Blockchain technology and its successors, the digital cryptocurrencies, gained massive popularity over the years and most of it has to do with one simple but crucial feature: Security. The decentralized nature of cryptocurrencies is what makes them secure and reliable but when it comes to storing them, the potential for problems begins to emerge. Cryptocurrencies are stored on a digital wallet, which is either physical hardware that connects to your computer or a computer program that acts as the key that gives access to your digital coins. If your wallet is compromised, you can kiss goodbye to your cryptocurrencies. There are vital points that must be noted before, during, and after setting up your crypto wallet to make sure your precious tokens are not going to end up in someone else’s pockets.
Essential tips for securing your crypto wallet
1. Use hardware wallets (or cold wallets in general)
Hot wallets are typically defined as any wallet that connects to the internet which includes basically any software wallet. They are way more convenient to work with since you can make deposits very fast, the setup process is quick and simple, and they are easy to access, but the tradeoff is their susceptibility to online attacks. Cold wallets do not rely on online operation and are therefore immune to such attacks but are less convenient to work with. Hardware wallets such as Trezor, Ledger, and KeepKey fall in the category of cold wallets and are the ultimate solution against hackers, but not against other forms of threats such as phishing scams.
2. Pick a trusted wallet
They are popular for a reason. Not Imagine Dragons, of course, I’m talking about crypto wallets! Crypto wallets that usually appear on most “top wallets list” have withstood the test of time and grown in popularity, which indicates that their overall score is way above the average. For example, you can check out our lists of the top software wallets and hardware wallets for Ethereum (add hyperlink), many of which support other blockchains and cryptocurrencies as well. The Evaluation Assurance Level or EAL is a category ranking assigned to an IT product or system, after a Common Criteria security evaluation. There are 7 levels of EAS and wallets that are labeled as CC EAL5+ meaning they have achieved 5 or more of said levels have a very high degree of security associated with them and are excellent options for buyers who prioritize the security and safety of their assets.
3. Take care of your keys
When it comes to their keys, wallets usually fall into 2 main categories: Custodial wallets, and Non-custodial wallets (or Self-custody wallets). In a custodial wallet, it’s the exchange who’s in “custody” of your wallet’s keys and responsible for the security of your assets. So if you go for a custodial wallet, the second tip about the wallet’s reputation becomes profoundly important. Most — but not all — web-based crypto wallets are custodial wallets and although they are considered less secure than a non-custodial wallet, it is more convenient to work with them. With a non-custodial wallet, otherwise known as a self-custody wallet, the responsibility of your keys and assets fall on your shoulders. They are the more popular option for people with huge possessions of cryptocurrencies since the role of third parties is eliminated. Self-custody wallets can be web-based software wallets or hardware wallets which the latter is the more secure option. Other than the cost of purchase, the biggest downside of self-custody wallets is the fact that if you lose your password, you might never get your coins back. But if you use a custodial wallet, you might be able to recover your wallet by contacting their customer support department. Whatever the case, always keep a backup of your private keys and choose a trusted wallet that you are comfortable working with.
4. Always Diversify
If you have a lot of gold in your possession, you don’t put them all in one safe so if someone cracked the safe and stole your gold, you wouldn’t go completely bankrupt. The same principle applies to cryptocurrencies as well. If you are in possession of a considerable amount of tokens, make sure to distribute them in more than a single wallet. This tip applies even when you use cold wallets; investing a few bucks in multiple wallets goes a long way, especially when talking about huge sums of crypto.
5. Make sure they are compatible
Not every wallet supports every cryptocurrency out there, so you should pick a wallet that’s compatible with the tokens in your possession. Wallets like MetaMask only support one class of cryptocurrencies, in this case only Ethereum-based coins and tokens. Wallets such as the Atomic wallet, on the other hand, support a diversity of tokens, in this case, the Atomic wallet supports more than 500 coins such as Bitcoin, Ethereum, Ripple, and Litecoin. If you wish to connect your software wallet to your hardware wallet, they should also be compatible with each other. Your wallet should not dictate what crypto you end up buying in the market, remember this before buying a shiny $100 wallet that might not support your cryptocurrencies.