allowing them the freedom to deposit and withdraw the cryptocurrencies with ease is an option between the online wallet and removable drives as far as security. However, there is a fee with all online exchange services. Also, there is the added risk of hacking or theft is higher than the removable drives.
If users prefer not to trust the online exchange or wallet, but also worry for the security and accessibility of removable drives, they can print blockchain key on paper. The process is lengthy and requires cryptocurrency holders to download the system needed on a USB drive. However, holders print the information instead of saving it online. Obviously there is a risk that someone can physically steal the paper or that it could burn. However, paper wallets essentially come with the same risk that storing paper money does. It’s also more difficult to buy and sell the cryptocurrencies once printed, as the making them digital again can be a process in and of itself.
A bearer item is similar to the storage system of a paper wallet, but include a private key that is embedded in a physical object that must be broken or torn to access the key. Cryptocurrency holders can store such objects in a safe or safety deposit box and it doesn’t require downloading any software. Additionally, cryptocurrency holders cannot spend their digital assets unless the physical item is broken and the process of creating the physical item and breaking it change the value of the cyrptocurrency over time.
Hot Wallet and Cold Wallet
In order to secure the value of cryptocurrency, protect, secure, and have access to it all, a combination of a “hot wallet” and “cold wallet” will best serve users who plan to spend and save their cryptocurrencies. A user can choose one of the Cold Wallet methods above for the amount of cryptocurrency they wish to “save”. Then, they can use an online secure format or connected credit card for everyday use of their cryptocurrency not in savings mode. The “hot wallet” will have more risk, but the majority of value should remain in the “cold wallet”.