Normally, after buying coins and tokens on an exchange, your cryptocurrency will be transferred into the exchange’s in-platform wallet. From there, you can decide whether to keep your digital assets where they are now or choose other storing options. Now the question is: How to choose the right solution to safely store your crypto?
Factors to consider when deciding on a crypto store solution
In this section, you may find some technical terms such as Hot and Cold Wallets or Custodial/Non-custodial Wallets. These are just different types of wallets and storage which we will explain in detail right after this part.
We push the “Factors to consider” first as it will help you better understand the advantages and risks of a particular storing solution based on these elements.
Amount of cryptocurrency
The total value of your crypto holdings is crucial when choosing a store solution. Normally, a more secure option, like cold storage, is much better for large amounts of tokens. A hot wallet might be more convenient for smaller amounts and daily trading.
Time/term
Think about how long you intend to hold your tokens. Short-term holders may prefer hot wallets for their sufficient security level and convenience. If you opt for long-term investments, cold ones would be better with enhanced security.
Security
Security is a top priority when deciding which storage solution to opt for. The level of security you need might vary based on several factors, such as the amount of crypto and how you plan to use them (day trading or long-term holding, for example).
However, basic security measures should be employed. Evaluate features like two-factor authentication (2FA), multi-signature wallets, biometric security, and even the service provider’s reputation. For instance, CoinSpot reviews often highlight the platform’s strong security features, which have contributed to its popularity.
Cost
Each type of wallet and storage will charge you differently. If you choose a hot wallet, then the cost is usually nothing. You just download a free wallet app or open a web-based account and transfer your tokens to that new wallet. Otherwise, you can store funds in a hardware wallet (with better security), which incurs the fee of buying a hardware wallet device.
Ease of Use
Not everyone is comfortable dealing with blockchain technology. Your technical expertise and skills should guide your choice of storing solutions. Beginners might prefer user-friendly platforms with intuitive interfaces and supportive customer service. CoinSpot review frequently mentions the ease of use of the platform, especially for beginners.
Liquidity
If you need quick access to your holdings for trading or spending (especially with day traders), liquidity should be weighted. Hot wallets and some in-platform exchanges’ storage do offer high liquidity, but users need to trade off for low security.
Supported cryptocurrencies
Not all wallets support all kinds of cryptocurrencies. Make sure that your storing solutions accept your cryptocurrencies.
Hot Wallets and Cold Wallets – Which are Better?
There are two main sorts of crypto wallets based on internet connectivity.
Hot Wallets
Hot wallets are internet-connected and thus prone to more risks such as fraud and cyber breaches. They are less secure but more accessible and user-friendly. Users can set up hot wallets much easier and access their funds much faster, so they are more favoured for daily transactions.
Here is a breakdown of 3 most popular kinds of hot wallets:
| Aspect | Web Wallet | Mobile Wallet | Desktop Wallet |
| Accessibility | Via a web browser | Via a mobile app | Via a desktop app |
| Convenience | High, viable on any device with Internet connection | High, require a smartphone (which is popular) | Medium, tied to a specific computer/laptop |
| Security | Vulnerable to online attacks | Depending on mobile security | Isolated from internet threats but can be compromised through email hacks or viruses. |
Cold Storage Wallet
Cold wallets, on the other hand, are stored offline and do not require internet access. Cold wallets are intrinsically hack-resistant thus more suitable for long-term investors who wish to hold their funds for a long time. As a protection measure, only a small amount of crypto is stored in hot wallets while being able to trade directly from their cold storage devices. Investors often prefer two kinds of cold storage:
Paper Wallets
Paper wallets are usually underrated and are not very popular these days, but they are one of the easiest and most secure ways to store your coins. As its name suggests, a paper wallet is nothing more than a physical copy of your public and private keys. You can simply create a paper wallet by copying your keys onto a piece of paper.
Hardware Wallets
A hardware wallet is a physical device that stores your private keys offline and away from hackers, viruses, and malware, eliminating several attack vectors. The exciting fact about hardware wallets is that they are frankly straightforward in design. Most of them are basic, single-purpose devices that work as dedicated computers for managing private keys.
You can find a hardware wallet in the shape of a USB stick (those produced by Ledger or Trezor) or something that looks more like touchscreen phones (provided by ELLIPAL Titan and NGRAVE).
Why do you need to protect your crypto wallets?
Protecting your crypto wallets is crucial. There have been records of significant hacks and scams targeting users’ wallets. Here are some real-world incidents highlighting why robust security is essential:
- The LastPass Incident: In October 2023, hackers exploited vulnerabilities in LastPass and drained around $4.4 million from 25 users. This breach affected 80 to 85 wallets, showing that even reputable wallet providers can be compromised.
- BitForge Vulnerabilities: Major wallet providers like Coinbase, Binance, and ZenGo were exposed to a series of flaws known as “BitForge.” These cryptographic protocol issues allowed attackers to access private keys, endangering user funds. This incident underscores the need for regular security updates and patches.
- The MetaMask Incident: On April 19, 2023, MetaMask users faced a significant hack. Attackers compromised Ethereum wallets and created substantial financial losses. Although details of the exploitation were debated, it highlighted that no wallet is completely immune to threats.
