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Whether it’s a hot wallet or a cold wallet, the need for storing your cryptocurrency independently has never felt greater. Industry regulation is still catching up with the reality of the cryptocurrency market, and that means cryptocurrency users are in many ways on their own in the world. If you own cryptocurrency, it may be up to you to make sure it’s safe and securely stored.
First, let’s take a look at what kind of wallets you can use to store Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and other major cryptocurrencies:
Hot wallets: These are software-based wallets such as apps that keep your cryptocurrency connected. Mobile and web-based wallets are left a little more exposed to the usual dangers of the web, but they’re ideal if you’re a frequent trader or you regularly use your cryptocurrency to make purchases. You can easily transfer cryptocurrency from a hot wallet to an exchange or a vendor. If you can, look for a hot wallet that offers insurance on your cryptocurrency funds.
Cold wallets: Hardware wallets, also known as cold wallets, are the gold standard for security, and wallets like Trezor have features that prevent both virtual and physical theft. Trezor is like a vault for your cryptocurrency, as even if you have malware on your PC, your physical keys are kept safe.
Paper wallets: While these wallets are also offline and safe from cybercrime, you have to be careful about losing them or having them stolen. Paper wallets are literally your keys written out on a piece of paper.
Why is it so important to find your own way to store Bitcoin and other cryptocurrencies? Given the latest cryptocurrency news and updates, it’s never been clearer.
Just take a look at what’s going on with Canadian cryptocurrency exchange QuadrigaCX, which recently filed for bankruptcy protection in the Canadian province of Nova Scotia. The cause was the surprise death of the company’s CEO, Gerald Cotton at age 30.
The problem: Cotton was holding over $180 million of the company’s users’ cryptocurrency in cold wallets that only he had access to the passwords to. Cotton neglected to share those passwords with his wife or business partners, meanings users have no way to access their own cryptocurrency funds. Cold storage is the most secure way to store cryptocurrency, but without a procedure to recover those funds in the case of an emergency, users could wind up on the hook.
This is why it’s so important to find your own way of storing cryptocurrency long-term, especially large sums. Events like this shouldn’t scare people away from cryptocurrency, but it should make them think twice about their personal cryptocurrency security measures. The industry needs better regulation, but until that happens, make sure you’re using a cryptocurrency exchange you trust and take the proper steps to ensure the security of your Bitcoin and other types of coins. Make sure you keep your passwords safe and let a loved one know what they are in case of an emergency.