After buying crypto, where do I store it?

0 Votes
2Answers
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7 months ago

I’m relatively new to the world of cryptocurrency and have recently purchased some crypto from an exchange. While I feel confident about the buying process, I know there’s a lot I need to understand about storing my newly acquired digital assets. I’ve read that leaving my crypto on the exchange might not be the safest option as exchanges are prone to hacks. But where should I keep it then?

I’ve come across terms like ‘wallets’ and ‘private keys’ in my research, but it’s all a bit confusing. Are these digital wallets similar to my physical wallet where I keep my traditional currency? And how does one handle private keys? Are they like passwords that we use for online banking? I would really appreciate some insight into these concepts.

Moreover, I’ve also heard of hardware and software wallets, which is even more perplexing. Are these two different types of digital wallets? If they are, what makes one better or safer than the other? I would appreciate any help to comprehend the intricacies of storing cryptocurrency. It would be beneficial not just for me, but probably for other new crypto users across the forum too. Any information or advice you could provide would be really appreciated, especially ways to protect my investment.

Answers:

1 Votes
7 months ago

You’ve asked some great questions. Yes, in the crypto world, a wallet is somewhat similar to your physical wallet, except instead of storing physical cash, it “stores” your cryptocurrency. Remember, though, that your cryptocurrency isn’t really being stored in the traditional sense. Instead, what’s actually being kept are the private and public cryptographic keys that are used to access, send, and receive your cryptocurrency.

Private keys are, indeed, similar to a password in that they grant access to your cryptocurrency. You’ll need to keep your private keys secret, as anyone who has them can access and spend your crypto. This is why some people choose not to keep much or any of their cryptocurrency on exchanges, due to the fear of hacks or other breaches that might expose their private keys.

Hardware wallets and software wallets are indeed two primary types of crypto wallets. Hardware wallets are physical devices like USB sticks that store your private keys offline, making them less vulnerable to hacks. Software wallets, on the other hand, are digital and can be installed on your computer or smartphone. While software wallets are more convenient as you can access them anywhere, they are more vulnerable to attacks than hardware wallets. In conclusion, it ultimately depends on your individual needs and preferences when it comes to choosing between a hardware or software wallet.

-2 Votes
7 months ago

That’s a good summary from ‘vinaceous’. I’d like to add, if you have a substantial amount of cryptocurrency, you may want to consider a multisig wallet for extra security. This type of wallet requires multiple private keys to access the cryptocurrency within, often stored on separate devices or even physically kept by different individuals. It’s comparable to the two-key system you’d find in a bank vault. It will give you an extra layer of security but might reduce convenience. On the other hand, as ‘vinaceous’ mentioned, software wallets offer more convenience but are more prone to attacks. You have to decide based on your need for security versus the convenience of access. ‘vinaceous’, in your experience, which type of wallet have you found the most practical?

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